assignment of ip rights means

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• > Intellectual Property Licensing and Transactions
• > Ownership and Assignment of Intellectual Property

Book contents

• Intellectual Property Licensing and Transactions
• Copyright page
• Acknowledgments
• Introduction
• Part I Introduction to Intellectual Property Licensing
• 1 The Business of Licensing
• 2 Ownership and Assignment of Intellectual Property
• 3 The Nature of an Intellectual Property License
• 4 Implied Licenses and Unwritten Transactions
• 5 Confidentiality and Pre-license Negotiations
• Part II License Building Blocks
• Part III Industry- and Context-Specific Licensing Topics
• Part IV Advanced Licensing Topics

2 - Ownership and Assignment of Intellectual Property

from Part I - Introduction to Intellectual Property Licensing

Published online by Cambridge University Press:  21 June 2022

Chapter 2 covers issues surrounding the assignment of IP (i.e., fixing its ownership as a prerequisite to transacting in it), and contrasts ownership with licensing of IP. It specifically covers the assignment of rights in patents, copyrights, trademarks and trade secrets, including within the employment context (i.e., shop rights , individuals hired to invent and works made for hire). The Supreme Court decision in Stanford v. Roche is considered at length. The chapter concludes with a thorough discussion of the issues presented by joint ownership of IP.

Summary Contents

2.1 Assignments of Intellectual Property, Generally 19

2.2 Assignment of Copyrights and the Work Made for Hire Doctrine 22

2.3 Assignment of Patent Rights 27

2.4 Trademark Assignments and Goodwill 37

2.5 Assignment of Trade Secrets 41

2.6 Joint Ownership 42

The owner of an intellectual property (IP) right, whether a patent, copyright, trademark, trade secret or other right, has the exclusive right to exploit that right. Ownership of an IP right is thus the most effective and potent means for utilizing that right. But what does it mean to “own” an IP right and how does a person – an individual or a firm – acquire ownership of it? This chapter explores transfers and assignments of IP ownership, first in general, and then with respect to special considerations pertinent to patents, copyrights and trademarks. Assignments and transfers of IP licenses , another important topic, are covered in Section 13.3 , and attempts to prohibit an assignor of IP from later challenging the validity of transferred IP (through a contractual no-challenge clause or the common law doctrine of “assignor estoppel”) are covered in Chapter 22 .

2.1 Assignments of Intellectual Property, Generally

Once it is in existence, an item of IP may be bought, sold, transferred and assigned much as any other form of property. Like real and personal property, IP can be conveyed through contract, bankruptcy sale, will or intestate succession, and can change hands through any number of corporate transactions such as mergers, asset sales, spinoffs and stock sales.

The following case illustrates how IP rights will be treated by the courts much as any other assets transferred among parties. In this case, the court must interpret a “bill of sale,” the document listing assets conveyed in a particular transaction. Just as with bushels of grain or tons of steel, particular IP rights can be listed in a bill of sale and the manner in which they are listed will determine what the buyer receives.

Systems Unlimited v. Cisco Systems

228 fed. appx. 854 (11th cir. 2007) (cert. denied).

Following the settlement of a dispute between Systems Unlimited, Inc. and Cisco Systems, Inc. over the ownership of certain intellectual property, Cisco agreed to covey the property to Systems. In the resulting bill of sale, Cisco:

granted, bargained, sold, transferred and delivered, and by these presents does grant, bargain, sell, transfer and deliver unto [Systems], its successor and assigns, the following:

Any and all of [Cisco]’s right, title and interest in any copyrights, patents, trademarks, trade secrets and other intellectual property of any kind associated with any software, code or data, including without limitation host controller software and billing software, whether embedded or in any other form (including without limitations, disks, CDs and magnetic tapes), and including any and all available copies thereof and any and all books and records related thereto by [Cisco]

Cisco never delivered [copies of] any of the software to Systems. Alleging that it had been damaged by the non-delivery, Systems sued Cisco for breaching the bill of sale contract and for violating the attendant obligations to deliver the software under the Uniform Commercial Code.

Systems contends that the district court erred in granting summary judgment in favor of Cisco because: (1) the plain language of the bill of sale required Cisco to deliver the software; (2) the bill of sale, when read in conjunction with other contemporaneous agreements, required delivery; and (3) the UCC, which governs the bill of sale, requires that all goods be delivered at a reasonable time. Systems is wrong on each point.

The bill of sale is interpreted in accord with its plain language absent some ambiguity. Here, the parties agree that the bill of sale is clear and unambiguous.

The bill of sale provides that Cisco will “grant, bargain, sell, transfer and deliver unto [Systems] … [a]ny and all of [Cisco]’s right, title and interest in any copyrights, patents, trademarks, trade secrets and other intellectual property of a kind associated with any software, code or data.” As the district court explained, this language unambiguously means that Cisco was required by the bill of sale to transfer to Systems all of its rights in intellectual property associated with certain software and data. There is no mention in the plain language of the contract itself of Cisco being obligated to transfer the actual software, and we will not imply any such obligation absent some good reason under law.

Systems says there are two good reasons to imply an obligation by Cisco to transfer the software. First, Systems argues that the bill of sale must be interpreted in conjunction with the settlement agreement between Systems and Cisco and other documents relating to the intellectual property. These other agreements, Systems claims, include an obligation by Cisco to deliver the software with any conveyance of intellectual property.

Assuming without deciding that the other agreements include language requiring Cisco to deliver the software, they are not relevant here because Systems has never alleged Cisco violated these other agreements. Systems’ complaint alleges only a violation of the bill of sale contract, and there is no obligation in that contract to deliver the software. The bill of sale does not reference or incorporate any other agreement.

To get around this point, Systems argues that “when instruments relate to the same matters, are between the same parties, and made part of substantially one transaction, they are to be taken together.” It is true that this is one of the canons for construing a contract under California law. But it is also true that this canon, as with most others, is inapplicable where the contract that is alleged to have been breached is unambiguous. Here, the language of the bill of sale is unambiguous. Thus, there is no need to apply any canons of construction.

Systems also argues that the UCC imposes a duty on Cisco to deliver the software. We will assume without deciding that Systems’ reading of the UCC is correct. Even so, the provisions of the UCC only apply to contracts that deal predominately with “transactions in goods.” The sale of intellectual property, which is what is involved here, is not a transaction in goods. Thus, the UCC does not apply. Accordingly, the plain language of the bill of sale governs and, as the district court held, it does not include a provision requiring Cisco to deliver any software.

Notes and Questions

1. IP and the UCC . The court in Systems v. Cisco holds that IP licenses and other transactions are not governed by Article 2 of the UCC, which pertains to sales of goods. In Section 3.4 we will discuss whether and to what degree Article 2 applies to IP licenses . But this case relates not to a license, but to a “sale” of software. Why doesn’t UCC Article 2 apply? Should it?

2. Delivery of what ? What does this language from the bill of sale refer to, if not delivery of software: “including any and all available copies thereof”? Does this language represent a drafting mistake by Systems’ attorney? Or an intentional omission by Cisco?

3. The need for software . Why is Systems so upset that Cisco has allegedly refused to deliver the software in question? How useful is an assignment of copyright and other IP to someone who is not in possession of the software code that is copyrighted? Has Cisco “pulled a fast one” on Systems and the court, or is there a valid business reason that could justify Cisco’s failure to deliver the software ?

4. Statute of frauds . Assignments of copyrights, patents and trademarks must all be in writing (17 U.S.C. § 204(a), 35 U.S.C. § 261, 15 U.S.C. § 1060(3)). Why? This requirement does not apply to most licenses, which may be oral. Can you think of a good reason for this distinction?

5. State law and mutual mistake . Despite the federal statutory nature of patents, courts have long held that the question of who holds title to a patent is a matter of state contract law. Footnote 1 This issue arose in an interesting way in Schwendimann v. Arkwright Advanced Coating, Inc ., 959 F.3d 1065 (Fed. Cir. 2020). In Schwendimann , the plaintiff’s former company purported to assign her a patent application in 2003. Due to a clerical error by the law firm handling the matter, the assignment document filed with the patent office listed the wrong patent name and number. In 2011, the plaintiff filed an action asserting the patent against an alleged infringer. The defendant, discovering the incorrect assignment document from 2003, moved to dismiss on the ground that the plaintiff did not hold any enforceable rights at the time she filed suit and thus lacked standing. The district court, interpreting applicable state law, held that the 2003 assignment was the result of a “mutual mistake of fact” that did not accurately reflect the intent of the parties. Accordingly, the erroneous document could be reformed and was sufficient to support standing to bring suit. The Federal Circuit affirmed. Judge Reyna dissented, reasoning that, irrespective of the district court’s later reformation of the erroneous assignment, the plaintiff’s failure to own the patent at the time her suit was filed necessarily barred her suit under Article III of the Constitution. Which of these positions do you find more persuasive? Notwithstanding the holding in favor of the plaintiff, is there a claim for legal malpractice against the law firm in question ?

2.2 Assignment of Copyrights and the Work Made for Hire Doctrine

Under § 201(a) of the Copyright Act, copyright ownership “vests initially in the author or authors of the work.” A copyright owner may assign any of its exclusive rights, in full or in part, to a third party. The assignment generally must be in writing and signed by the owner of the copyright or his or her authorized agent (17 U.S.C. § 204(a)).

If a work of authorship is prepared by an employee within the scope of his or her employment, then the work is a “work made for hire” and the employer is considered the author and owner of the copyright (17 U.S.C. § 201(b)). In addition, if a work is not made by an employee but is “specially ordered or commissioned,” it will be considered a work made for hire if it falls into one of nine categories enumerated in § 101(2) of the Act: a contribution to a collective work, a part of a motion picture or other audiovisual work, a translation, a supplementary work, a compilation, an instructional text, a test, answer material for a test, or an atlas. Commissioned works that do not fall into one of these nine categories (for example, software) are not automatically considered to be works made for hire, and copyright must be assigned explicitly through a separate assignment or sale agreement.

Warren v. Fox Family Worldwide, Inc.

328 f.3d 1136 (9th cir. 2003).

HAWKINS, Circuit Judge.

In this dispute between plaintiff-appellant Richard Warren (”Warren”) and defendants-appellees Fox Family Worldwide (“Fox”), MTM Productions (“MTM”), Princess Cruise Lines (“Princess”), and the Christian Broadcasting Network (“CBN”), Warren claims that defendants infringed the copyrights in musical compositions he created for use in the television series “Remington Steele.” Concluding that Warren has no standing to sue for infringement because he is neither the legal nor beneficial owner of the copyrights in question, we affirm the district court’s Rule 12 dismissal of Warren’s complaint.

Warren and Triplet Music Enterprises, Inc. (“Triplet”) entered into the first of a series of detailed written contracts with MTM concerning the composition of music for “Remington Steele.” This agreement stated that Warren, as sole shareholder and employee of Triplet, would provide services by creating music in return for compensation from MTM. Under the agreement, MTM was to make a written accounting of all sales of broadcast rights to the series and was required to pay Warren a percentage of all sales of broadcast rights to the series made to third parties not affiliated with ASCAP or BMI. These agreements were renewed and re-executed with slight modifications in 1984, 1985 and 1986.

Warren brought suit in propria persona against Fox, MTM, CBN, and Princess, alleging copyright infringement, breach of contract, accounting, conversion, breach of fiduciary duty, breach of covenants of good faith and fair dealing, and fraud.

Warren claims he created approximately 1,914 musical works used in the series pursuant to the agreements with MTM; that MTM and Fox have materially breached their obligations under the contracts by failing to account for or pay the full amount of royalties due Warren from sales to parties not affiliated with ASCAP or BMI; and that MTM and Fox infringed Warren’s copyrights in the music by continuing to broadcast and license the series after materially breaching the contracts. As to the other defendants, Warren claims that CBN and Princess infringed his copyrights by broadcasting “Remington Steele” without his authorization. Warren seeks damages, an injunction, and an order declaring him the owner of the copyrights at issue.

Defendants argu[ed] that Warren’s infringement claims should be dismissed for lack of standing because he is neither the legal nor beneficial owner of the copyrights. The district court dismissed Warren’s copyright claims without leave to amend and dismissed his state law claims without prejudice to their refiling in state court, holding that Warren lacked standing because the works were made for hire, and because a creator of works for hire cannot be a beneficial owner of a copyright in the work. Warren appeals.

The first agreement [between the parties], signed on February 25, 1982, states that MTM contracted to employ Warren “to render services to [MTM] for the television pilot photoplay now entitled ‘Remington Steele.’” It also is clear that the parties agreed that MTM would “own all right, title and interest in and to [Warren’s] services and the results and proceeds thereof, and all other rights granted to [MTM] in [the Music Employment Agreement] to the same extent as if … [MTM were] the employer of [Warren].” The Music Employment Agreement provided:

As [Warren’s] employer for hire, [MTM] shall own in perpetuity, throughout the universe, solely and exclusively, all rights of every kind and character, in the musical material and all other results and proceeds of the services rendered by [Warren] hereunder and [MTM] shall be deemed the author thereof for all purposes.

Figure 2.1 Warren claimed that he created 1,914 musical works for the popular 1980s TV series Remington Steele .

The parties later executed contracts almost identical to these first agreements in June 1984, July 1985, and November 1986. As the district court noted, these subsequent contracts are even more explicit in defining the compositions as “works for hire.” Letters that Warren signed accompanying the later Music Employment Agreements provided: “It is understood and agreed that you are supplying [your] services to us as our employee for hire … [and] [w]e shall own all right, title and interest in and to [your] services and the results and proceeds thereof, as works made for hire.”

That the agreements did not use the talismanic words “specially ordered or commissioned” matters not, for there is no requirement, either in the Act or the caselaw, that work-for-hire contracts include any specific wording. In fact, in Playboy Enterprises v. Dumas , 53 F.3d 549 (2d Cir. 1995), the Second Circuit held that legends stamped on checks were writings sufficient to evidence a work-for-hire relationship where the legend read: “By endorsement, payee: acknowledges payment in full for services rendered on a work-made-for-hire basis in connection with the Work named on the face of this check, and confirms ownership by Playboy Enterprises, Inc. of all right, title and interest (except physical possession), including all rights of copyright, in and to the Work.” Id. at 560. The agreements at issue in the instant case are more explicit than the brief statement that was before the Second Circuit.

In this case, not only did the contracts internally designate the compositions as “works made for hire,” they provided that MTM “shall be deemed the author thereof for all purposes.” This is consistent with a work-for-hire relationship under the Act, which provides that “the employer or other person for whom the work was prepared is considered the author.” 17 U.S.C. § 201(b).

Warren argues that the use of royalties as a form of compensation demonstrates that this was not a work-for-hire arrangement. While we have not addressed this specific question, the Second Circuit held in Playboy that “where the creator of a work receives royalties as payment, that method of payment generally weighs against finding a work-for-hire relationship.” 53 F.3d at 555. However, Playboy clearly held that this factor was not conclusive. In addition to noting that the presence of royalties only “generally” weighs against a work-for-hire relationship, Playboy cites Picture Music, Inc. v. Bourne, Inc ., 457 F.2d 1213, 1216 (2d Cir. 1972), for the proposition that “[t]he absence of a fixed salary … is never conclusive.” 53 F.3d at 555. Further, the payment of royalties was only one form of compensation given to Warren under the contracts. Warren was also given a fixed sum “payable upon completion.” That some royalties were agreed upon in addition to this sum is not sufficient to overcome the great weight of the contractual evidence indicating a work-for-hire relationship.

Warren also argues that because he created nearly 2,000 musical works for MTM, the works were not specially ordered or commissioned. However, the number of works at issue has no bearing on the existence of a work-for-hire relationship. As the district court noted, a weekly television show would naturally require “substantial quantities of verbal, visual and musical content.”

The agreements between Warren and MTM conclusively show that the musical compositions created by Warren were created as works for hire, and Warren is therefore not the legal owner of the copyrights therein.

1. Employee v. Contractor . In Warren v. Fox the musical compositions created by Warren fell into one of the nine categories of “specially commissioned works” that qualify as works made for hire under § 101(2) of the Copyright Act (audiovisual works), even if they were not made by employees of the commissioning party. They will thus be classified as works made for hire so long as they can be shown to have been “specially commissioned” – the focus of the debate in Warren . A slightly different question arose in Community for Creative Non-Violence v. Reid , 490 U.S. 730 (1989). In that case Reid, a sculptor, was engaged by a nonprofit organization, CCNV, to create a memorial “to dramatize the plight of the homeless.” Sculpture is not one of the nine enumerated categories of commissioned works. Thus, even if Reid’s sculpture were “specially commissioned” (as it probably was), it would not be classified as a work made for hire under § 101 unless Reid were considered to be an employee of CCNV. CCNV argued that it exercised a certain degree of control over the subject matter of the sculpture, making it appropriate to classify Reid as its employee. The Court disagreed:

Reid is a sculptor, a skilled occupation. Reid supplied his own tools. He worked in his own studio in Baltimore, making daily supervision of his activities from Washington practicably impossible. Reid was retained for less than two months, a relatively short period of time. During and after this time, CCNV had no right to assign additional projects to Reid. Apart from the deadline for completing the sculpture, Reid had absolute freedom to decide when and how long to work. CCNV paid Reid $15,000, a sum dependent on completion of a specific job, a method by which independent contractors are often compensated. Reid had total discretion in hiring and paying assistants. Creating sculptures was hardly regular business for CCNV. Indeed, CCNV is not a business at all. Finally, CCNV did not pay payroll or Social Security taxes, provide any employee benefits, or contribute to unemployment insurance or workers’ compensation funds.

Does the structure of the works made for hire doctrine under § 101(2) of the Copyright Act make sense? Why should specially commissioned works be considered works for hire only if they fall into one of the nine enumerated categories? Why is a musical composition treated so differently than a sculpture?

2. Manner of compensation . The form of compensation received by the author is mentioned in both Warren v. Fox and CCNV v. Reid . Why is this detail significant to the question of works made for hire? Are the courts’ conclusions with respect to compensation consistent between these two cases?

3. Software contractors and assignment . For a variety of professional, financial and tax-planning reasons, software developers often work as independent contractors and are not hired as employees of the companies for which they create software. And, like the sculpture in CCNV v. Reid , software is not one of the nine enumerated categories of works under § 101(2) of the Copyright Act. Thus, even if it is specially commissioned, software will not be considered a work made for hire. As a result, companies that use independent contractors to develop software must be careful to put in place copyright assignment agreements with those contractors. And because contractors often sit and work beside company employees with very little to distinguish them, neglecting to take these contractual precautions is one of the most common IP missteps made by fledgling and mature software companies alike. If you were the general counsel of a new software company, how would you deal with this issue?

4. Recordation . Section 205 of the Copyright Act provides for recordation of copyright transfers with the Copyright Office. Recordation of transfers is not required, but provides priority if the owner attempts to transfer the same copyrighted work multiple times:

§ 205(d) Priority between Conflicting Transfers.—As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice … Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer.

As students of real property will surely observe, this provision resembles a “race-notice” recording statute under state law. As such, the second transferee of a copyright may prevail over a prior, unrecorded transferee if the second transferee records first without notice of the earlier transfer. Note also that this provision is applicable only to copyrights that are registered with the Copyright Office.

5. Statutory termination of assignments . Sections 203 and 304 of the Copyright Act provide that any transfer of a copyright can be revoked by the transferor between 35 and 40 years after the original transfer was made. Footnote 2 This remarkable and powerful right is irrevocable and cannot be contractually waived or circumvented. It was intended to enable authors who were young and unrecognized when they first granted rights to more powerful publishers to profit from the later success of their works. For example, in 1938 Jerry Siegel and Joseph Shuster, the creators of the Superman character, sold their rights to the predecessor of DC Comics for $130. Siegel and Shuster both died penniless in the 1990s, while Superman earned billions for his corporate owners.

Though Sections 203 and 304 were originally directed to artists, writers and composers, these provisions apply across the board to all copyrighted works including software and technical standards documents. The possibility that an original developer of Microsoft Windows could suddenly pull the plug on millions of existing licenses is somewhat ameliorated because the reversion does not apply to works made for hire or derivative works. Nevertheless, one must ask why these reversionary rights apply to software and technical documents at all. If such works of authorship are excluded as works made for hire under Section 101(2), why shouldn’t they also be excluded from Sections 203/304? Footnote 3 Is there any justification for allowing developers of copyrighted “technology” products to terminate assignments made decades ago?

6. Divisibility of copyright . Prior to the Copyright Act of 1976, copyright ownership was not divisible. That is, the owner of a copyright, say in a book, could not assign the exclusive right to produce a film based on that book to a third party. The right to produce a film could be licensed to a third party, but an attempted assignment of the right would potentially be invalid or treated as a license. Footnote 4 But today, under 17 U.S.C. § 201(d)(2), “Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred … and owned separately.” What do you think was the rationale for this change in the law? Why would, say, a film studio prefer to “own” the right to produce a film based on a book rather than have a license to do so?

Figure 2.2 The creators of the Superman character died in near poverty while the Man of Steel went on to form a multi-billion-dollar franchise. Sections 203 and 304 of the US Copyright Act were enacted to enable authors and their heirs to terminate any copyright assignment or license between 35 and 40 years after originally made in order to permit them to share in the value of their creations .

