Tag Archives: Intellectual Property

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What to Include in a Licensing Agreement: The Licensor’s Perspective

If you are the owner of intellectual property (IP), it is imperative that you protect your rights by properly registering it and using a licensing agreement that safeguards your rights. For more general information, please read our blog titled “Understanding Licensing Agreements.”

When creating a licensing agreement, you first need to determine the scope of the license. You will want to keep ultimate ownership of the IP, but you can assign limited use rights. The license scope should be broad enough that others will want to use your IP. Generally speaking, unless the IP is custom-made, the license is usually nonexclusive, so you can sell or license the use of it to other parties.

In most circumstances, you will want to make it clear that the license does not allow the licensee to reproduce or pirate the IP in order to sell it to third-parties. However, if you allow the licensee to reproduce the IP, you will want to be paid royalties or ongoing maintenance charges in exchange for the resale license.

Other topics your license agreement should cover include:

  • How long the license will last
  • Outline any rights of the licensee to modify or combine the IP with other products
  • Set forth any prohibited uses of the IP
  • Establish whether there are rights to transfer or sublicense
  • Detail the warranties; Disclaimer of the UCC warranties
  • List the limitations on the licensor’s liability
  • Include a provision covering nondisclosure of protected information
  • Outline indemnity for infringement
  • Set forth available remedies
  • Establish the conditions for terminating the contract

There a numerous factors that must be considered and negotiated when creating a license agreement. The laws governing intellectual property can be complicated, so having a seasoned attorney assist you is invaluable. Contact Leslie S. Marell today to schedule your appointment.

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Understanding Licensing Agreements: From the IP Owner’s Perspective

Understanding what constitutes “intellectual property” (IP) and the importance of protecting it is important to any business owner. IP is anything that is created in an individual’s mind, including art, music, computer software, inventions, designs and trademarks. You can protect IP with a license, which is a type of contract that allows you to maintain control over your IP but transfers certain rights to a third party to use the IP.

The holder of the IP rights is called the “licensor.” The party that wishes to use the IP is called the “licensee.” By entering into a license agreement, the licensee pays money to the licensor for the right to use the invention or creative work. In many software license situations, the licensee is granted a non-exclusive right to use the IP. In other situations where the licensee has been involved in some development of the IP, the licensee may expect either ownership rights or exclusive rights to use the IP.

The primary way to protect your IP is to register for all rights that apply to your circumstance, such as:

  • Patents – inventions
  • Copyrights – original works of authorship
  • Trademarks – symbols, words, names or other designations used to identify goods made or sold in order to distinguish them from other similar goods

Intellectual property law can be complex, so it is important to confer with a knowledgeable attorney on how to protect and manage your IP rights. Once you have secured your rights to the IP, you can create your licensing contract.

A license agreement does not have to be lengthy and complicated, but it must be uniquely tailored to meet your individual needs. You want to ensure the contract is clear and concise, but most importantly, enforceable. Federal law imposes strict civil and criminal penalties for unauthorized use of IP. Your license agreement should provide you with the ability to file a lawsuit to enforce your rights and recover certain remedies such as an injunction and monetary damages if the licensee misuses the IP. You may also be entitled to recover actual damages, which may include any money you lost as a result of the infringement. In certain cases, you may even be able to recover any profits wrongfully gained by the infringing party.

To learn more about license agreements or how we can assist you with other business-related matters, contact Leslie S. Marell today. For more information, please read our next blog titled “What to Include in a Licensing Agreement.”

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3 Types of Agreements that Protect Your Proprietary Information

Does your business have an intangible asset that you need to protect from competitors? It could be an idea, customer list, computer code or other comparable assets. It is essential that you take steps to safeguard the aspects of your business that sets it apart from others. If you don’t do it now, it could mean costly litigation for you in the years to come.

How do your protect your intangible assets? The answer depends upon the unique circumstances surrounding your business, but the following are a few types of contracts that generally can be beneficial:

  • Intellectual property (IP). You might be surprised at what types of assets you can protect. Most businesses understand that they need a patent to protect a new invention, but you can also use a trademark to protect the source of your goods or services. Creative works can be protected by a copyright. Don’t assume you cannot protect your intangible asset. Confer with us and determine the best strategy for safeguarding your IP.
  • Non-Disclosure agreement. It should be mandatory for anyone who has access to your confidential information to sign a non-disclosure agreement. This includes your employees, independent contractors, vendors and customers. This type of agreement can limit when and how your business’s sensitive information is shared. It can also set forth your company’s available legal remedies if the contract is breached.
  • Non-Solicitation agreement. All of your main employees should execute an agreement preventing them from soliciting your business’s customers for