2.3 Assignment Of Patent Rights

As with other IP rights, patents, patent applications and inventions may be assigned. Patent rights initially vest in inventors who are, by definition, individuals. Unlike copyright, there is no work made for hire doctrine under US patent law. However, if an employee is “hired to invent” – that is, to perform tasks intended to result in an invention – then the employee may have a legal duty to assign the resulting invention to his or her employer. Footnote 5

Unfortunately, the “hired to invent” doctrine is murky and inconsistently applied. Footnote 6 Thus, most employers today contractually obligate their employees to assign rights in inventions and patents to them when made within the scope of their employment and/or using the employer’s resources or facilities. This requirement exists in the private sector, at nonprofit universities and research institutions, as well as government agencies. The initial assignment from an inventor to his or her employer is often filed during prosecution of a patent on a form provided by the Patent and Trademark Office. If such an assignment is not filed, the inventor’s employer obtains no rights in an issued patent other than so-called “shop rights” that allow the employer to use the patented invention on a limited basis. Footnote 7

Beyond the initial assignment from the inventor(s), the owner of a patent may assign it to a third party as any other property right. The following case turns on whether an inventor assigned his rights to his employer at the time the invention was conceived, or when the patent was issued.

Filmtec Corporation v. Allied-Signal Inc.

939 f.2d 1568 (fed. cir. 1991).

PLAGER, CIRCUIT JUDGE

Allied-Signal Inc. and UOP Inc. (Allied), defendants-appellants, appeal from the preliminary injunction issued by the district court. The trial court enjoined Allied from “making, using or selling, and actively inducing others to make use or sell TFCL membrane in the United States, and from otherwise infringing claim 7 of United States Patent No. 4,277,344 [’344].” Because of serious doubts on the record before us as to who has title to the invention and the ensuing patent, we vacate the grant of the injunction and remand for further proceedings.

The application which ultimately issued as the ‘344 patent was filed by John E. Cadotte on February 22, 1979. The patent claims a reverse osmosis membrane and a method for using the membrane to reduce the concentration of solute molecules and ions in solution. Cadotte assigned his rights in the application and any subsequently issuing patent to plaintiff-appellee FilmTec. This assignment was duly recorded in the United States Patent and Trademark Office. Defendant-appellant Allied manufactured a reverse osmosis membrane and FilmTec sued Allied for infringing certain claims of the ’344 patent.

John Cadotte was one of the four founders of FilmTec. Prior to founding FilmTec, Cadotte and the other founders were employed in various responsible positions at the North Star Division of Midwest Research Institute (MRI), a not-for-profit research organization. MRI was principally engaged in contract research, much of it for the United States (Government), and much of it involving work in the field of reverse osmosis membranes.

The evidence indicates that the work at MRI in which Cadotte and the other founders were engaged was being carried out under contract (the contract) to the Government. The contract provided that MRI

agrees to grant and does hereby grant to the Government the full and entire domestic right, title and interest in [any invention, discovery, improvement or development (whether or not patentable) made in the course of or under this contract or any subcontract … thereunder].

It appears that sometime between the time FilmTec came into being in 1977 and the time Cadotte submitted his patent application in February of 1979, he made the invention that led to the ’344 patent. As we will explain, just when in that period the invention was made is critical.

Cadotte left MRI in January of 1978. Cadotte testified that he conceived his invention the month after he left MRI. Allied disputes this, and alleges that Cadotte conceived his invention and formed the reverse osmosis membrane of the ’344 patent earlier—in July of 1977 or at least by November of 1977 when he allegedly produced an improved membrane.

Allied alleges that the evidence establishes that the contract between MRI and the Government grants to the Government “all discoveries and inventions made within the scope of their [i.e., MRI’s employees] employment,” and that the invention claimed in the ’344 patent was made by Cadotte while employed by MRI. From this Allied reasons that rights in the invention must be with the Government and therefore Cadotte had no rights to assign to FilmTec. If FilmTec lacks title to the patent, FilmTec has no standing to bring an infringement action under the ’344 patent. FilmTec counters by arguing that the trial court was correct in concluding that the most the Government would have acquired was an equitable title to the ’344 patent, which title would have been made void under 35 U.S.C. § 261 by the subsequent assignment to FilmTec from Cadotte.

The parties agree that Cadotte was employed by MRI and that the contract between MRI and the Government contains a grant of rights to inventions made pursuant to the contract. However, the record does not reflect whether the employment agreement between Cadotte and MRI either granted or required Cadotte to grant to MRI the rights to inventions made by Cadotte. Allied argues that Cadotte’s inventions were assigned nevertheless to MRI. Allied points to the provision in the contract between MRI and the Government in which MRI warrants that it will obligate inventors to assign their rights to MRI.

While this is not conclusive evidence of a grant of or a requirement to grant rights by Cadotte, it raises a serious question about the nature of the title, if any, in FilmTec. FilmTec apparently did not address this issue at the trial, and there is no indication in the opinion of the district court that this gap in the chain of ownership rights was considered by the court.

Between the time of an invention and the issuance of a patent, rights in an invention may be assigned and legal title to the ensuing patent will pass to the assignee upon grant of the patent. If an assignment of rights in an invention is made prior to the existence of the invention, this may be viewed as an assignment of an expectant interest. An assignment of an expectant interest can be a valid assignment.

Figure 2.3 FilmTec reverse osmosis membrane filter.

Once the invention is made and an application for patent is filed, however, legal title to the rights accruing thereunder would be in the assignee, and the assignor-inventor would have nothing remaining to assign. In this case, if Cadotte granted MRI rights in inventions made during his employ, and if the subject matter of the ’344 patent was invented by Cadotte during his employ with MRI, then Cadotte had nothing to give to FilmTec and his purported assignment to FilmTec is a nullity. Thus, FilmTec would lack both title to the ’344 patent and standing to bring the present action.

The district court was of the view that if the Government was the assignee from Cadotte through MRI, the Government would have acquired at most an equitable title, and that legal title would remain in Cadotte. The legal title would then have passed to FilmTec by virtue of the later assignment, pursuant to Sec. 261 of the [Patent Act]. Sigma Eng’g v. Halm Instrument , 33 F.R.D. 129 (E.D.N.Y. 1963).

But Sigma , even if it were binding precedent on this court, does not stretch so far. The issue in Sigma was whether the plaintiff, assignee of the patent rights of the inventors, was the real party in interest such as to be able to maintain the instant action for patent infringement. Defendant claimed that the inventors’ employer had title to the invention by virtue of the employment contract which obligated the inventors to transfer all patent rights to inventions made while in its employ. As the court expressly noted, no such transfers were made, however, and the court considered any possible interest held by the employer in the invention to be in the nature of an equitable claim.

In our case, the contract between MRI and the Government did not merely obligate MRI to grant future rights, but expressly granted to the Government MRI’s rights in any future invention. Ordinarily, no further act would be required once an invention came into being; the transfer of title would occur by operation of law. If a similar contract provision existed between Cadotte and MRI, as MRI’s contract with the Government required, and if the invention was made before Cadotte left MRI’s employ, as the trial judge seems to suggest, Cadotte would have no rights in the invention or any ensuing patent to assign to FilmTec.

Because of the district court’s view of the title issue, no specific findings were made on either of these questions. As a result, we do not know who held legal title to the invention and to the patent application and therefore we do not know if FilmTec could make a sufficient legal showing to establish the likelihood of success necessary to support a preliminary injunction.

It is well established that when a legal title holder of a patent transfers his or her title to a third party purchaser for value without notice of an outstanding equitable claim or title, the purchaser takes the entire ownership of the patent, free of any prior equitable encumbrance. This is an application of the common law bona fide purchaser for value rule.

Figure 2.4 Schematic showing possible assignment pathways for Cadotte’s invention.

Section 261 of Title 35 goes a step further. It adopts the principle of the real property recording acts, and provides that the bona fide purchaser for value cuts off the rights of a prior assignee who has failed to record the prior assignment in the Patent and Trademark Office by the dates specified in the statute. Although the statute does not expressly so say, it is clear that the statute is intended to cut off prior legal interests, which the common law rule did not.

Both the common law rule and the statute contemplate that the subsequent purchaser be exactly that—a transferee who pays valuable consideration, and is without notice of the prior transfer. The trial judge, with reference to FilmTec’s rights as a subsequent purchaser, stated simply that “FilmTec is a subsequent purchaser from Cadotte for independent consideration. There is no evidence presented to imply that FilmTec was on notice of any previous assignment.” The court concluded that, even if the MRI contract automatically transferred title to the Government, such assignment is not enforceable at law as it was never recorded.

“the bona fide purchaser for value cuts off the rights of a prior assignee who has failed to record the prior assignment in the Patent and Trademark Office by the dates specified in the statute.”

Since this matter will be before the trial court on remand, it may be useful for us to clarify what is required before FilmTec can properly be considered a subsequent purchaser entitled to the protections of Sec. 261. In the first place, FilmTec must be in fact a purchaser for a valuable consideration. This requirement is different from the classic notion of a purchaser under a deed of grant, where the requirement of consideration was a formality, and the proverbial peppercorn would suffice to have the deed operate under the statute of uses. Here the requirement is that the subsequent purchaser, in order to cut off the rights of the prior purchaser, must be more than a donee or other gratuitous transferee. There must be in fact valuable consideration paid so that the subsequent purchaser can, as a matter of law, claim record reliance as a premise upon which the purchase was made. That, of course, is a matter of proof.

In addition, the subsequent transferee/assignee—FilmTec in our case—must be without notice of any such prior assignment. If Cadotte’s contract with MRI contained a provision assigning any inventions made during the course of employment either to MRI or directly to the Government, Cadotte would clearly be on notice of the provisions of his own contract. Since Cadotte was one of the four founders of FilmTec, and the other founders and officers were also involved at MRI, FilmTec may well be deemed to have had actual notice of an assignment. Given the key roles that Cadotte and the others played both at MRI and later at FilmTec, at a minimum FilmTec might be said to be on inquiry notice of any possible rights in MRI or the Government as a result of Cadotte’s work at MRI. Thus once again, the key to FilmTec’s ability to show a likelihood of success on the merits lies in the relationship between Cadotte and MRI.

In our view of the title issue, it cannot be said on this record that FilmTec has established a reasonable likelihood of success on the merits. It is thus unnecessary for us to consider the other issues raised on appeal concerning the propriety of the injunction. The grant of the preliminary injunction is vacated and the case remanded to the district court to reconsider the propriety of the preliminary injunction and for further proceedings consistent with this opinion.

VACATED AND REMANDED .

1. Recording of title . As noted in Section 2.1 , Note 4, assignments of patents may be recorded at the Patent and Trademark Office. As provided in 35 U.S.C. § 261,

An interest that constitutes an assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.

This provision is a modified form of the familiar “race-notice” recording statute that applies to real estate transactions. Footnote 8 Unlike the comparable provision of the Copyright Act (17 U.S.C. § 205(d), discussed in Section 2.2 ), the second assignee of a patent may prevail over a prior, unrecorded assignee if the second assignee records first without notice of the earlier assignment unless the first assignee records within three months of the first assignment. An assignee of a patent thus has a three-month grace period in which to record its transfer without fear of being superseded by a second assignment. What is the reason for this three-month grace period, which exists neither in copyright nor real property law?

2. Inquiry notice . The court in FilmTec borrows the notion of “inquiry notice” from the law of real property recording. What is inquiry notice? Footnote 9 How does it differ from actual notice and constructive notice?

3. Present v. Future Grants of Patent Rights . The court in FilmTec explains that “the contract between MRI and the Government did not merely obligate MRI to grant future rights, but expressly granted to the Government MRI’s rights in any future invention. Ordinarily, no further act would be required once an invention came into being; the transfer of title would occur by operation of law.” That is, disregarding MRI’s failure to record the transfer, MRI’s present grant of rights in a future patent to the government (assuming that MRI had previously obtained the requisite rights from Cadotte) would automatically convey those rights to the government as soon as an invention was made.

A similar fact pattern arose in Stanford v. Roche , 563 U.S. 776 (2011) (reproduced, in part, in Section 14.1 ). In that case, a Stanford researcher who was obligated under Stanford’s policies to assign inventions to Stanford also signed an agreement assigning his future invention rights to Cetus Corp. while visiting the company to use its equipment. The Federal Circuit ruled for Cetus, reasoning that, under FilmTec , the researcher’s present assignment of future patent rights to Cetus automatically became effective when a patent application was filed, leaving nothing for him to assign to the holder of a future promise of assignment (i.e., Stanford). Stanford successfully sought certiorari on different grounds (whether the Bayh–Dole Act overrode these contractual provisions), and the Supreme Court affirmed the judgment for Cetus without reaching the assignment issue.

However, Justices Breyer and Ginsburg dissented (joined by Justice Sotomayor, who concurred in the judgment) on the ground that the Federal Circuit’s 1991 rule in FilmTec seemingly contradicted earlier precedent. Citing one 1867 treatise and a 1958 law review note, Justice Breyer proposed that before FilmTec , “a present assignment of future inventions (as in both contracts here) conveyed equitable, but not legal, title” and that this equitable interest “grants equitable enforcement to an assignment of an expectancy but demands a further act, either reduction to possession or further assignment of the right when it comes into existence.” In other words, the researcher’s present “assignment” of his future patent rights to Cetus would give Cetus an equitable claim to seek “legal title” once an invention existed or a patent application was filed. On this basis, Justice Breyer concludes,

Under this rule, both the initial Stanford and later Cetus agreements would have given rise only to equitable interests in Dr. Holodniy’s invention. And as between these two claims in equity, the facts that Stanford’s contract came first and that Stanford subsequently obtained a postinvention assignment as well should have meant that Stanford, not Cetus, would receive the rights its contract conveyed.

Despite Justice Breyer’s dissatisfaction with the holdings of FilmTec and Stanford v. Roche , their approach to future assignments still appears to be the law. Footnote 10 Which approach do you think most accurately reflects the intentions of the parties? What policy ramifications might each rule have ?

4. Shall versus does. The result in Stanford v. Roche turns on the wording of two competing legal instruments – Dr. Holodniy’s assignments to Cetus and Stanford. As noted by the Federal Circuit in the decision below, Holodniy’s initial agreement with Stanford constituted a mere promise to assign his future patent rights to Stanford, whereas his agreement with Cetus acted as a present assignment of his future patent rights to Cetus, thus giving the patent rights to Cetus (583 F.3d 832, 841–842 (2009)). As explained by Justice Breyer in his dissent: Footnote 11

In the earlier agreement—that between Dr. Holodniy and Stanford University—Dr. Holodniy said, “I agree to assign … to Stanford … that right, title and interest in and to … such inventions as required by Contracts and Grants.” In the later agreement—that between Dr. Holodniy and the private research firm Cetus—Dr. Holodniy said, “I will assign and do hereby assign to Cetus, my right, title, and interest in” here relevant “ideas” and “inventions.” The Federal Circuit held that the earlier Stanford agreement’s use of the words “agree to assign,” when compared with the later Cetus agreement’s use of the words “do hereby assign,” made all the difference. It concluded that, once the invention came into existence, the latter words meant that the Cetus agreement trumped the earlier, Stanford agreement. That, in the Circuit’s view, is because the latter words operated upon the invention automatically, while the former did not.

What could Stanford have done to avoid this problem? How do you think the result of Stanford v. Roche affected the wording of university patent policies and assignment documents in general? Footnote 12 Given this holding, should an assignment agreement ever be phrased in any way other than “Assignor hereby grants to Assignee … ”? Was Dr. Holodniy himself at fault in this situation? What, if anything, should he have done differently ?

5. Breadth of employee invention assignments . As noted in the introduction to this section, employers who wish to obtain assignments of the inventions created by their employees must do so pursuant to written assignment agreements. But how broad can these assignments be? In Whitewater West Indus. v. Alleshouse , 2020 U.S. App. LEXIS 36394 (Fed. Cir. 2020), the Federal Circuit reviewed an employee assignment agreement that contained the following provision:

a. Assignment: In consideration of compensation paid by Company, Employee agrees that all right, title and interest in all inventions, improvements, developments, trade-secret, copyrightable or patentable material that Employee conceives or hereafter may make or conceive , whether solely or jointly with others:

(a) with the use of Company’s time, materials, or facilities; or (b) resulting from or suggested by Employee’s work for Company; or (c) in any way connected to any subject matter within the existing or contemplated business of Company

shall automatically be deemed to become the property of Company as soon as made or conceived, and Employee agrees to assign to Company, its successors, assigns, or nominees, all of Employee’s rights and interests in said inventions, improvements, and developments in all countries worldwide. Employee’s obligation to assign the rights to such inventions shall survive the discontinuance or termination of this Agreement for any reason.

This provision, on its face, appears to require not only that current employees assign their inventions to the company (a typical provision in employment agreements), but also that former employees continue to make such assignments indefinitely in the future, so long as such inventions are “in any way connected to any subject matter within the existing or contemplated business of Company.” Needless to say, this provision is quite aggressive.

Richard Alleshouse, a designer of water park attractions, was hired by Wave Loch, Inc., a company operating in California, in October 2007. In September 2008, Alleshouse signed a Covenant Against Disclosure and Covenant Not to Compete containing the above assignment clause. In 2012, Alleshouse left Wave Loch to cofound a new company in the same line of business. There, he continued to develop and patent features of surfing-based water park attractions. In 2017, Wave Loch (through its successor Whitewater West) sued Alleshouse for breach of contract and correction of inventorship, seeking to acquire title to three patents on which Alleshouse was listed as a co-inventor following his departure from Wave Loch.

In evaluating Wave Loch’s claim, the Federal Circuit considered California Business and Professions Code § 16600, which states: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” This statutory provision has traditionally been interpreted to prohibit companies from imposing noncompetition restrictions on former employees. In this case, however, the Federal Circuit extended its reach to prohibit assignments of future IP rights not based on the company’s own IP. In assessing the over-breadth of the provision, the court noted that:

No trade-secret or other confidential information need have been used to conceive the invention or reduce it to practice for the assignment provision to apply. The obligation is unlimited in time and geography. It applies when Mr. Alleshouse’s post-employment invention is merely “suggested by” his work for Wave Loch. It applies, too, when his post-employment invention is “in any way connected to any subject matter” that was within Wave Loch’s “existing or contemplated” business when Mr. Alleshouse worked for Wave Loch.

Under these circumstances, the court invalidated the assignment provision, reasoning that it “imposes [too harsh a] penalty on post-employment professional, trade, or business prospects—a penalty that has undoubted restraining effect on those prospects and that a number of courts have long held to invalidate certain broad agreements with those effects.”

Interestingly, Wave Loch cited Stanford v. Roche in its defense, arguing that the court there interpreted § 16600 to uphold the invention assignment provision used by Cetus. The Federal Circuit rejected this argument, however, stating that in Stanford , unlike Whitewater , “there was simply no evidence of a restraining effect on [the researcher’s] ability to engage in his profession.” But as pointed out by Professor Dennis Crouch, “The weak point of the Federal Circuit’s decision [in Whitewater ] is that it is seemingly contrary to its own prior express statement [in Stanford ] that ‘section 16600 [applies] to employment restrictions on departing employees, not to patent assignments.’” Footnote 13

Which view do you find more persuasive? Should Alleshouse have been required to assign his post-departure patents to Wave Loch? What would the result be in a state that did not have an analog to California’s § 16600? Should this question be resolved under Federal patent law ?

6. When does an assignable invention exist ? Another twist relating to employee invention assignments involves the point in time when an “invention” actually comes into existence and can thus be assigned. In Bio-Rad Labs, Inc. v. ITC and 10X Genomics (Fed. Cir. 2021), two employees each agreed to assign to Bio-Rad, their employer, any IP, including ideas, discoveries and inventions, that he “conceives, develops or creates” during his employment. Both employees left Bio-Rad to form 10X Genomics, which competed with Bio-Rad. Four months later, 10X began to file patent applications on technology that the employees had worked on while at Bio-Rad. The employees claimed that, while their work at 10X was related to their work at Bio-Rad, they did not actually “conceive” the inventions leading to their patents until after they had joined 10X. The Federal Circuit, applying California employment and contract law, agreed, holding that the assignment clause in the Bio-Rad agreements related to “intellectual property” and that an unprotectable “idea,” even if later leading to a patentable invention, was not IP and could thus not be assigned. That is, the court found that the assignment duty under the agreement was “limited to subject matter that itself could be protected as intellectual property.” If this is the case, then why did the Bio-Rad agreement expressly call for the assignment of “ideas” in addition to inventions and other forms of IP?

Figure 2.5 Richard Alleshouse was the product manager for Wave Loch’s FlowRider attraction, shown here as installed on the upper deck of a Royal Caribbean cruise ship.

Professor Dennis Crouch contrasts Bio-Rad with Dana-Farber Cancer Inst., Inc. v. Ono Pharm. Co., Ltd ., 964 F.3d 1365 (Fed. Cir. 2020), in which unpatentable, pre-conception ideas did give rise to a claim for ownership of patentable inventions conceived later. Footnote 14 Which approach do you think most accurately reflects the intentions of the parties? How would you draft an assignment agreement to unambiguously cover pre-conception ideas, or to avoid such assignments?

7. Indivisibility of patent rights . Unlike copyrights (see Section 2.2 , Note 5), the rights “within” a patent are indivisible. That is, the owner of a patent may not assign one claim of the patent to another, nor may it assign the exclusive right to make or sell one particular type of product. As set out by the Supreme Court in Waterman v. MacKenzie , 138 U.S. 252 (1891), a patent owner’s only options are to assign (1) the whole patent, (2) an undivided part or share of the whole patent, or (3) the patent rights “within and throughout a specified part of the United States” (a rarity these days). Thus, when a patent owner, under option (2), assigns “an undivided part” of a patent, the assignee receives an undivided interest in the whole, becoming a tenant in common with the original owner and any other co-owners (the rights and duties of such joint patent owners are discussed in greater detail in Section 2.5 ). Why do patents and copyrights differ in this regard? Should patents be “divisible” like copyrights? What advantages or disadvantages might arise from such divisibility?

8. Past infringement . The general rule in the United States is that “one seeking to recover money damages for infringement of [a] patent … must have held the legal title to the patent during the time of the infringement.” Arachnid, Inc. v. Merit Indus., Inc . 939 F.2d 1574, 1579 (Fed. Cir. 1991). Thus, the assignee of a patent only obtains the right to sue for infringement that occurred while it owned the patent. As the Supreme Court held a century and a half ago, “It is a great mistake to suppose that the assignment of a patent carries with it a transfer of the right to damages for an infringement committed before such assignment.” Moore v. Marsh , 74 U.S. (7 Wall.) 515 (1868). This rule often acts as a trap for the unwary (see, e.g., Nano-Second Technology Co., Ltd. v. Dynaflex International , 2013 U.S. Dist. LEXIS 62611 (N.D. Cal.) (language purporting to assign “the entire right, title and interest” to a patent failed to convey the right to sue for past infringement)). As a result, if the assignee wishes to sue for infringement occurring prior to the date of the assignment, the assignment must contain an express conveyance of this right. Does this rule still make sense today? Why might an assignor of a patent not wish to assign the right to sue for past infringement to a purchaser of the patent? What language would you use in an assignment clause to convey this important right to the assignee ?

Problem 2.1

The Brokeback Institute (BI) is a leading medical research center. The IP assignment clause in its standard consulting agreement reads as follows:

Consultant hereby assigns to BI all of its ownership, right, title, and interest in and to all Work Product. An Invention will be considered “Work Product” if it fits any of the following three criteria: (1) it is developed using equipment, supplies, facilities, or trade secrets of BI; (2) it results from Consultant’s work for BI; or (3) it relates to BI’s business or its current or anticipated research and development.

How would you react to and/or revise this clause if you represented a consultant who was one of the following:

a. A software developer being engaged by BI for a six-month, full-time engagement to update BI’s medical records software database.

b. A Nobel laureate biochemist with a faculty appointment at Harvard who will be visiting BI to teach a three-week summer class to freshman pre-med students.

c. A brain researcher from Oxford who has been invited to serve on the scientific advisory board of a BI grant-funded neurosurgery project, which will involve participation in one telephonic board meeting per calendar quarter.

d. A pathologist who will advise BI on the design of its new pathology lab, which is expected to require fifty hours of work over the next year.

Problem 2.2

Help out Stanford University by drafting an IP assignment clause applicable to its faculty members, including those who occasionally visit other institutions and companies to use their equipment and facilities.

2.4 Trademark Assignments and Goodwill

Like copyrights and patents, trademarks may be assigned by their owners. But as IP rights, trademarks differ in important respects from copyrights and patents. Most fundamentally, as discussed in the following case, an assignment of a registered trademark is invalid unless it is accompanied by an assignment of the associated business goodwill.

Sugar Busters LLC v. Brennan

177 f.3d 258 (5th cir. 1999).

KING, Chief Judge

Plaintiff-appellee Sugar Busters, L.L.C. (plaintiff) is a limited liability company organized by three doctors and H. Leighton Steward, who co-authored and published a book entitled “ SUGAR BUSTERS! Cut Sugar to Trim Fat ” in 1995. In “ SUGAR BUSTERS! Cut Sugar to Trim Fat ,” the authors recommend a diet plan based on the role of insulin in obesity and cardiovascular disease. The authors’ premise is that reduced consumption of insulin-producing food, such as carbohydrates and other sugars, leads to weight loss and a more healthy lifestyle. The 1995 publication of “ SUGAR BUSTERS! Cut Sugar to Trim Fat ” sold over 210,000 copies, and in May 1998 a second edition was released. The second edition has sold over 800,000 copies and remains a bestseller.

Brennan then co-authored “ SUGAR BUST For Life! ,” which was published in May 1998. “ SUGAR BUST for Life ” states on its cover that it is a “cookbook and companion guide by the famous family of good food,” and that Brennan was “Consultant, Editor, Publisher, [and] Sales and Marketing Director for the original, best-selling ‘ Sugar Busters!™ Cut Sugar to Trim Fat .’” Approximately 110,000 copies of “ SUGAR BUST for Life !” were sold between its release and September 1998.

Plaintiff filed this suit in the United States District Court for the Eastern District of Louisiana on May 26, 1998. Plaintiff sought to enjoin [Brennan] from selling, displaying, advertising or distributing “ SUGAR BUST for Life !,” to destroy all copies of the cookbook, and to recover damages and any profits derived from the cookbook.

The mark that is the subject of plaintiff’s infringement claim is a service mark that was registered in 1992 by Sugarbusters, Inc., an Indiana corporation operating a retail store named “Sugarbusters” in Indianapolis that provides products and information for diabetics. The “SUGARBUSTERS” service mark, registration number 1,684,769, is for “retail store services featuring products and supplies for diabetic people; namely, medical supplies, medical equipment, food products, informational literature and wearing apparel featuring a message regarding diabetes.” Sugarbusters, Inc. sold “any and all rights to the mark” to Thornton-Sahoo, Inc. on December 19, 1997, and Thornton-Sahoo, Inc. sold these rights to Elliott Company, Inc. (Elliott) on January 9, 1998. Plaintiff obtained the service mark from Elliott pursuant to a “servicemark purchase agreement” dated January 26, 1998. Under the terms of that agreement, plaintiff purchased “all the interests [Elliott] owns” in the mark and “the goodwill of all business connected with the use of and symbolized by” the mark.

The district court found that the mark is valid and that the transfer of the mark to plaintiff was not “in gross” because

[t]he plaintiff has used the trademark to disseminate information through its books, seminars, the Internet, and the cover of plaintiff’s recent book, which reads “ Help Treat Diabetes and Other Diseases .” Moreover, the plaintiff is moving forward to market and sell its own products and services, which comport with the products and services sold by the Indiana corporation. There has been a full and complete transfer of the good will related to the mark …

A trademark is merely a symbol of goodwill and has no independent significance apart from the goodwill that it symbolizes. Therefore, a trademark cannot be sold or assigned apart from the goodwill it symbolizes. The sale or assignment of a trademark without the goodwill that the mark represents is characterized as in gross and is invalid.

The purpose of the rule prohibiting the sale or assignment of a trademark in gross is to prevent a consumer from being misled or confused as to the source and nature of the goods or services that he or she acquires. Use of the mark by the assignee in connection with a different goodwill and different product would result in a fraud on the purchasing public who reasonably assume that the mark signifies the same thing, whether used by one person or another. Therefore, if consumers are not to be misled from established associations with the mark, [it must] continue to be associated with the same or similar products after the assignment.

Plaintiff’s purported service mark in “SUGARBUSTERS” is valid only if plaintiff also acquired the goodwill that accompanies the mark; that is, “the portion of the business or service with which the mark is associated.” [Brennan] claim[s] that the transfer of the “SUGARBUSTERS” mark to plaintiff was in gross because “[n]one of the assignor’s underlying business, including its inventory, customer lists, or other assets, were transferred to [plaintiff].” [Brennan’s] view of goodwill, however, is too narrow. Plaintiff may obtain a valid trademark without purchasing any physical or tangible assets of the retail store in Indiana – the transfer of goodwill requires only that the services be sufficiently similar to prevent consumers of the service offered under the mark from being misled from established associations with the mark.

In concluding that goodwill was transferred, the district court relied … on its finding that “plaintiff is moving forward to market and sell its own products and services, which comport with the products and services sold by the Indiana corporation.” Steward testified, however, that plaintiff does not have any plans to operate a retail store, and plaintiff offered no evidence suggesting that it intends to market directly to consumers any goods it licenses to carry the “SUGAR BUSTERS!” name. Finally, we are unconvinced by plaintiff’s argument that, by stating on the cover of its diet book that it may “[h]elp treat diabetes and other diseases” and then selling some of those books on the Internet, plaintiff provides a service substantially similar to a retail store that provides diabetic supplies. We therefore must conclude that plaintiff’s purported service mark is invalid.

1. Acquiring goodwill . The Servicemark Purchase Agreement between Elliott and Sugar Busters, LLC clearly purported to transfer “the goodwill of all business connected with the use of and symbolized by” the SUGARBUSTERS mark. Given this language, why did the Fifth Circuit find that the goodwill of the business was not transferred? In view of the court’s holding, how would you advise a client if it desires to acquire a trademark but not to conduct the same business as the prior owner of the mark?

2. Consumer confusion . Generally, trademark infringement cases hinge on whether an alleged infringer is causing consumer confusion as to the source of goods or services. A similar theory applies to the Fifth Circuit’s rule on in gross trademark assignments: If the new goods sold under the mark are significantly different than the old goods sold under the mark, then consumers might be confused as to the source and nature of the goods being sold. Why is this the case? What is the harm in this confusion?

3. Effect of an in gross transfer . Professor Barton Beebe notes, in discussing the Sugar Busters case, that “In most situations … the assignee may claim exclusive rights in the mark, but the basis of and the priority date for those rights stems only from the assignee’s new use of the mark, not from any previous use by the assignor.” Footnote 15 This conclusion is sensible – without the accompanying goodwill, the acquirer gets nothing from the original mark owner, but may begin to use the mark afresh and may build up goodwill based on its own use. But does this reasoning correspond with the holding of Sugar Busters ? Note the date on which the plaintiff purported to acquire the trademark from Elliott (January 26, 1998), when Brennan’s allegedly infringing book was released (May 26, 1998) and when the plaintiff brought suit against Brennan (May 26, 1998). Even if the plaintiff acquired no trademark rights at all from Elliott, wouldn’t it have acquired some enforceable rights between January and May, 1998? And what about any common law trademark rights that the plaintiff accrued from the 1995 publication of its first Sugar Busters book?

4. Toward free transfer ? Professor Irene Calboli argues that the rule requiring transfer of goodwill with trademarks is an outdated trap for the unwary that should be abolished. She hypothesizes a transaction in which a new company acquires the Coca-Cola Company, observing all the proper formalities, and then decides to apply the famous Coca-Cola mark not to carbonated colas, but to salty snacks. Will consumers be confused? Possibly, but the new owner is perfectly within its rights to apply the mark to its snack products rather than colas. Would consumers be worse off if the transaction documentation had neglected to reflect a transfer of goodwill? Calboli reasons that

the rule of assignment “with goodwill” is failing to meet its purpose and … rather than focusing on a sterile and confusing requirement, the courts should focus directly on the assignee’s use of the mark. If this use is likely to deceive the public, the courts should declare the assignments at issue void. Yet, if no likelihood of confusion or deception results from the transaction, the courts should allow the assignments to stand. Footnote 16

Do you agree? Does the prohibition on in gross transfers of trademarks serve any useful purpose today? Footnote 17

5. Recordation . The recordation requirements for trademarks are similar to those for patents. As provided under 15 U.S.C. § 1060(3):

An assignment shall be void against any subsequent purchaser for valuable consideration without notice, unless the prescribed information reporting the assignment is recorded in the United States Patent and Trademark Office within 3 months after the date of the assignment or prior to the subsequent purchase.

As with patents, this provision is a modified form of “race-notice” recording statute. The second assignee of a trademark may prevail over a prior, unrecorded assignee if the second assignee records first without notice of the earlier assignment unless the first assignee records within three months of the first assignment.

6. Security interests and mortgages . The recording statute for patents 35 U.S.C. § 261 refers to “a subsequent purchaser or mortgagee” of a patent, whereas the statute for trademarks refers only to “a subsequent purchaser.” Why does the trademark statute omit mention of mortgagees? Can a trademark be mortgaged? What might prevent this from happening effectively?

7. Short-form assignments . Intellectual property rights are often conveyed as part of a larger corporate merger or acquisition transaction. In order to avoid filing the entire transaction agreement with the Patent and Trademark Office for recording purposes, the parties often execute a short-form assignment document that pertains only to the assigned patents or trademarks. This short-form document is then recorded at the Patent and Trademark Office. A sample of such a short-form assignment follows.

Short-Form Trademark Assignment (for Filing with the US Patent and Trademark Office)

This assignment is made as of the ____ day of ______________ by ASSIGNOR INC., a _______ corporation having a principal place of business at ______________, hereinafter referred to as the ASSIGNOR, to ASSIGNEE CORP., a ___________ corporation, having a principal place of business at __________________, hereinafter referred to as ASSIGNEE.

WHEREAS, ASSIGNOR is the owner of the registered trademarks and trademark applications, hereinafter collectively referred to as the TRADEMARKS, identified on Schedules “A” and “B” attached hereto, together with the good will and all rights which may have accrued in connection therewith.

WHEREAS, ASSIGNEE is desirous of acquiring the entire right, title and interest of ASSIGNOR in and to said TRADEMARKS together with said rights and the good will of the business symbolized thereby.

NOW, THEREFORE, for good and valuable consideration paid by the ASSIGNEE, receipt of which is hereby acknowledged, ASSIGNOR does hereby sell, assign, transfer and set over to ASSIGNEE, its successors and assigns, ASSIGNOR’s entire right, title and interest in and to the TRADEMARKS, together with said good will of the business symbolized thereby, said TRADEMARKS to be held and enjoyed by the ASSIGNEE, its successors and assigns as fully and entirely as the same would have been held and enjoyed by the ASSIGNOR had this assignment not been made.

ASSIGNOR covenants and agrees to execute such further and confirmatory assignments in recordable form as the ASSIGNEE may reasonably require to vest record title of said respective registrations in ASSIGNEE.

IN WITNESS WHEREOF, ASSIGNOR has caused this Assignment to be executed by a duly authorized officer.

By: _____________________ Date: ____________________

2.5 Assignment of Trade Secrets

Like other IP rights, trade secrets may be assigned by their owners. As the leading treatise on trade secret law announces in the heading of one of its chapters, “Trade Secrets Are Assignable Property.” Footnote 18 Yet the assignment of trade secrets is perhaps the least developed and understood among IP types.

Part of the complexity arises from the fact that the term “trade secret” refers to two distinct concepts: A trade secret is, on one hand, a piece of information that derives value from being kept secret. Yet the term also refers to the set of enforceable legal rights that give the “owner” of that information legal redress for its improper acquisition or usage. In some ways, this dichotomy is similar to that seen with patents and copyrights. On one hand, there is an invention, and on the other hand, a patent right that gives its owner enforceable legal rights with respect to that invention. Likewise, a work of authorship and the copyright in that work of authorship. Unfortunately, trade secrecy law is hobbled by the existence of only a single term to describe both the res that is protected, and the legal mode of its protection.

It is for this reason that the few courts that have considered issues surrounding trade secret assignment have distinguished between “ownership” of a trade secret and its “possession.” In DTM Research, L.L.C. v. AT&T Corp ., 245 F.3d 327, 332 (4th Cir. 2001), the court held that “While the information forming the basis of a trade secret can be transferred, as with personal property, its continuing secrecy provides the value, and any general disclosure destroys the value. As a consequence, one ‘owns’ a trade secret when one knows of it, as long as it remains a secret.” Accordingly, the court held that a party possessing secret information is entitled to seek redress against another party that misappropriated it, even if the first party lacks “fee simple” title to that information (i.e., if the first party itself allegedly misappropriated the information from another).

Possession of a trade secret also figures prominently in cases that discuss the assignment of trade secrets. When the owner of a copyrighted work of art transfers the copyright to a buyer, the transferor loses its right to reproduce the work further. Likewise, when the owner of a trade secret transfers that secret to a buyer, the transferor loses its right to exploit that secret further. As the court explained in Memry Corp. v. Ky. Oil Tech., N.V ., 2006 U.S. Dist. LEXIS 94393 at *16 (N.D. Cal. 2006), “in giving up all rights to use of the secrets through assignment, the assignor is implicitly and legally bound to maintain the secrecy of the information contained in the trade secrets.”

2.6 Joint Ownership

Just like real and personal property, IP may be co-owned by multiple parties. But the laws regarding joint ownership of IP are different than those affecting real and personal property. To make matters worse, they also differ based on the kind of IP involved, and they vary from country to country. As a result, planning for joint ownership of IP can become fraught with risks and traps for the unwary. As one waggish practitioner has written, “‘Joint ownership of IP’ – no words strike more terror into the heart of an IP practitioner than the task of having to provide appropriate contractual provisions in such a situation.” Footnote 19

Joint ownership of IP rights impacts prosecution of patents and trademarks, exploitation of those rights, and licensing and enforcement of rights. These principles are discussed below in the context of patents, copyrights, trade secrets and trademarks under US law.

2.6.1 Patents

When more than one individual makes an inventive contribution to an invention, the resulting patent will be jointly owned. As explained by the Federal Circuit in Ethicon v. United States Surgical Corp. , 135 F.3d 1456, 1465 (Fed. Cir. 1998), “in the context of joint inventorship, each co-inventor presumptively owns a pro rata undivided interest in the entire patent, no matter what their respective contributions.”

The rights of joint owners of patents are described in 35 U.S. Code § 262:

In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.

Thus, each co-owner of a patent may independently exploit the patent without the consent of its co-owners. But unlike copyrights, joint owners of patents do not owe one another a duty of accounting or sharing of profits. Thus, the co-owner of a patented process that uses it to embark on a profitable new manufacturing venture has no obligation to share any of its earnings with the co-owners of the patent.

Any co-owner of a patent may also license it to others, again with no obligation to share royalties or other amounts received with its co-owners. Footnote 20 While a co-owner may grant an exclusive license to a third party, and that exclusivity may operate to prevent the granting co-owner from granting further licenses to others, it has no effect on the other co-owners of the patent, who may continue to exploit or grant other licenses under the patent.

Likewise, any co-owner of a patent may bring suit to enforce it against an infringer, but in order for the suit to proceed, it must join all other co-owners in the suit (see Section 11.1.5 ). Moreover, as illustrated in Ethicon , a retroactive license from any co-owner will serve to authorize the infringer’s conduct, thus defeating a suit brought by fewer than all co-owners .

2.6.2 Copyrights

There are some similarities between the treatment of joint owners under US copyright and patent law. Under US copyright law, each co-owner of a copyright may independently exploit the copyright without permission of the other co-owners. This exploitation includes performance, reproduction, creation of derivative works and all other exclusive rights afforded by the Copyright Act. However, unlike patents, a copyright co-owner who earns profits from the exploitation of a jointly owned work must render an accounting to his or her co-owners and share the profits with them on a pro rata basis. Thus, if three members of a band compose a song, and one of them quits to pursue a solo career, the soloist must account to the other two for any profits that he or she earns from performing the song (or a derivative of it) for the duration of the copyright.

Likewise, any co-owner of a copyright may license the copyright to others. As with patents, an exclusive license granted by a single co-owner will not be particularly valuable to the licensee, as the other co-owners are free to license the same rights to others. Such an exclusive license will thus be considered nonexclusive for purposes of standing to sue. Footnote 21 As with other exploitation, the copyright licensor must account to the other co-owners for any profits earned based on the license.

Finally, any co-owner of a copyright may sue to enforce the copyright against an infringer without the consent of the other co-owners. As with patents, a license from any co-owner will serve to authorize the infringer’s conduct. But unlike patent infringement litigation, notice to the co-owners of a copyright, and their joinder in an infringement suit, is not mandatory, but discretionary in the court (see 17 U.S.C. § 501(b), discussed in greater detail in Section 11.1.5 , Note 5).

2.6.3 Trade Secrets

There is scant case law, and little reliable commentary, discussing the rights and obligations of joint owners of trade secrets to one another. Yet from the authority that exists, it appears that joint owners of trade secrets, unlike joint owners of patents and copyrights, are not free to exploit jointly owned trade secrets without the consent of their co-owners.

Thus, in Morton v. Rank Am., Inc ., 812 F. Supp. 1062, 1074 (C.D. Cal. 1993), one co-owner of trade secrets relating to the operations of the Hard Rock Café chain sued another co-owner who used the information in violation of a noncompetition agreement. The court held that, under California law, being the co-owner of a trade secret does not necessarily insulate one from a claim of trade secret misappropriation. In Jardin v. DATAllegro, Inc ., 2011 U.S. Dist. LEXIS 84509 *15 (S.D. Cal. 2011), another California court, citing Morton , held that a joint owner of a trade secret could be liable for disclosing the trade secret in a patent application without the permission of his co-owner.

It also appears, in at least one case, that a co-owner of a trade secret may sue a third party for misappropriation of that trade secret without the consent of the other co-owner(s). In MGP Ingredients, Inc. v. Mars, Inc ., 465 F. Supp. 2d 1109 (D. Kan. 2006), MGPI and SNM jointly owned trade secrets relating to the formulation of the popular Greenies® dog chews. MGPI alleged that SNM impermissibly disclosed these trade secrets to Mars, Inc., which then began to manufacture its own dog chews using the secret formula. The court rejected Mars’ motion to dismiss MGPI’s suit for trade secret misappropriation against both SNM and Mars on the basis that SNM was a co-owner of the trade secrets .

2.6.4 Trademarks

Unlike patents, copyrights and trade secrets, the primary purpose of a trademark is to act as an indication of the source of goods or services. The ownership of a single mark by two or more entities contradicts this fundamental principle and is thus “disfavored” by the law. As the Sixth Circuit cautions in Yellowbook Inc. v. Brandeberry , 708 F.3d 837, 845 (6th Cir. 2013),

Joint ownership is disfavored in the trademark context. By their nature, trademarks derive their value from exclusively identifying a particular business. If customers are confused about which business the mark refers to, one of the users may unfairly benefit from the goodwill of the other, or the goodwill of the mark may be dissipated entirely. Beneficial joint ownership or licensing schemes may be devised, but courts are not well placed to fill in these details, and parties (and customers) are typically best served by exclusive ownership.

Nevertheless, the PTO permits joint ownership of registered marks. One scenario in which this is permitted is when the joint owners are related companies that exhibit a “unity of control” that eliminates consumer confusion because the joint owners are, for practical purposes, operating as a single unit. Footnote 22 In another scenario, two parties may be granted “concurrent” registrations for the same mark in connection with a similar product in different geographic markets. Footnote 23 In addition, the owner of a trademark registration may assign a partial interest in that registration to a third party, after which both parties will be co-owners of the registration. Footnote 24 This situation occurs, inter alia , as a result of the break-up of joint ventures and the inheritance of businesses by multiple heirs or testamentary beneficiaries. Footnote 25

When a jointly owned trademark serves as an indication of source, no individual co-owner has the right to exploit that mark separately from the collective use made by the joint owners. For example, the four original members of the musical group “The Commodores” held common law trademark rights in the group’s name. When Thomas McClary, one of the group’s members, left the group and began to perform under the names “The 2014 Commodores” and “The Commodores Featuring Thomas McClary” the other group members sued him for trademark infringement and a number of other causes. The Eleventh Circuit held in Commodores Entm’t Corp. v. McClary , 879 F.3d 1114 (11 th Cir. 2018) that “The rights to use the name ‘The Commodores’ remained with the group after McClary departed, and the corollary is also true: McClary did not retain rights to use the marks individually.”

1. Vive la difference ? Why is there such discord among four areas of US IP law regarding the rights of joint owners? Would there be value in harmonizing these different systems? How would you recommend that such harmonization be pursued?

2. Economic justifications . Judge Richard Posner offers a potential economic justification for the discrepancies in the treatment of jointly owned copyrights and patents.

In both domains, a joint owner is allowed to use or license the jointly owned work without the permission of the other owner or owners; this rule reduces transaction costs by eliminating bilateral monopoly. But the joint owner of a copyright who uses or licenses a copyright must account to the other owners for the profits of the use and share them with those others, while the joint owner of a patent need not. The latter rule provides greater encouragement to inventors to keep working to improve their inventions, consistent with the continuously improving quality of technology, but not of the arts. Footnote 26

What do you think of this explanation? Would requiring the co-owner of a patent to share its profits from the exploitation of the patent with its co-owners decrease innovation? Why doesn’t the accounting requirement similarly dampen creative activity?

Figure 2.6 Though he was an original member of the musical group The Commodores, Thomas McClary did not retain rights to utilize the group’s name after he left the band in 1984.

3. International inconsistency . Commentators have long observed that US law is out of step with the laws of many other countries in how it handles jointly owned IP. For example, in many countries in Europe and Asia, IP rights may not be exploited, licensed or asserted without the consent of all joint owners. Is this approach preferable? What does it mean for joint owners of IP?

In 1990, Professor Robert Merges and Lawrence Locke analyzed the laws of the United States and various other countries regarding their handling of joint patent owners. They concluded, among other things, that:

The American rule permitting co-owners to work their patent without compensating the other co-owners is preferable to the French rule requiring compensation … [T]he French rule can lead to a situation where both co-owners elect not to work the patent, in hopes of forcing the other co-owner to work it and split the profits. Since society has an obvious interest in seeing patented technology developed, the American rule is better.

The right of co-owners to license and assign their full interest, or any portion of it, should be restricted according to the rule in effect on the continent, in Great Britain and in Japan: consent of all co-owners should be required. This will prevent one co-owner from taking advantage of the others … Footnote 27

Do you concur with these recommendations? Why or why not? Should any of Merges and Locke’s recommendations be applied to forms of IP other than patents?

1 See Enovsys LLC v. Nextel Commc’ns Inc ., 614 F.3d 1333, 1342 (Fed. Cir. 2010).

2 See also Section 12.4 , Note 4, discussing these statutory provisions as mechanisms for terminating copyright licenses .

3 See Timothy K. Armstrong , Shrinking the Commons: Termination of Copyright Licenses and Transfers for the Benefit of the Public , 47 Harv. J. Legis . 359 , 405–09 ( 2010 ) (discussing implications for software) and Jorge L. Contreras & Andrew Hernacki , Copyright Termination and Technical Standards , 43 U. Baltimore L. Rev . 221 ( 2014 ) (discussing implications for technical standards) .

4 See Jonathan M. Barnett , Why Is Everyone Afraid of IP Licensing ? 30 Harv. J.L. & Tech. 123 , 126 ( 2017 ) .

5 See Standard Parts Co. v. Peck , 264 U.S. 52 (1924) (employee hired to invent a specific improvement owed a duty to assign patent rights to the employer even though the employment contract did not specifically mention patent rights).

6 See 8 Chisum on Patents § 22.03[2] (“The line between these ‘hired-to-invent’ and ‘general employment’ categories is a fine one, and it often must be drawn on the basis of sharply conflicting testimony … [ Standard Parts Co. v. Peck ] has served as a precedent for a multitude of decisions by lower federal courts, both finding (1) an employment to invent and (2) the absence of such employment.”)

7 As explained by Professor Chisum, “The classic ‘shop right’ doctrine provides that an employee who uses his employer’s resources to conceive an invention or to reduce it to practice must afford to his employer a nonexclusive, royalty-free, nontransferable license to make use of the invention, even though the employee subsequently obtains a patent thereon. The shop right is not an ownership interest in the patent. Rather it constitutes a defense to a charge of patent infringement by the employee or his/her assignee.” 8 Chisum on Patents § 22.03[3].

8 See, e.g., Jesse Dukeminier et al., Property 716 ( 8th ed., Wolters Kluwer Law & Business , 2014 ) .

9 For a discussion and lively critique of this doctrine, see Carol M. Rose , Crystals and Mud in Property Law , 40 Stan. L. Rev . 577 ( 1988 ) .

10 Professor Sean O’Connor analyzes the FilmTec rule and Justice Breyer’s critique in Sean O’Connor , The Aftermath of Stanford v. Roche: Which Law of Assignments Governs? , 24 Intell. Prop. J. 29 ( 2011 ) . Professor Dennis Crouch considers these issues in the context of patent prior art in Dennis Crouch , Not-Yet Filed Invention Rights, Patently-O, December 2, 2020, https://patentlyo.com/patent/2020/12/filed-invention-rights.html .

11 For a discussion of the substance of Justice Breyer’s dissent in Stanford v. Roche , see Section 2.3 , Note 3.

12 See Parker Tresemer , Best Practices for Drafting University Technology Assignment Agreements after FilmTec, Stanford v. Roche, and Patent Reform , 2012 U. Ill. J.L. Tech. & Pol’y 347 ( 2012 ) (offering concrete proposals for the improvement of university assignment documents), Sean M. O’Connor , The Real Issue Behind Stanford v. Roche: Faulty Conceptions of University Assignment Policies Stemming from the 1947 Biddle Report , 19 Mich. Telecomm. & Tech. L. Rev. 379 , 421 ( 2013 ) (noting that “it is not clear that universities will be able or willing to impose new present assignment agreements upon their faculty without some form of consideration or shared governance consultation”). Notwithstanding the notoriety of Stanford v. Roche , not all universities appear to have gotten the message. For example, in Omni Medsci, Inc. v. Apple Inc. , 7 F.4th 1148 (Fed. Cir. 2021), the Federal Circuit held that a University of Michigan bylaw providing that intellectual property in a faculty member’s inventions “shall be the property of the University” did not automatically assign the inventor’s rights in the invention to the university. It explains that “On its face, [the clause] does not unambiguously constitute either a present automatic assignment or a promise to assign in the future. It does not say, for example, that the inventor ‘will assign’ the patent rights—language that this court has previously held to constitute an agreement to assign rather than a present assignment. Nor does it say that the inventor ‘agrees to grant and does hereby grant’ title to the patent—language that this court has previously held to constitute a present automatic assignment of a future interest. We conclude that [the clause] is most naturally read as a statement of intended disposition and a promise of a potential future assignment, not as a present automatic transfer.”

13 Dennis Crouch, Overbroad Assignment Agreement: Invalid under California Law, Patently-O, November 19, 2020, https://patentlyo.com/patent/2020/11/overbroad-assignment-california.html .

14 See Dennis Crouch, Pre-Invention Innovations Not Captured by Employment Agreement Duty to Assign, Patently-O, April 29, 2021, https://patentlyo.com/patent/2021/04/invention-innovations-employment.html .

15 Barton Beebe, Trademark Law: An Open Source Casebook, version 4.0 at Part III, 127 (2017).

16 Irene Calboli , Trademark Assignment “With Goodwill”: A Concept Whose Time Has Gone , 57 Fla. L. Rev. 771 , 776 ( 2005 ) .

17 Note that the requirement that a trademark license be accompanied by a transfer of goodwill was rejected in Dawn Donut Co. v. Hart’s Food Stores, Inc ., 267 F.2d 358 (2d Cir. 1959), discussed in Section 13.1 .

18 Milgrim on Trade Secrets, § 2.02.

19 Neil Wilkof , Joint Ownership of a Trade Mark: The Tribulations of Termination , IPKat, November 26, 2010 , https://ipkitten.blogspot.com/2010/11/joint-ownership-of-trade-mark.html .

20 See Schering Corp. v. Roussel-UCLAF SA , 104 F.3d 341, 344 (Fed. Cir. 1997) (“Each co-owner’s ownership rights carry with them the right to license others, a right that also does not require the consent of any other co-owner”).

21 See Sybersound Records, Inc. v. UAV Corp. , 517 F.3d 1137 (9th Cir. 2008).

22 See Trademark Manual of Examining Procedure (TMEP), 1201.07(b)(ii).

23 15 U.S.C. § 1052(d) (“Concurrent registrations may also be issued by the Director when a court of competent jurisdiction has finally determined that more than one person is entitled to use the same or similar marks in commerce. In issuing concurrent registrations, the Director shall prescribe conditions and limitations as to the mode or place of use of the mark or the goods on or in connection with which such mark is registered to the respective persons”).

24 Trademark Manual of Examining Procedure (TMEP), 501.06.

25 See, e.g., Iskenderian v. Iskenderian , 144 Cal. App. 4th 1162 (Cal. App. 2006) (trademark in family restaurant was validly transferred by late parent to three children).

26 Richard A. Posner , Intellectual Property: The Law and Economics Approach , 19 J. Econ. Persp. 57 , 70 ( 2005 ).

27 Robert P. Merges & Lawrence A. Locke , Co-ownership of Patents: A Comparative and Economic View , 72 J. Pat. & Trademark Off. Soc’y 586 ( 1990 ).

Figure 2.2 The creators of the Superman character died in near poverty while the Man of Steel went on to form a multi-billion-dollar franchise. Sections 203 and 304 of the US Copyright Act were enacted to enable authors and their heirs to terminate any copyright assignment or license between 35 and 40 years after originally made in order to permit them to share in the value of their creations.

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• Ownership and Assignment of Intellectual Property
• Jorge L. Contreras , University of Utah
• Book: Intellectual Property Licensing and Transactions
• Online publication: 21 June 2022
• Chapter DOI: https://doi.org/10.1017/9781009049436.003

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Intellectual Property Assignment Agreements & Licenses

Intellectual property (IP) can be just as valuable as—or even more valuable than—tangible property. Many companies make money exclusively through marketing products based on intellectual property rights. That’s why it is so important to protect your intellectual property through patents, trademarks, copyrights, and other legal devices that keep your intellectual property safe.

However, once you have secured your intellectual property rights, it is sometimes more convenient or valuable to let someone else use them in exchange for a fee, which is why intellectual property agreements and intellectual property contracts exist. These documents are complex agreements that determine the manner in which third parties can use your intellectual property. Intellectual property agreements and intellectual property contracts require careful negotiation, and owners of intellectual property should conduct these negotiations with the support of an experienced intellectual property lawyer. Through Priori, you can connect with a vetted a lawyer who can help you draft and negotiate an intellectual property agreement or an intellectual property contract.

Understanding Intellectual Property Agreements & Intellectual Property Contracts

Because you have the right to confer your intellectual property rights to other parties, intellectual property agreements can take one of two basic form: assignment agreements and IP license agreements.

About Assignment Agreements

Under an intellectual property assignment agreement, you permanently transfer some or all IP rights to the assignee in exchange for a specified sum. Essentially, you sell the rights to a third party the same way that you could sell physical property for a permanent transfer. Generally, you relinquish all control, involvement, and claim on the intellectual property rights transferred.

About Intellectual Property Licensing

Under an intellectual property licensing agreement (also known as an intellectual property license or an intellectual property license agreement), you retain ownership of your patent, copyright, or trademark, but you give another party permission to use some or all of your intellectual property rights for a specific amount of time for a fee or royalty. These intellectual property contracts typically specify termination dates and procedures.

There are several types of intellectual property licenses embodied in a typical intellectual property agreement. The following three are the most common:

• Exclusive License.  You agree not to grant any other licenses of the invention and rights concerned, as well as not to use the technology yourself.
• Sole License . You agree not to grant any other licenses of the invention and rights concerned, but you can use such rights yourself.
• Non-Exclusive License . You agree to give the licensee certain rights, but you also reserve the right to grant licenses of the invention and rights concerned to third parties or to use them yourself.

You can also combine elements of these three types of intellectual property agreements, such as by giving an intellectual property license for exclusive rights in certain geographic areas. You can review a sample patent license agreement in Priori's Document and Form Learning Center . You can also learn more about software licenses here . 

Intellectual Property Assignment Agreement vs. Intellectual Property License

Which is better, an intellectual property assignment agreement or an intellectual property license? The reality is that there are pros and cons to each choice, depending on your needs and interests. Most of the time, IP holders want to maintain control of their IP, and they choose intellectual property licensing. This is advantageous because you can determine the manner in which your IP is used and change partners if a partnership isn’t advantageous. Also, intellectual property licensing allows you to produce a steady income from your IP over a particular time period and possibly confer the same rights to multiple users.

Intellectual property assignment agreements can also have its advantages, however. If you assign intellectual property to a third party, you no longer have any responsibility towards the product. That means you cannot generally be sued for problems relating to your IP and you are not responsible for any maintenance fees. Intellectual property assignment is generally more appropriate when you are selling your business or leaving a field entirely.

Priori Pricing

Depending on the complexity of your needs, the cost of drafting intellectual property licensing or intellectual property assignment agreements may vary. Priori attorneys typically create flat-rate packages ranging from $400 to $1,500 for relatively straightforward intellectual property agreements. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.

How does an exclusive license differ from an assignment?

While both exclusive intellectual property licenses and intellectual property assignment agreements give exclusive exercise of that right to another person in exchange for monetary compensation, an exclusive license is much more limited than an assignment. If you assign an IP right to another person, you permanently transfer that right and would have to repurchase it in order to use it again.

An IP license is generally subject to a certain term and possible renewal. For that reason, you generally get more money upfront with an assignment. In addition, unless otherwise stated in the contract, an exclusive license cannot generally be handed off to a third party without your permission, but if you assign that right to someone else, they can then license or sell it as they see fit.

What is an implied license?

In certain circumstances, an implied IP license arises without the existence of a formal licensing agreement if the conduct of the parties indicates that the IP right holder intended to license certain rights to the other party. Often, courts grant implied licenses in cases where one party created a copyrighted work at the request of another under a contract that did not explicitly confer the copyright to the purchaser after payment and completion of the work.

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Intellectual Property Assignment Agreement: Definition & Sample

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ContractsCounsel has assisted 37 clients with intellectual property assignment agreements and maintains a network of 65 intellectual property lawyers available daily. Customers rate lawyers for intellectual property assignment agreement matters 5.0.

What is an Intellectual Property Assignment Agreement?

An intellectual property assignment agreement is a contract that transfers the intellectual property rights (For example, patents, trademarks, industrial designs, or copyrights) from the creator to another entity. The intellectual property rights holder may transfer all or part of their rights. The transfer of intellectual property rights is made upon a payment of a lump sum or royalties.

Employees hired for research and development roles or other technical areas sign intellectual property assignment agreements to assign to the company any ideas, work products, or inventions related to the company business that they may create during their employment.

Common Sections in Intellectual Property Assignment Agreements

Below is a list of common sections included in Intellectual Property Assignment Agreements. These sections are linked to the below sample agreement for you to explore.

Intellectual Property Assignment Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.12 3 dex1012.htm FORM OF INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT , Viewed October 24, 2021, View Source on SEC .

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Intellectual Property Assignment Agreement

Nov 2, 2022

An intellectual property assignment agreement is an agreement to transfer intellectual property from one person or company to another.

What is an Intellectual Property Assignment Agreement?

An intellectual property assignment agreement is an agreement to transfer intellectual property from one person or company to another. The agreement may also be referred to as an intellectual property transfer agreement, an IP assignment agreement or an IP transfer agreement.

When should you use an Intellectual Property Assignment Agreement?

An intellectual property assignment agreement should be used whenever transferring the rights in intellectual property ( IP ). There are a number of situations where you may need to do this. The most common for SMEs is where an individual has done work for a company as a consultant without using a consultancy agreement with the result that the consultant and not the company, owns the IP in the work. It is also necessary to transfer IP where founders create IP before incorporating or being employed by a company and, as a result, title to the IP vests in the founder.  

Why is an Intellectual Property Assignment Agreement important and why should you use it?

Investors in early stage companies will often require the company and key employees to give warranties confirming that the company owns all material IP used by the company. Any IP not owned by the company will need to be transferred to the company before the investment is completed. Failing to transfer the IP can materially impact the valuation of the company or, in extreme cases, lead investors to pull out of the transaction.

It is necessary to use a written agreement for an assignment of certain types of IP (such as copyright) to be effective. Further, it is important to ensure that the agreement is an enforceable contract. For the contract to be enforceable there must be some form of consideration paid in exchange for the IP. The amount of consideration payable will depend on the situation in which the IP is being transferred. If a consultant or founder is transferring IP that should have been owned by the company, the consideration should be a nominal amount, e.g. £1, which is deemed to have been received by the assignor (note that some form of consideration is required for the agreement to be an enforceable contract). The IP can, however, be transferred for valuable consideration or as part of an asset sale.

An IP assignment will also include warranties to confirm that the assignor is the owner of the intellectual property being transferred and that the assignor has the right to transfer the intellectual property. Transferring intellectual property without these assurances means that your company will have limited or no recourse should it transpire that the assignor did not own or have the right to transfer the intellectual property.

What are the common pitfalls of an Intellectual Property Assignment Agreement?

Where possible, it is important to clearly describe the IP being transferred. IP by its nature is not physical so failing to accurately describe the IP can result in disputes about what has been transferred. 

Further, there are several different types of IP (copyright, patents, trade marks and designs). Certain IP rights can also be registered. Depending on what is being transferred it may be necessary to take additional steps to perfect the transfer (for example notifying the appropriate register of the transfer). The agreement should include a requirement that the assignor takes the necessary steps to perfect the transfer and specify which party is required to pay any associated costs (such as registration fees).

In addition where copyright is being transferred, the assignor should also ensure that the assignor waives their moral rights (such as the right to attribution) in respect of the copyrighted work.

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Related Content

• checklists (2)
• practice notes (9)
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Intellectual Property Assignment definition

What does intellectual property assignment mean, view the related checklists about intellectual property assignment, university spin-offs—checklist.

University spin-offs—checklist Universities undertake a significant amount of research and therefore potentially generate a lot of protectable IP. This Checklist presents issues to consider in exploiting such IP, looked at from the perspectives of different people who may be involved in the creation and subsequent use of that IP. By definition universities and other academic institutions undertake a significant amount of research and therefore generate a lot of IP rights. The protection and exploitation of IP is both expensive and time consuming and often a university is better placed to take on this role than individual academics. Larger universities often have an IP policy requiring academics to assign all IP rights arising from their research to the university. In return incentives such as a share in the revenue generated by the IP will be given. Once a university has secured ownership of IP there are various ways in which it can be commercialised. These include: • donation for the general good of the public • licensing to existing third parties...

Sale of business as a going concern—checklist of information

Sale of business as a going concern—checklist of information General checklist Set out below is a checklist of some of the issues that a lawyer acting for an administrator (and the directors/company in some situations pre-appointment) selling a business and its assets should have in mind when drafting a sale and purchase agreement (the Agreement). This checklist can be used in a pre-pack situation or in a post-administration sale of business and/or assets. The checklist is not exhaustive, and depending on the type of business, there may be many other issues to consider. For more information, see: Sale and Purchase of Assets—overview and Pre-packs—overview. Below we make reference in places to asking the directors for information. This will not always be possible, eg in a hostile situation. Therefore, where directors are on board, they should be able to supply the information and will often be best placed to do so, but where hostile or if you are acting solely for the administrators, any requests should be made to the administrators,...

View the related practice notes about Intellectual Property Assignment

Joint ownership of intellectual property rights.

Joint ownership of intellectual property rights When parties collaborate on creative projects or research and development, complex questions arise about the ownership of any resulting IP. Joint ownership of IP may seem like a straightforward and fair solution where parties have worked together and cannot distinguish the output of their respective efforts. However, where parties fail to give careful consideration as to how their jointly created IP will be owned, organised and exploited, there are legal pitfalls, practical difficulties and obstacles to full commercialisation of the IP. In the vast majority of cases it is preferable for parties to enter into an express agreement on joint ownership of IP rather than relying upon the default legal position. This Practice Note provides an overview of the law on joint ownership of IP (also known as co-ownership, used interchangeably in this note): • Implied joint ownership—basic principles • Implied joint ownership—risks and obstacles • Joint ownership agreements—key considerations • Alternatives to joint ownership of IP • Summary—joint ownership checklist...

Assigning intellectual property rights

Assigning intellectual property rights Legislative framework This Practice Note considers the assignment of IP rights. It covers the statutory provisions governing the formalities for the legal assignment of patents, trade marks, copyright and designs set out in the Patents Act 1977 (PA 1977), the Trade Marks Act 1994 (TMA 1994), the Copyright, Designs and Patents Act 1988 (CDPA 1988), the Registered Designs Act 1949 (RDA 1949) and Assimilated Regulation (EU) 6/2002, including the partial assignment of such rights. It also considers equitable assignment of IP rights. As well as looking at the common features for the assignment of patents, trade marks, copyright and designs, it examines the special considerations that should be taken into account when assigning each right. It also covers the assignment of future IP rights, and the assignment of comparable trade marks and re-registered designs. It considers how to register (or record) assignments at the UK Intellectual Property Office (IPO) and the consequences of non-registration. It summarises the key terms of an assignment and sets out practical...

Discover our 9 Practice Notes on Intellectual Property Assignment

View the related precedents about Intellectual Property Assignment

Intellectual property assignment—pro-assignor.

Intellectual property assignment—pro-assignor This Agreement is dated [insert date] Parties 1 [insert name] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Assignor); and 2 [insert name] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Assignee) (each of the Assignor and the Assignee being a party and together the Assignor and the Assignee are the parties). BACKGROUND (A) The Assignor is the owner of certain intellectual property rights. (B) The Assignor has agreed to assign such intellectual property rights to the Assignee and the Assignee has agreed to accept the assignment in accordance with the terms of this Agreement. The Parties Agree: 1 Definitions and interpretation 1.1 In this Agreement: Affiliate • means any entity that directly or indirectly controls, is controlled by or is under common control with, another entity; Assigned Rights • means [all Intellectual Property Rights...

Copyright assignment—pro-assignee

Copyright assignment—pro-assignee This DEED is made on [insert date] Parties 1 [insert name] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Assignor); and 2 [insert name] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Assignee) each of the Assignor and the Assignee being a party and together the Assignor and the Assignee are the parties. Background (A) The Assignor is the [author AND/OR exclusive] proprietor of certain rights in the [insert description, eg literary] works. (B) The Assignee is [insert description of the Assignee’s background/background to assignment or relevant transaction]. (C) The Assignor agrees to assign their rights in such works to the Assignee and the Assignee agrees to accept the assignment in accordance with the terms of this Deed. THIS DEED PROVIDES: 1 Definitions and interpretation 1.1 In this Deed: Affiliate • means any entity that directly...

Dive into our 4 Precedents related to Intellectual Property Assignment

View the related q&as about Intellectual Property Assignment

When intellectual property (ip) is sold, does ownership transfer subject to any licences that have been granted in respect of that ip do the licences encumber the ip.

When Intellectual Property (IP) is sold, does ownership transfer subject to any licences that have been granted in respect of that IP? Do the licences encumber the IP? Licences of intellectual property rights Licences of intellectual property rights can be assigned in their own right. It is also possible to transfer the licence as part of the disposal of the intellectual property right itself. The extent to which ownership of an intellectual property right is transferred subject to a previously-granted licence depends on the type of intellectual property: • UK trade mark registrations: unless the licence provides otherwise, it is binding on a successor in title to the grantor’s interest. See section 28(3) of the Trade Marks Act 1994 • Patents: if a patent assignee is aware of a pre-existing licence, then it is bound by the terms. See section 33(1) of the Patents Act 1977, and commentary: Licences passing on assignment: Roughton, Johnson and Cook on Patents [10.34] • UK design registrations: any transmission of a...

If a contractor is engaged through an agency and the contractor and agency sign a contract including the assignment of IP rights to the client, is that sufficient to assign the rights to the client?

If a contractor is engaged through an agency and the contractor and agency sign a contract including the assignment of IP rights to the client, is that sufficient to assign the rights to the client? This Q&A relates to the position in respect of the assignment of IP rights under English law. The general position is that the assignment of an IP right must be in writing, signed by or on behalf of the assignor or personal representative. There is no requirement for the assignee to sign an assignment unless they are accepting obligations. The provisions setting out the formalities required for the assignment of the key IP rights are as follows: • registered trade marks, see: section 24(3) of the Trade Marks Act 1994 • registered designs, see: section 15B(3) of the Registered Designs Act 1949 • unregistered designs, see: section 222(3) of the Copyright, Designs and Patents Act 1988 (CDPA 1988) • copyright, see: CDPA 1988, s 90(3) • patents, see: section 30(6) of the Patents Act 1977...

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View the related News about Intellectual Property Assignment

Ip weekly highlights—17 november 2022.

Welcome to this week’s edition of the IP weekly highlights: a hand-picked summary of news analysis, updates and new content from the world of IP. These highlights focus on the key rights of copyright and associated rights, database rights, trade marks and passing off, designs, and patents as well as covering issues relating to confidential information, know-how R&D and IP disputes all mainly from a UK and European perspective.

Local Government weekly highlights—17 November 2022

This week's edition of Local Government weekly highlights includes expert analysis of the new Subsidy Control Regime which is to come into effect on 4 January 2022. Case analysis includes Re G, in which the Court of Appeal clarified that the Court of Protection’s power to grant injunctions was based on the Mental Capacity Act 2005, in exercise of the High Court’s inherent jurisdiction. The weekly highlights also includes further updates on public procurement, governance, education, children’s social care, social housing, planning, licensing, local government finance, highways and environmental law and climate change.

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Intellectual Property Assignment Agreement: A Comprehensive Guide for Your Business

LegalGPS : Jul. 25, 2024

Hello there, entrepreneur friend! Today let’s have that coffee chat about Intellectual Property Assignment Agreements. If you're thinking "what's that?" or "why do I need it?" then this is the perfect starting point for you. In today's competitive business world, protecting your intellectual property (IP) is more crucial than ever.

Intellectual Property Assignment Agreement Template

Legal GPS templates are drafted by top startup attorneys and fully customizable.

Table of Contents

Defining the purpose.

• Clarity of Transfer
• Definition of Transferred Intellectual Property
• Compensation and Payment Terms
• Warranties and Representations
• Confidentiality Agreements
• Governing Law and Dispute Resolution

Step 1 - Identify the Parties Involved

Step 2 - specify the assigned intellectual property, step 3 - describe the transfer of rights, step 4 - detail compensation and payment terms, step 5 - include confidentiality clauses, step 6 - determine governing law and dispute resolution process, tips for avoiding common mistakes and pitfalls.

What is An Intellectual Property Assignment Agreement?

An Intellectual Property Assignment Agreement is a legal document that ensures the transfer of an inventor or creator's rights to another person or company. Essentially, it’s a legal way of saying "what’s mine is now yours". These agreements are often used in situations involving startups, company buyouts, or employees creating new works or inventions during their jobs - situations a lot of entrepreneurs find themselves in.

Let's break that down a touch more:

The IP assignment agreement's primary purpose is to help your business prevent future disputes regarding IP ownership. When all parties are clear on who owns the intellectual property, it prevents a whole host of potential issues.

Believe me, the last thing you need or want as an entrepreneur is a legal dispute over who owns an idea, an invention, or any creative output.

And that's where this agreement steps in: it provides legal proof that the ownership has been transferred. So, if ever challenged, you can show the agreement and say "See, it’s mine!" .

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Key Elements to Consider for a Properly Drafted Agreement

When it comes to IP assignment agreements, not just any generic contract will do. It's crucial to understand and include some key elements to ensure you're fully protected.

1. Clarity of Transfer

The agreement must clearly define the scope and extent of the transferred rights. To do this, use precise language that leaves no room for confusion. For example, specify whether the IP rights being transferred are exclusive or non-exclusive and if there are any limitations on how the Assignee can use or sublicense the IP. Here's a suggested format:

"The Assignor hereby assigns to the Assignee, its successors and assigns, [exclusive/non-exclusive] rights, title, and interest in and to the Intellectual Property, subject to the following limitations [if any]:"

2. Definition of Transferred Intellectual Property

This section is where you identify the specific Intellectual Property being assigned. Start by describing the IP type (e.g., copyright, patent, trademark), then provide the necessary details:

For a copyright, include the work title and a brief description.

For a patent, mention the patent number and summarize the invention.

For a trademark, provide the trademark name, registration number, and design details.

Remember, the key is to be as detailed and transparent as possible.

3. Compensation and Payment Terms

Just as with any deal, it's important to be crystal clear about the compensation for transferring IP rights. Make sure you consider the following in your agreement:

The total amount payable

The currency

The payment method (e.g., check, wire transfer)

The payment schedule (e.g., lump-sum, installments)

For example: "In consideration for the assignment of rights, the Assignee shall pay the Assignor a total sum of [Amount] in [Currency], through [Payment Method], payable as follows:"

4. Warranties and Representations

Including warranties and representations in the agreement helps provide confidence to both parties. The Assignor should explicitly declare that they:

Are the sole and true owner of the IP

Have the complete right to assign the IP to the Assignee

The IP does not infringe on any third-party rights

A sample clause might look like this:

"The Assignor warrants and represents that they are the true and lawful owner of the Intellectual Property, have full right and authority to enter into this Agreement, and that the Intellectual Property does not infringe upon any third-party rights."

5. Confidentiality Agreements

A crucial aspect of a well-drafted IP Assignment Agreement is protecting sensitive information about the business and the IP itself. Incorporate confidentiality clauses to maintain a secure environment.

Try a clause similar to this one: "The parties agree to treat all confidential information related to this Agreement as strictly confidential, and to take all necessary precautions to prevent unauthorized disclosure or use of such information."

6. Governing Law and Dispute Resolution

Last but not least, outline which jurisdiction's laws will govern the agreement. Furthermore, state how any disputes will be resolved, such as through arbitration, mediation, or litigation.

A model clause could be: "This Agreement shall be governed by the laws of the State of [State]. Any dispute arising out of or in connection with this Agreement shall be resolved by [method of dispute resolution]."

Drafting Your IP Assignment Agreement

Let's move on to the most crucial part of our discussion: Creating your Intellectual Property Assignment Agreement. This section intends to make it much clearer and more action-oriented. Your aim? To walk away with enough information to begin drafting your agreement. Let's dive in.

Start by clearly naming the parties involved in the agreement.

Who is the 'Assignor' (the party transferring the rights)?

Who is the 'Assignee' (the individual or business entity receiving the rights)? Clearly outline their legal names and any other relevant identifying information, like addresses or official business names. It would typically look like this: "[Full Legal Name], referred to as the "Assignor," and [Full Legal Name], referred to as the "Assignee."

Here, you need to provide a full and exhaustive description of the intellectual property being transferred. Please don't leave room for vagueness or ambiguity - the more specific, the better. For instance, if it's a patent, include the patent number and a detailed summary of what the patent covers. If it's a copyrighted work, offer the title, the form of the work (e.g., a book, software, music), and a short description of it.

Your entry here might read: "The "Intellectual Property" includes, but is not limited to, [detailed description]."

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This section is all about clearly laying out what you're giving up and what you're gaining. Highlight all rights, titles, and interests being assigned from the Assignor to the Assignee. You could list them out just to ensure nothing falls between the cracks.

It’s vital to be as clear and detailed as possible here. You're specifying the extent of the rights transferred. It could be exclusive, non-exclusive, permanent, temporary, how it can be used, if it can be sold, and more.

Here's an example:

"The Assignor hereby assigns to the Assignee, its successors and assigns, all rights, title, and interest in and to the Intellectual Property, including, without limitation, the right to sue and recover for past, present, and future violations."

Now, let's talk about money. In this step, you need to fully detail the financial exchanges. Include the amount of payment, payment format, and schedule (upfront, lump sum, installments). It wouldn't hurt to clearly lay out what conditions, if any, would lead to a return of the compensation.

This clause might look something like:

"For the assignment of rights under this Agreement, the Assignee shall provide compensation to the Assignor in the amount of [Amount], payable [insert payment method and schedule]".

Especially with IP, you'll want to build in some safety nets. You can include a confidentiality clause that prevents the involved parties from disclosing sensitive information about the IP.

A basic confidentiality clause may read: "The Assignor agrees to keep confidential all non-public information that the Assignee designates as being confidential, not to disclose it to any other people, and not to use it for any purpose other than the discharge of the Assignor's obligations under this Agreement."

Finally, specify which state or country's laws will govern the agreement. This is crucial in the case of any future legal disputes. Additionally, include how disputes over the agreement will be resolved - arbitration, mediation, litigation, etc.

Here is an example:

"This Agreement will be governed by and construed in accordance with the laws of the State of [State]. Any disputes under this Agreement shall be resolved by [method of dispute resolution]."

You're now equipped with all you need to draft an agreement. But before you get started, here are some quick tips to avoid any missteps:

Ensure the agreement is detailed and described correctly

Work with a knowledgeable attorney

Review the final agreement carefully before signing

With these, you're set to protect your business's most valuable assets!

In today's competitive business environment, it's imperative to protect your inventions, your creations - your Intellectual Property. If you're still unsure where to start, check out our professional template for Intellectual Property Assignments!

With an Intellectual Property Assignment Agreement in hand, you're ensuring that ownership of these is well established to prevent future disputes.

Get Legal GPS's Intellectual Property Assignment Agreement Template Now

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Assignment of IP

Fact sheet: commercialising intellectual property - assignment agreements.

This fact sheet deals with the assignment of Intellectual Property (IP) rights. An assignment can be beneficial in many business circumstances. Examples may include your company not having the means to undertake commercialisation or preferring to receive a once-off lump sum payment for the innovative technology. This implies having no further concerns regarding the maintenance and enforcement of the IP rights.

Download Fact sheet

Infographic: Commercialising IP - Assignment Agreements

An IP assignment is a transfer of ownership of an intellectual property right, such as a patent, trade mark or copyright, from one party (the assignor) to another party (the assignee). This infographic adds together the benefits, risks and the key elements of assignment agreements.

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IP Guide: Your Guide to IP and Contracts

IP can be transferred or licensed, offered to enter into cooperation agreements or contributed as capital in a joint venture. Protecting and managing IP through well-drafted agreements is key for business success. Therefore, the purpose of this guide on IP and contracts is to be a useful tool regarding IP exploitation and management. It aims to help businesses better understand contracts in the IP field and to get an idea on different key points and how these should be drafted.

Download IP Guide

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“Vest” and Intellectual Property

7 December 2018 | Ken Adams

Earlier this week I did the following tweet:

Hey IP people. Just saw this: "… all right, title and interest throughout the world in and to all such Intellectual Property rights shall vest solely in such Service Provider …." Aside from the other clutter, why "vest"? Why not just "the Service Provider will own all"? — Ken Adams (@AdamsDrafting) December 5, 2018

It was prompted by my despair at the umpteen different ways people find to say the same thing. If you strip away the redundancy, your verb structures become much more manageable.

Here’s what Ned had to say:

“The Service Provider will own …” means the same thing as “shall vest”. (of course, that shall fails the famous MSCD “has a duty” test; we know it really means will ). Either way, it’s language of policy. But it falls short, as both formulations aren’t sufficient to give ownership to the party in question. IP ownership is conferred under a contract in one of two ways: A contract can establish ownership rights through language of assignment (either present assignment using language of performance, as in Acme hereby assigns , or an obligation to assign) or because the contract otherwise meets specific requirements that result in a party owning the IP. For example, a contract for specific services that meets the statutory requirements for a “work made for hire” agreement under U.S. copyright law will result in the hiring party being the owner and author of the work product (rather than the independent contractor who does the work), even absent words of assignment. If the same work were performed without the contract—or with a contract that doesn’t contain the magic words work made for hire , then the contractor would be the author and, absent an assignment, the owner of the copyright in the work product. But the scenario in your tweet isn’t that kind of scenario, so instead we need a present assignment. Vest wouldn’t accomplish that, but neither would own . Instead, we need language of performance. The moral of this story is one you know already, and I’m sure you would have remembered it if you had considered the language in its broader context—when you’re dealing with IP, everything is more complicated than it seems!

So I’m half right, in that we can dispense with vest . But in this game, half right gets you nowhere. Serves me right for looking at a few words in isolation. Excuse me, I now have to go flog myself with a wet noodle.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of  A Manual of Style for Contract Drafting , and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

5 thoughts on ““Vest” and Intellectual Property”

As a friendly amendment to the advice Ned Barlas gave you, the use of the magic words “work made for hire” (usually in the context of the phrase “will be deemed a work made for hire”) is effective only for one of the nine categories of contract specified in the Copyright Act as qualifying for WMFH status (a very, very limited universe, I might point out). In all other cases, you can forgo the magic words because, as the medicine man in Little Big Man might say, the magic won’t work. In those circumstances you have to rely on an assignment.

Agreed, Vance. I didn’t want to dig into the weeds of the requirements of a work made for hire agreement in my comment to Ken. My short-hand “for specific services” was intended as a vague reference to the statutory requirement that the services be for creating one of 9 specifically enumerated categories of work.

Since everyone seems to love the magic words, I’ve revised typical language to read “will be deemed to be” a WFH with the idea being that (1) the parties will be bound by that agreement to treat the property as a WFH even when the statutory requirements aren’t met and (2) the assignment language I add will do the real work. Is there a better alternative to adjusting the WFH language to try to achieve the desired result?

this is a useful and valuable post.

In general, any appropriate language of performance will suffice to transfer title to an existing thing from Alpha to Bravo: assign, convey, deed, give, grant, transfer, vest.

When the thing is an invention that doesn’t exist yet, and the provision is supposed to determine who owns the invention when it comes into existence, that probably requires language along these lines: ‘Title to any such invention will, immediately upon its invention, vest in Alpha, free of any claim of Bravo to any interest in it’.

I’m sure that formula could be improved, but what I’m shaky about is the category of contract language to which it belongs.

I suppose the ‘free of any claim of Bravo’ part is, and could be recast explicitly as, a kind of waiver, which falls into language of performance if memory serves, or maybe language of declaration (acknowledgment division), but the category of the part that says that Alpha will own the invention ab ovo puzzles me.

If France and China agree by a two-power treaty that any new Pacific islands that volcanic action creates will belong to France and not China, perhaps the key ‘will belong’ language must be a conditional waiver of rights?

Or is the best conceptualization a present grant of potential future rights?

Sorry to use a non-IP example, but my IP knowledge is a tiny riddle inside a still smaller mystery, wrapped in a truly exiguous enigma.

What’s the right category, Ken?

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Deed of Assignment (for Intellectual Property)

In the realm of intellectual property, a Deed of Assignment is a formal legal document used to transfer all rights, title, and interest in intellectual property from the assignor (original owner) to the assignee (new owner). This is crucial for the correct transfer of patents, copyrights, trademarks, and other IP rights. The deed typically requires specific legal formalities, sometimes notarization, to ensure it is legally enforceable.

To be legally effective a deed of assignment must contain:

• Title of the Document : It should clearly be labeled as a "Deed of Assignment" to identify the nature of the document.
• Date : The date on which the deed is executed should be clearly mentioned.
• Parties Involved : Full names and addresses of both the assignor (the party transferring the rights) and the assignee (the party receiving the rights). This identifies the parties to the agreement.
• Recitals : This section provides the background of the transaction. It typically includes details about the ownership of the assignor and the intention behind the assignment.
• Definition and Interpretation : Any terms used within the deed that have specific meanings should be clearly defined in this section.
• Description of the Property or Rights : A detailed description of the property or rights being assigned. For intellectual property, this would include details like patent numbers, trademark registrations , or descriptions of the copyrighted material.
• Terms of Assignment : This should include the extent of the rights being transferred, any conditions or limitations on the assignment, and any obligations the assignor or assignee must fulfill as part of the agreement.
• Warranties and Representations : The assignor typically makes certain warranties regarding their ownership of the property and the absence of encumbrances or third-party claims against it.
• Governing Law : The deed should specify which jurisdiction's laws govern the interpretation and enforcement of the agreement.
• Execution and Witnesses : The deed must be signed by both parties, and depending on jurisdictional requirements, it may also need to be witnessed and possibly notarized.
• Schedules or Annexures : If there are detailed lists or descriptions (like a list of patent numbers or property descriptions), these are often attached as schedules to the main body of the deed.

Letter of Assignment (for Trademarks and Patents)

This is a less formal document compared to the Deed of Assignment and is often used to record the assignment of rights or licensing of intellectual property on a temporary or limited basis. While it can outline the terms of the assignment, it may not be sufficient for the full transfer of legal title of IP rights. It's more commonly used in situations like assigning the rights to use a copyrighted work or a trademark license.

For example, company X allows company Y to use their trademark for specific products in a specific country for a specific period.  

At the same time, company X can use a Letter of Assignment to transfer a trademark to someone. In this case, it will be similar to the Deed of Assignment. 

Intellectual Property Sales Agreement

An IP Sales Agreement is a detailed contract that stipulates the terms and conditions of the sale of intellectual property. It covers aspects such as the specific rights being sold, payment terms, warranties regarding the ownership and validity of the IP, and any limitations or conditions on the use of the IP. This document is essential in transactions involving the sale of IP assets.

However, clients usually prefer to keep this document confidential and prepare special deeds of assignment or letter of assignment for different countries.

IP Transfer Declaration

In the context of intellectual property, a Declaration is often used to assert ownership or the originality of an IP asset. For example, inventors may use declarations in patent applications to declare their invention is original, or authors may use it to assert copyright ownership. It's a formal statement, sometimes required by IP offices or courts.

When assigning a trademark, the Declaration can be a valid document to function as a proof of the transfer. For example, a director of company X declares that the company had sold its Intellectual Property to company Y. 

Merger Document

When companies or entities with significant IP assets merge, an IP Merger Document is used. This document outlines how the intellectual property owned by the merging entities will be combined or managed. It includes details about the transfer, integration, or handling of patents, copyrights, trademarks, and any other intellectual property affected by the merger.

In all these cases, the precise drafting of documents is critical to ensure that IP rights are adequately protected and transferred. Legal advice is often necessary to navigate the complexities of intellectual property laws.

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6 potential pitfalls when assigning IP Rights | For Microsoft Partners

October 13, 2021

What does it mean to assign Intellectual Property (IP) Rights?

An assignment of IP rights is the transfer of ownership of IP rights (or newly created bespoke IP) to another individual or entity. Your company’s IP is a critical asset and therefore care needs to be taken in its proper transfer.

Alarmingly, it is possible to unwittingly transfer IP by mistake so, to protect your IP, here are 6 areas to watch for in the assignment of IP rights.

Licensing versus Assignment

There is a marked difference between the assignment and the licensing of an IP right.

Licensing is akin to a loan of the IP right for a certain period.

With licensing, the owner of the IP doesn’t change and continues to hold the proprietary interest (or ownership), so they can apply conditions or limits on the use of the licence.

The licence can even be revoked.

Assignment is the transfer of ownership of the IP right after creation.

Critically, assignment means you have given away the ownership of that IP forever.

It is therefore very important to distinguish whether you wish to assign or license the IP rights.

What is 'Background' or 'General' IP, and why does it matter?

It is important to ringfence your own or your company’s IP which you use as a fundamental part of your business and is independent from any particular one of your customers, typically known as background or general IP. This is to ensure, where you have agreed to assign some bespoke IP to your customer, you do not inadvertently assign away your background IP rights which can be a crucial USP to your business.

This can easily happen if you’re not familiar with contract terms, so it’s important to have an appropriate level of skill and technical knowledge when attempting ringfence your background IP. That’s what we’re here for!

After you’ve excluded (aka protected) your background IP from an assignment, you may need to provide a limited licence to your customers to use the general IP for them to make use of your services or products.

A licence can be non-exclusive, non-transferable, non-assignable, revocable, for a limited time period or even one that attracts a royalty fee. These are aspects which are usually heavily contested and negotiation points for the lawyers of the parties, based on each party’s commercial position and bargaining power.

Be clear about what rights you are assigning

You should be clear about exactly which rights you are assigning in an agreement and make references to these.

For example, if you’ve been engaged to design some software for a customer, the software you are creating should be clearly defined in your assignment clause either in the definitions, main body of a contract or the schedule. This way it is clear that only the IP existing in that piece of software (usually the copyright in the underlying source code) is being assigned, making it easier to ring fence your own background IP.

Be mindful of employment or consultancy terms

If you are using a consultant to create any bespoke IP, or you have employees who work for you, make sure you have terms in the respective consultancy or employment contract relating to transfer of any IP created for your business or your customers.

Generally, in law, most IP created by an employee, under a contract of employment, will automatically transfer to the employer except for non-economic rights, such as moral rights in copyright, which will not automatically transfer as they are personal to the employee.

If you don’t have a consultancy agreement or employment contract in place, or they don’t specify who owns the IP created, make sure you document an assignment of IP rights agreement between the appropriate parties so you know who owns the IP.

Without this clarity, a consultant might inadvertently own the IP, and it may be the case that you do not even own the IP rights you are looking to assign!

Warranties can leave you out of pocket

Another hotly debated aspect of the assignment of IP rights are warranties.

What happens when you use the customer’s product to provide a service that breaches a third party’s IP rights or where a customer uses your product which infringes a third party’s IP right? This scenario can crop up where you have created bespoke product for a customer which happens to infringe a third party’s IP rights. Example: Imagine you have been commissioned to develop some software for Joe Blogs. Unbeknown to you, Joe’s software may infringe Harry’s (a third party’s) existing IP rights, or the software which you create for Joe may make use of some IP which is already owned by Harry. In such situations, you would want to be protected as much as possible.

Here warranties protect the innocent user of the IP but a breach of a warranty can typically be a very expensive affair falling foul to large scale liability. Therefore, it is important to have in place both commercial and prudent terms regarding warranties, including caps on liability to protect your business. If this aspect is badly negotiated, the fallout can result in immense losses for your business.

Beware of the paperwork

In order to properly execute and facilitate a proper assignment of an IP right, for example, where the IP requires registration, sometimes customers may place a high threshold for you to execute all documents and complete all applications to a superior degree or to unreasonable timeframes. It is important in such circumstances to negotiate these terms properly to ensure the terms are reasonable and you are being properly reimbursed for your time and efforts in completing the steps.

We hope this guide on the pitfalls in an assignment of IP rights has been helpful and has provided some key insight on dealing with assignment of IP rights.

At Law 365 we have a team of dedicated lawyers with a keen eye for such matters and are always happy to be of service whether it is in respect of assignment of IP rights or any other commercial issue.

Further reading

Find out why you should cap indemnities (law365.co).

What Is The Point Of An Indemnity In A Contract? Law 365

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• Practical Law

Transferring intellectual property rights: avoiding the pitfalls

Practical law uk articles 2-504-4154  (approx. 11 pages).

• What IPR are from a legal perspective.
• The practicalities and consequences of the registration of registrable IPR transactions, and the due diligence to be conducted.
• How to identify the relevant IPR to be transferred.
• How to document the transfer.
• Some important issues concerning liability arising on the transfer of IPR.

Legal nature of IPR

Confidential information, community rights, registering assignments of ipr, administrative and costs issues.

• It was not practicable to register the assignment within the six-month time limit.
• The assignment was registered as soon as practicable thereafter.

Protecting mortgages and charges

Registered rights due diligence.

• Carry out an initial search of the register to check that the seller is the registered proprietor. Check for any earlier assignments to that seller and investigate thoroughly any such assignments and the circumstances surrounding them. If there are any such assignments, consider taking an assignment of the seller's causes of action for failure to deliver good title against his own seller (if any still remain).
• Carry out a second search on the morning of completion as the IPO/OHIM update their registers at midnight following each working day.
• Register the transaction on the day it completes, wherever possible, or as soon as possible thereafter.
• Require the seller to assign with full title guarantee (see " Liability " below).

Identifying the relevant IPR

• Identify the relevant registered IPR which are to be transferred.
• Produce a conceptual definition of the non-registered IPR which are to be included in the sale, such as "all the company's know-how (whether recorded or not) and documentation relating to the process of manufacturing xyz".
• Identify which (if any) of the IPR being transferred will still need to be used by the seller or its group after the transaction has taken place, and determine how such access is to be secured (this will usually require some form of licence back).
• Identify which IPR are not going to be transferred to the buyer, and consider whether or not to write to the buyer explaining precisely which IPR are not going to be included in such a sale and why. This can stop arguments occurring later as to what was meant to be included or excluded, and should also make an action for rectification (correction) of the assignment agreement much more difficult for the buyer to win.
• Properly instruct the seller's negotiating team and lawyers as to the matters above.

Documenting the transaction

Assigning by deed, method of assignment in a sale and purchase agreement, what should be assigned in an spa, country-specific agreements, patent attorney files.

• The person disposing of the IPR has the right to dispose of them.
• The person disposing of the IPR will do all he reasonably can do, at his own cost, to give the assignee the title he purports to give ( section 2(1), 1994 Act ).
• Charged or encumbered the IPR with any charge or encumbrance, which still exists at the time of the present disposition.
• Granted any third party rights in relation to the IPR, which still subsist at the time of the present disposition.
• Allowed anyone else to do so.

Excluding liability

Sale of goods act 1979, mortgages and charges of ipr.

• An outright assignment of the legal title in the IPR to the lender.
• A right of redemption; that is, the right to have the legal title transferred back to the borrower once repayment and other obligations have been fulfilled.
• Pending exercise of the right of redemption by the borrower, some form of licence back from the lender to the borrower to enable the borrower to use the IPR in its business.
• The charging clause.
• A transfer mechanism to allow the transfer of the IPR in the event of default.
• A range of negative obligations on the borrower not to grant conflicting security or other interests in the charged IPR.

Practicalities of assignment: an overview

Problems with the ipr registration system.

• Trade Marks
• Confidentiality

• About of Intellectual Property

IP Training

What is intellectual property.

Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.

IP is protected in law by, for example, patents , copyright and trademarks , which enable people to earn recognition or financial benefit from what they invent or create. By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish.

Explore the main IP types and how the law protects them.

Types of intellectual property

Do you know what the difference is between a patent and an industrial design, how to protect your photo with a copyright, or why you would want to obtain a protected designation of origin? Discover everything you ever wanted to know about IP rights.

A patent is an exclusive right granted for an invention. Generally speaking, a patent provides the patent owner with the right to decide how - or whether - the invention can be used by others. In exchange for this right, the patent owner makes technical information about the invention publicly available in the published patent document.

Copyright is a legal term used to describe the rights that creators have over their literary and artistic works. Works covered by copyright range from books, music, paintings, sculpture and films, to computer programs, databases, advertisements, maps and technical drawings.

A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises. Trademarks date back to ancient times when artisans used to put their signature or "mark" on their products.

Industrial designs

An industrial design constitutes the ornamental or aesthetic aspect of an article. A design may consist of three-dimensional features, such as the shape or surface of an article, or of two-dimensional features, such as patterns, lines or color.

Geographical indications

Geographical indications and appellations of origin are signs used on goods that have a specific geographical origin and possess qualities, a reputation or characteristics that are essentially attributable to that place of origin. Most commonly, a geographical indication includes the name of the place of origin of the goods.

Trade secrets

Trade secrets are IP rights on confidential information which may be sold or licensed. The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.

WIPO runs workshops, seminars and training courses throughout the year, both in Geneva and worldwide.

Year-round roving seminars help businesses, researchers, lawyers and innovators stay on top of latest developments in global IP services.

Browse seminars and workshops

The WIPO Academy is the center of excellence for IP education, training and skills-building for WIPO member states, in particular developing countries, least-developed countries (LDCs) and countries in transition. The Academy works to help build human capacity in IP, which is essential to innovation and creativity.

Access the WIPO eLearning Center Explore programs

Test your knowledge about intellectual property with an IP quiz!

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This intellectual property agreement  is between , an individual a(n) (the " Assignor ") and  , an individual a(n) (the " Assignee ").

The Assignor has full interest in the intellectual property listed in Exhibit A and described in section 1 below.

The Assignor wishes to transfer to the Assignee, and the Assignee wishes to purchase and receive from the Assignor, all of its interest in the Intellectual Property.

The parties therefore agree as follows:

1. ASSIGNMENT OF INTELLECTUAL PROPERTY.

The Assignor assigns to the Assignee, and the Assignee accepts the assignment of, all of the Assignor's interest in the following in the United States and its territories and throughout the world:

• (a) the intellectual property rights related to the intellectual property listed in Exhibit A ;
• (b) all precursors, portions, and works in progress with respect to that intellectual property and all inventions, works of authorship, mask works, technology, information, know-how, materials, and tools relating to those or to the development, support, or maintenance of those;
• (c) all copyrights, patent rights, trade dress, trade names, business names, other indicia of origin, trade secret rights, trademark rights, mask works rights, and all other intellectual property rights and all business, contract rights, and goodwill in, incorporated, or embodied in, used to develop, or related to any of those; and
• (d) the registrations and applications for registrations of the foregoing (collectively, the" Intellectual Property ").

2. PURCHASE PRICE.

The Assignee shall pay the Assignor a flat fee of $ as full payment for all rights granted under this agreement. The Assignee shall complete this payment no later than .

3. RECORDATION.  

In order to record this assignment with all relevant government agencies, within hours of the effective date of this assignment, the parties shall sign the form of intellectual property assignment agreement attached as Exhibit B . The is solely responsible for filing the assignment and paying any associated fees of the transfer.

4. NO EARLY ASSIGNMENT.

The Assignee shall not assign or otherwise encumber its interest in the Intellectual Property or any associated registrations until it has paid to the Assignor the full consideration provided for in this assignment. Any assignment or encumbrance contrary to this provision shall be void.

5. ASSIGNOR'S REPRESENTATIONS.

The Assignor hereby represents and warrants to the Assignee that it:

• (a) is the sole owner of all interest in the Intellectual Property;
• (b) has not transferred, exclusively licensed, or encumbered any Intellectual Property or agreed to do so;
• (c) is not aware of any violation, infringement, or misappropriation of any third party's rights (or any claim of those) by the Intellectual Property;
• (d) is not aware of any third-party consents, assignments, or licenses that are necessary to perform under this assignment;
• (e) was not acting within the scope of employment of any third party when conceiving, creating, or otherwise performing any activity with respect to any item of Intellectual Property.

The Assignor shall immediately notify the Assignee in writing if any facts or circumstances arise that would make any of the representations in this assignment inaccurate.

6. INDEMNIFICATION. The Assignor shall indemnify the Assignee against:

• (a) any claim by a third party that the Intellectual Property or its use, manufacture, sale, distribution, or reproduction infringes on or misappropriates any copyrights, trade secrets, patents, or other intellectual property;
• (b) any claim by a third party that this assignment conflicts with, violates, or breaches any contract, assignment, license, sublicense, security interest, encumbrance, or other obligation to which the Assignor is a party or of which it has knowledge;
• (c) any claim relating to any past, present, or future use, licensing, sublicensing, distribution, marketing, disclosure, or commercialization of any of the Intellectual Property by the Assignor; and
• (i) the Assignee promptly notifies the Assignor of that claim;
• (ii) the Assignor controls the defense and settlement of that claim;
• (iii) the Assignee fully cooperates with the Assignor in connection with its defense and settlement of that claim; and
• (iv) the Assignee stops all sales, distribution, and public use of the infringing Intellectual Property, if requested by the Assignor.
• (i) obtain the right for the Assignee to continue to use the infringing Intellectual Property;
• (ii) modify the infringing Intellectual Property to eliminate the infringement;
• (iii) provide substitute noninfringing intellectual property to the Assignee pursuant to this assignment; or
• (iv) refund to the Assignee the amount paid under this assignment for the infringing Intellectual Property.
• (c) No Other Obligations. The Assignor shall have no other obligations or liability if infringement occurs, and shall have no other obligation of indemnification or to defend relating to infringement. The Assignor shall not be liable for any costs or expenses incurred without its prior written authorization and shall have no obligation of indemnification or any liability if the infringement is based on (i) any modified form of the Intellectual Property not made by the Assignor, (ii) any finding or ruling after the effective date of this assignment, or (iii) the laws of any country other than the United States of America or its states.

7. GOVERNING LAW.

• (a) Choice of Law. The laws of the state of  govern this agreement (without giving effect to its conflicts of law principles).
• (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in County, .

8. AMENDMENTS.

No amendment to this assignment will be effective unless it is in writing and signed by a party or its authorized representative.

9. ASSIGNMENT AND DELEGATION.

• (a) No Assignment. Neither party may assign any of its rights under this assignment, except with the prior written consent of the other party. All voluntary assignments of rights are limited by this subsection.
• (b) No Delegation. Neither party may delegate any performance under this assignment, except with the prior written consent of the other party.
• (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.

10. COUNTERPARTS; ELECTRONIC SIGNATURES.

• (a) Counterparts. The parties may execute this assignment in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
• (b) Electronic Signatures. This assignment, agreements ancillary to this assignment, and related documents entered into in connection with this assignment are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

11. SEVERABILITY.

If any one or more of the provisions contained in this assignment is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this assignment, but this assignment will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this assignment to be unreasonable.

12. NOTICES.

• (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
• (b) Addresses. A party shall address notices under this section to a party at the following addresses:
• If to the Assignor: 

• If to the Assignee: 
• (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

13. WAIVER.

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this assignment will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

14. ENTIRE AGREEMENT.

This assignment constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this assignment. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this assignment are expressly merged into and superseded by this assignment. The provisions of this assignment may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this assignment by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this assignment. Except as set forth expressly in this assignment, there are no conditions precedent to this assignment's effectiveness.

15. HEADINGS.

The descriptive headings of the sections and subsections of this assignment are for convenience only, and do not affect this assignment's construction or interpretation.

16. EFFECTIVENESS.

This assignment will become effective when all parties have signed it. The date this assignment is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this assignment.

17. NECESSARY ACTS; FURTHER ASSURANCES.

Each party shall use all reasonable efforts to take, or cause to betaken, all actions necessary or desirable to consummate and make effective the transactions this assignment contemplates or to evidence or carry out the intent and purposes of this assignment.

[SIGNATURE PAGE FOLLOWS]

Each party is signing this agreement on the date stated opposite that party's signature. 

[PAGE BREAK HERE] EXHIBIT A LIST OF INTELLECTUAL PROPERTY

[PAGE BREAK HERE] EXHIBIT B FORM OF RECORDABLE INTELLECTUAL PROPERTY ASSIGNMENT For good and valuable consideration, the receipt of which is hereby acknowledged, an individual a(n) (the " Assignor ") hereby assigns to an individual a(n) (the " Assignee ") all of the Assignor's interest in the Intellectual Property identified in Attachment A to this assignment, and the Assignee accepts this assignment.

Each party is signing this agreement on the date stated opposite that party's signature.

[PAGE BREAK HERE]

ATTACHMENT A INTELLECTUAL PROPERTY

How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Intellectual property assignment agreement: How-to guide

In the dynamic realm of commerce and innovation, the notion of property extends far beyond physical boundaries. Just as one might transfer ownership of a house or a car, the exchange of intellectual property (IP) rights is a critical component of modern business transactions. For instance, if you're launching a startup, acquiring product rights, or even purchasing an entire company, in each scenario, the seamless transfer of intellectual property ownership is essential for ensuring a smooth transition and protecting your interests.

So what constitutes intellectual property? Intellectual property encompasses creations of the mind, such as inventions, software, and hardware programs, literary and artistic works, designs, symbols, names, and images. As businesses grow and evolve, the need to manage and protect these valuable assets becomes increasingly important. One crucial aspect of managing intellectual property is through intellectual property assignment agreement, otherwise known as IP assignment agreement. These agreements facilitate the transfer of IP rights from one part to another.

In this article, we’ll explore the nuances of intellectual property assignment agreements, including their definitions, benefits, types, and considerations.

What is an intellectual property assignment agreement?

An intellectual property assignment agreement, also known as an IP assignment agreement, is a written contract that transfers intellectual property rights from one party (the assignor) to another (the assignee). Intellectual property covers a broad spectrum of intangible assets, including patents, copyrights, trademarks, trade secrets, and more.

For instance, a software developer might have created a groundbreaking algorithm while employed at the company. Through an IP assignment agreement, the developer transfers the rights to this algorithm to the employer, ensuring that the company has exclusive ownership and control over its use and commercialization.

Benefits of IP assignment agreement

IP assignment agreements are crucial in a company’s business and provide multiple benefits for the assignor and assignee.

Clear ownership

By executing an IP assignment agreement, the assignor unequivocally transfers all rights and interests in the intellectual property to the assignee. This clarity of ownership and proprietary rights helps to avoid disputes and potential litigation over the ownership of the IP in the future.

Legal protection

By formally transferring the IP rights through a written agreement, both parties are legally protected. This protection can be essential in case of any infringement or misuse of intellectual property.

Assured compensation or price guarantee

When transferring IP ownership rights for patents, trademarks, copyrights, etc., the original owner gets compensated by the party buying the ownership. The buyer will also pay the IP owner an agreed-upon price for the IP, which will be paid on the date as decided by the involved parties.

No future obligations

The party selling the IP won’t be responsible for meeting any future obligations. For instance, if there is an existing trademark that requires constant monitoring to know whether the trademark is used by any other competitors, the seller won't bear the charges incurred for  trademark monitoring . The buyer has to bear these and any future trademark maintenance costs.

Commercialization opportunities

Assigning intellectual property rights can enable businesses to commercialize the intellectual property more effectively. This could involve licensing the IP to third parties, selling it outright, or using it as collateral for financing.

Facilitates collaboration

In cases where multiple parties are involved in creating intellectual property, an assignment agreement can facilitate collaboration by clearly defining each party's rights and responsibilities.

Risk mitigation

For businesses acquiring ownership rights to intellectual property, an assignment agreement mitigates the risk of third parties claiming rights to the IP. It provides a legal basis for defending against infringement claims and protects the assignee's investment in the IP.

Enhanced value

Clear ownership of intellectual property assets can enhance the value of a business, especially during mergers, acquisitions, or fundraising activities. Investors and stakeholders are more likely to perceive a business positively when it has secure ownership of valuable IP assets. For example, let’s say your start-up company holds sole intellectual property rights to an automatic house-locking system. When your company gets acquired by another company, the new company will also evaluate the value of the IP owned.

Understanding IP assignment agreements: Considerations for sellers

While intellectual property assignment agreements offer various benefits, as a seller of the IP you need to keep in mind what it entails for you when you sell your IP.

Choosing between an IP assignment and a licensing agreement

In an IP assignment agreement, the seller transfers all ownership rights to the intellectual property for a predetermined fee. Here the seller gets a fair market value for their IP as a one-time payment. However, if they had opted for an  IP licensing arrangement , they could have retained the ownership of their IP while giving certain usage rights to the interested party. For instance, let’s say you have written and composed a song. A music company wants your song under their label. Here you have two options. You can sell your song completely to the music label, where they’ll have the right to use or alter your song as they deem fit. Or you can license your creation for an agreed-upon fee or price and set the terms and conditions for using your song. Here you’re getting paid for your creation while retaining ownership of your creation. Whichever option works best for you can be opted and respective agreements can be drawn. 

Value uncertainty

The value of intellectual property can fluctuate over time due to changes in market demand, technological advancements, or legal developments. Sometimes an intellectual property’s future value can increase tremendously, impacting the fairness of the negotiated price. Hence, while deciding the price of such assets, the seller should calculate the future valuation and decide the price of IP.

Limited future opportunities

Once intellectual property rights are assigned, the assignor may be restricted from using or further developing the intellectual property in the future. This limitation could hinder the assignor's ability to explore new business ventures or pivot their existing strategies.

In conclusion, while an intellectual property assignment agreement offers significant benefits in terms of clarity, protection, and commercialization of intellectual property assets, parties must carefully weigh these advantages against the limitations. Consulting with legal professionals experienced in intellectual property law is essential to navigate these considerations effectively.

What are the types of IP assignment agreements?

Intellectual property assignment agreements are comprehensive in nature, outlining the terms and conditions under which the transfer of IP ownership occurs. Here's an overview of the types of IP assignment agreements:

Patent assignment agreement or assignment of patents

A  patent assignment agreement  is a written agreement whereby the owner of a patent transfers or assigns their ownership rights to the other party. This agreement ensures that the assignee gains full legal rights to the patent, including the right to exclude others from making, using, or selling the patented invention, innovations, and processes. Patent assignment agreements typically include details about the patented invention, including patent numbers, descriptions, and any related rights or obligations.

Copyright assignment agreement or assignment of copyrights

Copyright assignment agreements  transfer ownership of creative works, such as literary works, music, art, and other creative expressions. By signing a copyright assignment agreement, the creator relinquishes their rights to reproduce, distribute, and display the copyrighted work to the assignee.

Trademark assignment agreement or assignment of trademarks

Trademark assignment agreement s  transfer ownership of trademarks, which are used to identify and distinguish goods or services in the marketplace. Through this agreement, the assignor relinquishes their exclusive rights to use the trademark in commerce, allowing the assignee to use and enforce the mark for their business or products.

Trade secret assignment agreement or assignment of trade secrets

Trade secret assignment agreements are used to transfer ownership of confidential information or trade secrets from one party to another. These agreements outline the specific trade secrets being transferred and impose obligations of confidentiality on the assignee to protect the secrecy of the information.

By signing such an agreement, the assignee gains the rights to use and protect the trade secrets for their own benefit. It can be any proprietary information like formulas, processes, customer lists, and business strategies. These agreements typically include provisions to maintain confidentiality and prevent unauthorized disclosure or use of trade secrets.

Design assignment agreement or assignment of design

An assignment of design agreement involves the transfer of ownership rights related to industrial designs or product designs. It ensures that the assignee gains exclusive rights to reproduce, distribute, and modify the design according to their business needs. This agreement is crucial for companies involved in product development and manufacturing.

Employee or contractor IP assignment agreement

These agreements transfer ownership of intellectual property created by employees or contractors during their employment or engagement. They are essential for employers to secure ownership of IP developed by their personnel. They often include provisions related to confidentiality, non-competition, and non-disclosure, which are mostly included in an employment agreement. Sometimes, employers even ask employees to sign separate non-disclosure agreements whenever an employee comes up with an invention. 

Assignment of IP in a joint venture 

In cases where multiple parties jointly create intellectual property, a joint ownership agreement may establish each party's rights and responsibilities. These agreements detail the terms of joint ownership, including each party's share of the IP, decision-making authority, and rights to exploit the IP.

It's essential to choose the appropriate type of IP assignment agreement based on the specific intellectual property rights being transferred and the circumstances of the transaction. Consulting with legal professionals knowledgeable in intellectual property law can help ensure that the agreement adequately protects the interests of all parties involved.

Who uses intellectual property assignment agreements?

IP assignment agreements are utilized across a spectrum of industries and scenarios. These agreements are crucial tools for businesses and individuals seeking to define and transfer intellectual property rights.

Corporations and businesses

Employment agreement : Companies frequently incorporate IP assignment clauses into their employment contracts. This ensures that any intellectual property created by employees during the course of their employment is automatically assigned to the company.

Consulting agreement : Similar to employment agreements, consulting contracts may include provisions requiring consultants to transfer any intellectual property they develop while working for the company.

Transactions contemplated : In mergers, acquisitions, or other business transactions, IP assignment agreements are employed to transfer ownership of intellectual property assets between parties.

Joint ventures : Partners in joint ventures often use these agreements to clarify ownership rights and facilitate the sharing or licensing of intellectual property developed during the collaboration.

Individuals and inventors

Prior inventions : An individual with a prior invention may use IP assignment agreements to transfer ownership rights to a new employer or business partner.

Consultants and contractors : Freelancers, consultants, and independent contractors may be required to sign an IP or invention assignment agreement as part of their contractual arrangement with clients.

Startups : Startup founders commonly use these agreements to consolidate ownership of intellectual property created before or during the company's establishment.

In essence, assignment agreements are utilized by parties across various sectors and contexts to facilitate the transfer of valuable intellectual property rights, ensuring legal protection and compliance while fostering innovation and business growth.

Key provisions of an intellectual property assignment agreement

Introduction.

Begin the agreement by formally introducing the parties involved to the agreement. In an intellectual property assignment agreement, the party selling the IP is called the “assignor,” and the other party who buys it is called the “assignee.” Here, along with providing the details of the intellectual property, the assignor explicitly agrees to transfer intellectual property rights to the assignee according to the agreed-upon terms of the agreement.

Assignment of IP

This section specifies the intellectual property being transferred. It identifies the specific patents, trademarks, copyrights, trade secrets, or other intellectual property referenced in the agreement. Additionally, it outlines the scope of the transfer and any limitations on the assigned IP rights.

Purchase price

The agreement details any monetary compensation involved in the transfer of intellectual property rights. In this section, clearly outline the payment terms of the agreement. Detail whether the parties hereto agree to pay the assignor as a lump sum or in installments. If the payment is made in installments, you must also provide the schedule for such payment.

Recordation

To formalize the transfer of intellectual property rights, recordation with relevant authorities may be necessary. This provision addresses the requirement and process for recording the assignment with the appropriate governmental authority, ensuring compliance with legal formalities.

No early assignment

This clause states that the assignment of IP rights cannot occur before certain conditions are met, such as before the completion of a project or the fulfillment of payment obligations. This section prevents premature transfers of IP.

Assignor’s representations

In this part, the assignor provides assurance that they have the sole right to the IP created and it hasn’t been licensed to any third-parties. They also affirm that they have the legal authority to transfer ownership of the IP and there are no undisclosed encumbrances or infringements.

Indemnification

This provision outlines the parties' obligations to indemnify each other against any losses, damages, or liabilities arising from a breach of the agreement or the assertion of third-party claims related to the transferred IP.

Governing law

This section specifies the jurisdiction whose laws will govern and interpret the agreement. It provides clarity in the event of legal disputes.

This clause outlines the procedures for making changes or modifications to the intellectual property assignment agreement. To make any changes pertaining to the terms of the agreement requires written consent from both parties.

Assignment and delegation

This provision addresses the transferability of rights and obligations under the IP assignment agreement. They stipulate whether parties can assign their rights or delegate their duties to third parties.

Counterparts; electronic signatures

This section permits the IP assignment agreement to be executed in multiple counterparts, facilitating convenience in signing. It also recognizes the legal validity of electronic signatures, ensuring compliance with modern technological practices.

Severability

The severability clause states that if any provision of the agreement is found to be invalid or unenforceable, the remaining provisions will remain in full force and effect. This ensures that the invalidity of one provision does not invalidate the entire agreement.

This provision details the methods and addresses for official communication between the parties regarding the intellectual property assignment agreement. They ensure that important correspondence is properly delivered and acknowledged.

Waiver provision addresses instances where a party chooses not to enforce its rights under the agreement. For instance, if certain provisions are waived off on a one-time basis regarding the agreement, this doesn’t mean that the provision is waived for the entire term of the agreement. Take the case where the assignee is paying for the IP in installments. If the assignee is not able to pay the installment for a month, then the assignor can waive that default and continue the agreement upon prior written consent.

Entire agreement

This part of an intellectual property assignment agreement explains that the parties agree to the specific terms and conditions mentioned in the agreement. Any verbal negotiations or other terms that are even stated via email or otherwise are not part of this agreement.

This section states that the headings used in the agreement are for convenience only and do not affect the interpretation of the provisions.

Effectiveness

The effectiveness provision specifies the date on which the agreement becomes effective. This ensures clarity regarding when the rights and obligations outlined in the agreement take effect.

Necessary acts; further assurances

Requires the parties to take any additional actions necessary to carry out the terms of the agreement fully. This may include signing additional documents or cooperating with each other as needed.

How does an online template facilitate drafting intellectual property assignment agreements?

There are various advantages of using an online template for IP such as.

Simplified drafting process

Online templates streamline the drafting process of IP assignment agreements. By providing a structured framework, these templates guide users through the essential elements required for such agreements. Users can efficiently input pertinent details specific to their arrangement, ensuring comprehensive coverage of the subject matter assigned.

Ease of customization

Some  online template providers, like LegalZoom , allow you to easily customize the templates to suit specific circumstances. With editing options available, users can modify clauses and provisions to reflect their agreed-upon terms and conditions of the arrangement

Clarity and consistency

These templates offer clear and standardized language, enhancing understanding and minimizing ambiguity. Consistent formatting and terminology throughout the agreement contribute to its readability and effectiveness.

Time and cost efficiency

Utilizing an online template can minimize the need for extensive document research and costly legal consultations. It allows parties to draft a comprehensive IP assignment agreement efficiently and affordably, saving valuable time and resources.

Accessibility and convenience

Online templates are readily accessible from anywhere with an internet connection, enabling parties to initiate and complete the drafting process conveniently. This accessibility promotes collaboration and facilitates the timely execution of agreements.

As you can see, using online templates provides numerous benefits. Since there are a multitude of templates available online, choosing the right template is key. To streamline this process, LegalZoom offers a comprehensive intellectual property assignment agreement template that is simple and easy to use. Just answer the guided questions, complete the form, and download the document for free.

Frequently asked questions

What's an intellectual property assignment agreement.

When your business needs to sell or buy intangible assets, use an intellectual property assignment agreement to protect both parties. It enables the transfer of ownership of intangible items legally. Intellectual property includes everything from patents to trademarks to software and more.

What key details are required to complete your assignment agreement?

Here's the information you'll need to complete your intellectual property assignment agreement:

• Who owns the intellectual property : Keep the information of the assignor ready while drafting your agreements
• Who's buying the intellectual property : Have the name and contact details of the assignee ready
• How much it costs : Know what the buyer pays for the intellectual property

Free Intellectual Property Assignment Agreement Template

Related categories, related templates.

Assignment of Agreement

Transfer work responsibilities efficiently with an assignment of agreement. Facilitate a smooth transition from one party to another.

Copyright Assignment

Protect your intellectual property with a copyright assignment form. Securely transfer your copyright to another party, clearly defining ownership terms while preserving your rights effectively.

Patent Application Assignment

Transfer the ownership rights or interests in a patent application. A patent application agreement defines the terms of transfer, promotes collaboration, and mitigates risks.

Patent Assignment

Simplify the process of transferring patent rights for both buyers and sellers with a patent assignment agreement. Document the ownership transfer clearly and efficiently.

Trademark Assignment

Simplify the buying and selling of trademarks with a trademark assignment agreement. Transfer intellectual property rights and ensure a fair and smooth transaction.

Trademark License Agreement

Ensure fair use of intellectual property with a trademark license agreement. Outline the terms of usage and compensation.

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Drafting Intellectual Property Rights Transfer Agreements - Part II

Home | Knowledge Center | Thought Papers Drafting Intellectual Property Rights Transfer Agreements - Part II

06th Aug, 2020

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In the first part of this series on intellectual property (“ IP ”) transfers available here , we discussed the legal provisions governing assignment and license of IP. In this second part, we will discuss the various transfer related clauses in IP assignment and license agreements and the manner in which these clauses must be drafted.

As discussed in the first paper of this series, IP can either be assigned or licensed by the owner, allowing the commercial use of the asset in various forms. Apart from this, various other commercial arrangements also lead to the creation of IP. For instance, IP can be created under an employment agreement, a collaboration among multiple persons, a commissioning agreement or a consulting agreement. These are just a few examples. In all the above circumstances, it is important to have an effective contract that clearly establishes the rights held by the parties concerned. In this paper we cover two issues. First, we will look at certain crucial clauses that are an integral part of IP transfer agreements, and broadly discuss the structure and framing of these clauses. Second, we will look at some specific types of agreements dealing with IP creation and transfer, and also cover some of the key commercial and legal aspects of these agreements.

Generally, in agreements concerning the use and/or transfer of IP, the following clauses are important:

1. Assignment:

In any IP assignment, there is a clause specifically assigning/transferring the title in the IP from the assignor to the assignee. This clause must clearly state the extent of the rights that are being granted to the assignee. Assignments must contain express language such as “hereby assigns”, which indicates that the assignor is assigning rights in an existing or a future work in the present. [1]

Example: “Rights granted– X hereby grants, conveys and assigns to Y all the rights in the [Work], including without limitation the following exclusive rights throughout the Territory (as defined in clause [•]) for the Term (as defined in clause [•]) –

- insert a list of all rights in relation to the [Work] that are being assigned -"

Points to remember:

1.1. Work/invention/mark/property: It is advisable for the agreement to have a specific definition for the work or the invention or other IP that is being assigned. In this way, the assignment clause can be short and precise without having to define the work/invention that is being assigned.

1.2. Indicative list of rights: The assignment clause must contain an indicative list of rights, i.e., a list of ways in which the assignee may use the work/invention. These words are normally borrowed from the statute but drafted in a manner that is consistent with the intent of the parties. For instance, in the case of a cinematograph film, one of the rights assigned would be the right to make, sell, distribute copies of the film and communicate the film to the public.

2. License:

In an agreement where IP is licensed, there is no transfer of title. Therefore, the agreement must contain a clause demarcating the specific rights of use granted to the licensee. It is advisable to use clear terms such as “hereby grants a license”.

Example: “Grant of License– The Licensor hereby grants to the Licensee a non-exclusive, non-transferable, non-sub-licensable, non-delegable and conditional license to use in the manner agreed hereinbelow, the Trademark, solely in relation to the business operations of the Licensee, within the Territory and for the Term:

- insert a list of all rights in relation to the trademark that are being licensed -"

2.1. Intellectual Property: The IP, whether it is a work/invention or trademark, that is being licensed must be specifically defined in a separate clause. As stated in 1.1 above, it makes for easier and cleaner drafting of the license clause.

2.2. Exclusive/non-exclusive: This is the most important part of the license grant which must clearly indicate whether the license is exclusive or non-exclusive.

2.3. Sublicense/further transfers: If the intention of the parties is that the license remains with the licensee alone, the clause must specify that the licensee does not have the authority to sub-license or further transfer the rights granted under the license.

2.4. Indicative list of rights: Given that a license can be far more limited than an assignment in its scope, it is advisable to include a list of specific uses that are permissible under the license. Further, the licensor may also clarify that the licensee is not permitted to do anything other than what is stated in the license.

2.5. The ownership of any IP must be mentioned, and the licensor must have the right to immediately know when there is a possibility that the IP may have been infringed by a third-party.

3. Term and termination:

The assignment or license agreement must contain separate clauses defining the term and instances when the agreement can be terminated.

a. “The rights assigned herein shall be irrevocable and shall be vested in the assignee for perpetuity including without limitation, for the full term of copyright protection everywhere in the world and any and all renewals, extensions and revivals thereof.”

b. “This License shall come into effect on the Effective Date and shall remain valid and binding on the Parties until such time that it is terminated in accordance with clause [•] of this Agreement.”

c. “This License shall come into effect on the Effective Date and shall remain valid for a period of 5 (five) years from the effective date unless it is terminated in accordance with clause [•] of this Agreement.”

Termination:

“This Agreement may be terminated: a) by mutual agreement of the Parties; or b) on a material breach of any provision of this Agreement by the other Party, provided however that in case of a breach capable of remedy, only if the breach is not remedied by the other Party within the Notice Period. Upon termination: a) either Party shall forthwith hand over to the other Party all documents, material and any other property belonging to the other Party that may be in the possession of the Party or any of its employees or agents; b) each Party shall immediately pay all pending fees or other amounts due to the other Party under this Agreement.”

3.1. Term: The term of the assignment or license can be anything that the parties choose. However, the outer limit of the grant is determined by the term specified in the statute for the IP. For instance, the term of a patent is 25 (twenty- five) years from the date of the application beyond which period the invention enters the public domain.

3.2. Termination: This clause must be drafted with care and caution bearing in mind the agreement between the parties. Further, if the agreement involves promises that can only be performed by a specific individual, termination by such party must not be permitted. In any event, if the assignment is irrevocable in nature, termination must not be permitted unless there is a material breach and terminating party must be required to serve adequate notice. Once the agreement is terminated, the IP will revert to the assignor or the licensor, as the case may be. Any IP that still remains with the transferee must be returned to the transferor or destroyed (when appropriate) upon termination.

4. Territory:

The territory for which the IP is assigned is crucial to be specified in the agreement. The same IP can be assigned or licensed to two or more separate entities for use and exploitation in different territories. If this is not clearly specified in the agreement, the territory might be deemed to be India as a whole. This would render any subsequent assignment or license impossible to carry out.

Example: “The assignment/license granted herein shall be exercisable within the territory of India (“Territory”).”

5. Consideration:

The agreement must contain a clause on consideration or fees/payment to be made for transfer of the IP. This clause must define the manner in which payments will be made by the assignee or licensee. There are several ways in which payment terms can be structured; some of the most common modes are discussed below:

5.1.  Lumpsum payments: IP rights can be granted in exchange for a lumpsum payment where the grantee can pay a specific sum of money in the manner prescribed under the agreement. This amount can be paid either as a single payment or in instalments.

a. “In consideration of Licensor granting a license to use the Intellectual Property in terms of this Agreement, the Licensee shall pay a monthly fee of Rs. [•] ([•]) to the Licensor (“License Fee”).

The Licensee shall pay the License Fee to the Licensor by way of wire transfer, no later than [7 (seven) days] prior to the commencement of each month.”

b. “As consideration for all the rights granted and assigned in the Intellectual Property by the Assignor, the Assignee agrees to pay a sum of Rs. [•] ([•]) to the Assignor in the following manner:

i. Rs. [•] ([•]) via -insert mode of payment-  on the Execution Date;

ii. The remaining sum of Rs. [•] ([•]) via -insert mode of payment-  no later than -insert date- ”

5.1.1. In the event the parties agree on payment in instalments, the agreement must clearly specify the schedule.

5.1.2. The mode of payments which are acceptable to both parties must be specified.

5.1.3. The agreement must also provide for consequences of delay in payment, if any.

5.1.4. The payments clause must specify the taxes, if any, that are deductible.

5.2. Royalty: In consideration for the rights granted, the assignor or licensor may also require that royalty be paid. Typically, royalty payments will be a portion of the sales revenue earned by the use/exploitation of the IP rights granted.

a. “In consideration of the rights granted in clause [•], the Licensee shall pay to Licensor a royalty (the “Royalty”) equal to [•]% of Net Sales occurring during the Royalty Term. The royalty under this clause shall be payable no later than 5 (five) business days after the last day of every quarter.”

b. “Royalty will accrue upon distribution of any copy of [software] delivered or sold in the manner specified in clause [•]. Rs. [•]/[•]% of the sale price of any copy of [software] shall be payable as royalty on each copy sold. All accrued Royalty shall be paid to the Licensor within [•] days after the end of each fiscal quarter, which ends on the last day of each of March, June, September and December. Payments shall be accompanied by a report stating the number of units of [software] sold/distributed in the relevant quarter, and the calculation of the royalty payment.

5.2.1. While royalty is typically represented as a percentage portion of the net sales revenue, it can be structured in any manner as the parties deem fit.

5.2.2. Royalty must be payable for the royalty term, which can either be for the whole term of the agreement or only a part of the term.

5.2.3. The schedule for payment must be specific and must always be accompanied by proper accounts for the relevant period showing the manner in which royalty payments have been calculated.

5.2.4. The agreement must also provide for consequences of delay in payment, if any.

5.2.5. The payments clause must specify the taxes, if any, that are deductible.

5.2.6. The method and frequency of invoicing must also be included.

6. Representations, warranties and covenants:

Apart from the representations and warranties that are usually included in agreements, including in relation to capacity and execution, there are certain specific warranties that should be included in IP related agreements.

6.1. The person granting the rights must represent that he has the sole and absolute ownership of the IP and is therefore entitled to grant rights either by way of assignment or license.

6.2. The person granting the rights must also represent that the IP in which the rights are being granted does not infringe any third party’s IP rights.

7. Indemnity

The person granting the rights must ordinarily indemnify the other party from any legal proceedings or costs arising as a result of defective title in the IP or any third-party claims of infringement. The person granting the rights, especially in a license, must be indemnified against all illegal and improper uses of the IP including indemnification against any legal proceedings that may arise as a result of such actions of the grantee.

8. Further assignments:

Depending on the rights being granted and the discussions between parties, the rights that are being transferred may be further assigned by the parties. Note however, there must be a clear bar on further assignment of rights and obligations especially when the promises made by the parties concerned are personal in nature.

9. Standard form clauses:

Other than the specific terms detailed above, all the standard form clauses that find their place in other agreements must also be included in IP assignments and licenses.

In this part we will discuss certain specific types of agreements and clauses in relation to copyrights, patents and trademarks.

1. Copyright:

1.1.  Film-related agreements: The producer of a film is the author of a film. [2] The producer enters into several agreements including with writers, composers of music, etc. in order to create various works which will be included in the film. An effective contract between the producer and other authors such as the music composer, writer, etc. would help avoid any disputes as to the ownership of the film and the use of other content in the making of the film. The producer also enters into agreements with financiers to finance the making of the film, and with distributors and digital partners. Some aspects of these agreements have been discussed below:

1.1.1. Agreement with composer of music: It is industry practice for the producer of a film to engage the music composer to compose the music and the background score for the film. Under the Copyright Act, 1957 (“ Copyright Act ”), the composer is the author of the musical work. It is often the case that until the release of the film the producer retains the copyrights in all the musical works by entering into a contract of service with the music composer. [3]

The producer, as the owner of the copyright in the musical works under a contract of service, can either retain all the copyrights or assign the rights to a music label. Usually, when the producer assigns the rights in the musical works to a music label, the producer, who is the owner of the film, retains the right to use the sound recording as a part of the film, and the music label would then hold the rights in the sound recordings and the underlying musical works, and can commercialize such music through sales or further licenses. The basic goal here is for the producer to leverage the rights in the music in a profitable manner.

While this is generally the industry practice, it is legally possible for a composer to retain the rights in his works. Such an agreement would encompass a limited license from the composer allowing the use of the musical works in the film by the producer.

1.1.2. Agreement with lyricist: Similar to the composer, the lyricist is also engaged by the producer to write the lyrics for various songs that are usually part of Indian films. Copyrights in lyrics, which are literary works as per the Copyright Act, will be retained by the producer or transferred by him to the music label. The lyricist is also eligible to receive unassignable royalty from the use of the lyrics.

i. To protect the interests of the producer, the agreement with the composer and lyricist must contain a clause that clearly states that all the IP in the musical and literary works will belong to the producer.

ii. In appropriate circumstances, it is also prudent to include a clause giving creative control over the final product to the producer.

iii. As discussed in Section 1.2.2 of the first paper in this series, composers and lyricists continue to retain unassignable royalty rights in the musical works.

iv. These agreements must contain a clause with specific timelines within which the composer must deliver the musical works.

1.1.3. Agreement with writers: The producer of a film usually engages more than one writer to write the story, script, screenplay, dialogues, etc. These works amount to literary works under the Copyright Act. It has been held by the Madras High Court in Thiagarajan Kumararaja v. Capital Film Works, [4] that the producer of a film has the rights to dub the film into any number of languages and this right is part of her copyright under Section 14(d) of the Copyright Act. On the other hand, it has also been held that the producer can remake the film in any number of languages only if she owns the script because remaking a film would require changes being made to the underlying script. Therefore, where a producer proposes to remake the film in various languages, apart from permission to use the script for the making of the film itself, the producer needs to entirely retain the copyrights in the script in order to be able to remake the film. [5]

i. If it is the intention of the producer to make remakes or sequels of the film, it is advisable for her to ensure that she owns the script. Whether the agreement is a contract of service or otherwise, it is prudent to have an IP clause specifically stating that the producer seeks to own the script.

ii. On the other hand, if the writer owns the script, any remake can only be made with a license from the writer.

iii. The contract must specify the degree of creative control each party has over the script or story.

iv. If the producer seeks to own the script in its entirety, she must also ensure this includes the characters and other distinctive elements of the script. [6]

v. This agreement must contain a clause with specific timelines within which the writers must deliver the scripts.

1.1.4. Agreements engaging principal director, actors and other individuals: Under Indian law, a director of a film does not have any copyrights in any aspect of the film. Therefore, producers in India can enter into a regular contract of service with the director. There will be certain circumstances where the director is also the scriptwriter, in which cases there can be a common agreement which includes the terms in 1.1.3 above and the contain clauses covering her directorial responsibilities. The director will be remunerated for her services.

Additionally, there are agreements that the producer enters with actors and other artists. These agreements will define the roles and responsibilities of the actor and her remuneration. The actor or other artists typically do not own any of the copyrights in the content or the character.

1.1.5. Credits clauses under 1.1.1 to 1.1.4: The parties to these agreements must also approve the manner in which each of these persons is credited in the film.

Example: “The Parties agree that the Composer shall be credited in the film as “Music by ______” by the Producer. The Composer shall have no copyrights in the sound recordings or the Musical Works in the film by way of such credits.”

1.1.6. Financing agreement/film investment agreement: The producer can enter into agreements with various persons for raising funds to make a film. These agreements can be structured in many ways and might in certain cases result in transfer of ownership of IP. Some types of investment agreements are discussed below:

i. Film investment agreement: The producer and the third-party investor can agree to co-produce the film. In these cases, the parties must arrive at a revenue sharing arrangement. The co-producer will also have a share in the IP that is consequential to the extent of investment.

ii. Rights agreement: The producer can, in exchange for money, grant the financier some right in the IP. For instance, if the producer seeks an investment of Rupees Fifty Lakhs, he can grant the dubbing rights, or overseas distribution rights in exchange for the same. Such agreements work just like assignments or exclusive licenses but are a useful way in which producers can raise funds.

1.1.7. Theatrical distribution agreement: Producers must also enter into various distribution agreements with several distributors for distributing the film in theatres in various territories. Essentially, what the distributor receives under these agreements is a limited license or assignment to communicate the film to the public through theatrical distribution. The term of these agreements is limited to the period during which the film would be distributed in theatres.

Example: “In consideration of the mutual promises, payments and other terms contained herein, Producer hereby exclusively [assigns/licenses] to the Distributor the right to communicate the Film to the public only via theatrical distribution in the Territory for the Term.”

1.1.8.  Production of television/web-series/other shows/online content: For the production of any other content, all the agreements described in 1.1.1 to 1.1.8 will be used. However, the manner in which the IP is shared and owned may differ depending upon the facts and circumstances of each case. For example, let us say XYZ Pvt. Ltd. is producing a stand-up comedy special with a prominent comedian Mr. P. The parties can agree that the content will be written, performed and, therefore, owned by Mr. P, and where XYZ Pvt. Ltd. only takes a commission and a share of the revenue.

1.2. Album production:

1.2.1. Agreements with music composers and lyricists: These agreements are similar to the agreements described in 1.1.1 and 1.1.2 above. The producer of the sound recording may engage composers and lyricists and seek to retain the copyrights in the underlying works along with the sound recording he produces and owns.

1.2.2. Agreement with the singers/other artists: The singers and other artists are usually engaged under a contract of service to sing in a studio, which performance is recorded, edited and produced into a sound recording at the instance of the producer. The singer does not own the copyright in the musical work, literary work or the sound recording itself.

1.3.  Digital distribution of copyrighted works: Songs, films or any other copyrighted content can be distributed and communicated to the public through a variety of digital platforms. Today, most popular among these are OTT platforms such as Netflix, Prime Video, etc. Typically, these entities enter into either an exclusive license with the owner of the content for a particular term and for a specific territory. Since these entities are able to geo-block the content, they avail territory specific licenses for various titles. Therefore, a TV series that is available in the United States of America on X OTT service, may instead be available on Y OTT service in India. These entities do not seek a complete transfer of title typically but restrict themselves to a license for a specified term.

i. The agreements must contain a schedule detaining the timeline for delivery of prints and materials to the platform along with the technical specifications for such materials.

ii. Clauses must specify the manner of use of any trademarks and other artwork belonging to either party.

iii. The consideration or license fee can pe paid in a single lumpsum payment or be divided into instalments.

1.4. Book publishing agreements: These agreements are entered between the authors of books and publishers. Under the Copyright Act, the author of a literary work has the right to make copies of her work and sell them. However, such rights are normally transferred to publishing houses that have the means to mass produce the book and aid in the distribution of the work. This may also include various formats in physical or digital form. The rights granted could also include the right to translate the books into various languages. Typically, the author retains the right to make film/television adaptations of the book.

Example: “The Author grants the Publisher the exclusive right during the Term to reproduce, print, publish, distribute, translate, display and transmit the Work, in whole and in part, in the Territory, in such languages and formats as agreed to between the Parties. It is clarified that no film, motion picture, television, radio, dramatic or other adaptation rights are granted to the Publisher and the Author can exploit such rights.”

i. Publishing agreements must contain detailed clauses on when the author will deliver the work to the publisher.

ii. The acceptance of the work for publication is usually left to the discretion of the publisher.

iii. The author gives the publisher the sole and exclusive right to publish and distribute the work. The author, however, may retain other rights such as the right to translate the work, the right to make adaptations, the right to make films, etc.

iv. The author is usually paid a certain advance amount on the date of signing of the agreement. Additionally, royalties may be paid to the author for the sale of each copy of the work payable as a percentage portion of the net sales revenue earned by the publisher.

v. The onus of receiving any prior approvals for copyrighted works to be included in the book usually lies with the author.

1.4.1. Option Purchase agreements: Such agreements are typically entered into between the author of the book and a producer. The agreement grants an option to a purchaser to avail an assignment or a license at a future date to make film/television/digital adaptations of the book. For example, A, the author of a book, can enter into an option-purchase agreement with B who wants to make a film-adaptation of the book. The option purchase agreement will give B a specific timeframe for some groundwork such as testing the viability of the project, raising funds, etc. At the end of the option period, B can exercise the option and have the adaption rights assigned or licensed to her. The author is usually offered an option-fee for the period during which the grantee-purchaser holds on to the option. Once the option is exercised, the parties can enter into an assignment or a license agreement as the case may be.

1.4.2. Adaptation agreement: If the film is based on a story or book written by a third-party upon which the producer seeks to rely, then the producer may avail an adaptation license from the author of the literary work.

1.5.  Software license: In India, software is a subject matter of copyright law. The person writing and creating the program holds a copyright over it. The software can therefore be licensed by the owner for use by another entity. Software licenses are normally granted by companies to their users usually based on a subscription fee model.

Example: “Entity hereby grants the customer a non-exclusive, non-sublicensable, non-assignable, world-wide license to use the Service solely for the internal business operations of the customer in accordance with the terms of use specified herein.”

1.5.1. Platform licenses for user-generated content: If the software is such that it allows the creation, storage and dissemination of user-generated content, the entity licensing the software must also take a license from each user to store and disseminate the user-generated content. For instance, with applications such as YouTube or TikTok, such a license would be required from the user. The clause must clarify that the user agrees to a non-exclusive, non-sublicensable, non-assignable, royalty-free license to be granted to the entity for the use of the content while the user continues to retain all the copyrights in the content.

1.5.2. Software as a service: Typically, in these agreements, there is an entity that has developed a software and provides services that aid in the productive use of such software. The entity enters into an agreement with the customer granting a customer a license to use the software for its business operations while the entity retains the IP in the software.

Example: “The Company agrees to license and grant access and right to use the Application to the Subscriber and provide to the Subscriber all other services necessary for the productive use of the Application, including, initial setup and installation, user identification, user account and password change management, data import/export, remote technical support, maintenance, training, backup and recovery, and change management ("Services") as further set forth in Schedule [•] of this Agreement.”

i. These agreements must contain a clause preventing any reverse engineering of the software and controlling security breaches. This would also include clauses pertaining to data security and data protection.

ii. The data that belongs to the customer will continue to belong to her while the licensor/service provider will continue to own the software.

1.5.3.  Software development agreement: In certain cases, one may choose to engage the services of a third-party software developer to develop a software or product under a contract of service. For instance, A may have a concept or idea but may not have the expertise to engineer the product. A can engage the services of B, third-party developer, to develop the product. B will be remunerated for his services. But A, whose resources (typically monetary resources as A would bear the operational costs) were expended on developing the product, will be the owner of the IP in the product.

Example: “The Service Provider agrees that all original works that are made by the Service Provider (solely or jointly with others) using the Company’s resources, or any other assistance that may be provided by the Company, pursuant to this Agreement, are protectable by copyright as “works made under a contract of service” under the Copyright Act, 1957.

The Service Provider hereby agrees to transfer and assign all intellectual property rights that may be developed or created by it pursuant to this Agreement without any claim over any such work, and waives any other right that the Service Provider may have in law.”

1.5.4.  Application programming interface (“API”) integration agreement: APIs are tools that permit interaction between various software intermediaries. In API integration agreements, (i) a party licenses its API (either on an exclusive basis or on a non-exclusive basis) to another party for integration of its API into the software (in the form of an app or website), or (ii) two parties propose to integrate their software to create a new product.

i. In these agreements, there must be a two-way obligation to keep the licensee’s tool/programme and the licensor’s API fully functional and usable at all times.

ii. These agreements would also contain clauses on data security, data protection and covenants on the basis that security breaches will be controlled and monitored.

iii. It must be specified that the integration agreement will not result in any transfer of IP and each party will continue to hold their IP rights. However, a limited right to use the tool and the API will be licensed to the other party for the duration of the agreement. In case a new product is created both parties hold rights in the IP jointly.

2. Trademark:

Trademarks can be assigned or licensed irrespective of whether they are registered or unregistered trademarks. Generally, all assignments and licenses of trademarks must be in conformity with the principles and rules under the Trademarks Act, 1999.

Apart from what is covered in Part I of this article, the following must be noted while drafting clauses on assignments and licenses of trademarks.

Assignment:

i. The grant clause in an assignment agreement must clearly specify whether the mark is being assigned together with the goodwill of the business or not.

ii. Assignment agreements must contain a clause/schedule describing all the trademarks that are being assigned, and details pertaining to their registration.

iii. The assignor must agree to execute all necessary documents in order to record the assignment with the Registrar of trademarks under Section 45 of the Trademarks Act.

i. Prevention of naked licensing: While licensing a trademark, the terms of use need to be specific and clear. If a license permits the unbridled use of a trademark without any quality assurance measures in place, such a license amounts to ‘naked licensing’. The clause must also state that the mark can only be used in relation to the goods and services specified in the agreement. Quality control is essential to protect the interests of both the licensor and the end-user of the product.

ii. There must be a separate clause defining the uses of the mark by the licensee that are permitted and uses that are strictly disallowed and not within the ambit of the license.

iii. The agreement must also include a clause stating that no rights in and to the trademarks are being transferred or assigned by virtue of the license.

iv. The more control the licensor would like to exercise over the use of the mark, the stronger must be the quality, use and termination clauses of the agreement.

v. It must be specified that the licensee shall not have the right to further assign or license the mark to any third-party.

Apart from these issues, transfer of trademarks through assignment and license might involve larger commercial arrangements that impact the creation, use and transfer of trademarks. Some of these are discussed below:

2.1.  Transfer of trademark under a franchise agreement: Franchisors typically have proprietary methods of doing business and own trademarks which consumers come to solely associate with the business of the franchisor. Internationally renowned brands such as McDonalds or Krispy Kreme follow this business model where their businesses have proprietary elements which they license to local businesses all over the world. The businesses which acquire a license of this kind under a franchise agreement will have the right to set up a local unit of the franchisors business and run it as per the terms of the franchise agreement.

2.1.1. Use of the franchisor’s trademark: The main condition as to the use of the franchisor’s trademark is that the franchisee will be permitted to use the franchisor’s trademark in accordance with the terms specified in the franchise agreement. Please note that the agreement must clarify that this is a limited use license granted to the licensee and does not result in transfer of ownership. Further, in relation to the franchisor’s business, the franchisee shall not have the right to any mark other than the ones that it is authorized to use under the franchise agreement.

Example: “The Franchisee agrees that the Franchisor is the sole and exclusive owner of the TRADEMARKS and has the absolute right to control the Franchisee’s use of the TRADEMARKS. For removal of doubts, the Franchisee agrees and affirms that it has not acquired any right, title or interest in the TRADEMARKS and that its limited right to use the TRADEMARKS is governed by the terms of this agreement. Further, the Franchisee agrees that it shall not register, in its name or in the name of any associated entity or person, any trademark, logo or domain name that is identical or similar to the TRADEMARKS.”

i. The franchisee must not be permitted to take any action against any infringer without the prior consent of the franchisor. It is best for the franchisor to initiate any legal action as the sole and absolute owner of the mark.

ii. If the agreement is terminated, any action taken by the franchisee in respect of the trademarks must revert to the benefit of the franchisor and the franchisee must stop associating itself with the trademarks of the franchisor.

iii. There must be a clause allowing the franchisor to terminate the agreement if the trademark is used in a manner that would bring disrepute to the business of the franchisor.

iv. There must be clauses controlling the use of the trademark by the franchisee in advertising and marketing literature.

1.2.  Marketing Agreement: A marketing agreement allows a third-party a limited right to display the trademarks of the licensor while marketing, advertising and selling products that belong to the licensor.

i. This agreement has to specify that the licensor continues to own the trademark and this agreement does not result in any transfer of ownership.

ii. Such a license must specify the manner in which the trademark is permitted to be used. Any contravention of such use restriction would amount to a material breach of the agreement.

Patents can be assigned or licensed for specific purposes meaning that patent rights can be granted to make, sell or import the subject matter of a patent.

Some specific agreements pertaining to patentable subject matter are discussed below:

3.1.  Technology transfer agreement: Technology transfer agreements (“ TTA ”) involve the licensor transferring its IP and know-how to the transferee for a specific period of time and for a specific purpose. A large part of arrangements of this nature would depend on the specific facts and circumstances of each case. Not everything that is transferable under a TTA will be IP. One part of the transfer may relate to the licensing of IP such as patents or software for specific purposes, while the other would include information and know-how. Clauses in relation to the sharing of information and other know-how are strictly contractual and are secured by having strong confidentiality clauses in the agreement.

i. The agreement must define the IP or the technical know-how to be transferred clearly. The definition must be tightly worded so as to cover only what is necessary, failing which, the licensee will secure access to more than what was intended by the parties.

ii. The territory within which these rights can be exercised must be specific, and the term must also be specified. The term must be agreed upon based on prevailing norms of the Reserve Bank of India and other regulations in this regard. The termination clause must specify the consequences of early termination, reversion of the IP to the licensor, and, to the extent possible, destruction of any confidential material or information within the possession of the licensor.

iii. Consideration including royalty payments must be structured properly.

iv. As far as the know-how is concerned, the confidentiality clause matters the most. The confidential information must be clearly identified as such. If the information is highly technical, this clause must be drafted in an industry specific manner. The consequences for any breach must be clearly identified.

v. The tax liability under TTAs varies based on whether the parties are Indian or would include foreign collaborators. The tax liability clause must identify the manner in which all taxes must be paid.

vi. TTAs involve heavy obligations on both parties. The licensor must ensure that the technology is used properly and for that ensure that the licensee, at all times, has the technical capabilities that are required to achieve it. This may include training, testing, quality control and other measures. The licensee will have the responsibility to use the technology to the fullest, make all payments on time and to maintain confidentiality throughout the duration of the agreement.

vii. Use of other IP, i.e., brand names or other literature, must be carved out through separate clauses defining all permissible uses.

4. Employment agreement:

Employment agreements must typically contain a blanket clause allowing the use and transfer of all IP created by the employee, during the course of employment, by and to the employer, especially where the employee is a senior member of the team. The clause also grants exclusive rights in all such IP to the employer.

Example: “The Employee agrees that all and any work executed and performed in the course of employment, whether or not conducted on the premises of the Company but related to the business of the Company, is being done on behalf of the Company. In this regard any discoveries, inventions, work created, data produced, concepts, ideas, creations and discoveries belong to the Company. The Employee hereby agrees to transfer and assign all intellectual property rights that may be developed or created by her without any claim over any such work, and waives any other right that she may have in law.

The Employee further agrees to execute, upon the request of the Company all necessary papers and otherwise provide proper assistance to enable the Company to obtain for itself (and to vest legal title in the Company), patents, copyrights, or other legal protection for such inventions, discoveries, innovations, improvements, original works of authorship, trade secrets and technical or business information in any and all countries.”

In this article, which is the second of the two-part series on transfer of IP, we have discussed the manner in which various clauses in an IP transfer agreement must be drafted. There are several ways in which these agreements can be structured, but it is important to keep in mind the intention of the parties and the extent of rights that are to be granted. Similarly, rights must be granted in such a manner that would allow the full and proper use of the IP. Note that the example clauses given in this article are only indicative, and in any agreement, these clauses must be drafted to suit the relevant purpose and context.

This paper has been written by Suchita Ambadipudi (Partner) and Sheetal Srikanth (Associate).

[1] In Waterman v. MacKenzie et.al , 138 US 252, the Supreme Court of the United States held that to determine whether an agreement is an assignment or a license, the legal effect of the clauses and the grant must be considered and not the mere nomenclature of the agreement or the headings for various clauses.

[2] Section 2(d) and 2(uu), Copyright Act, 1957.

[3] Section 17, Copyright Act, 1957.

[4] 2018 (73) PTC 365 (Mad).

[5] For similar issues arising out of making a sequel of a film, see, Ian Eagles “Copyright and the Sequel: What Happens Next?” in F MacMillan (ed), New Directions in Copyright Law, Vol 6, (Edward Elgar Publishing, UK, 2007) pp. 35-65. See also, Zee Entertainment Enterprises Limited v. Ameya Vinod Khopkar Entertainment and Ors. , MANU/MH/0512/2020.

[6] For an overview of issues arising out of character- related rights, see, Arbaaz Khan Production Private Limited v. Northstar Entertainment Private Limited and Ors. , 2016 (67) PTC 525 (Bom).

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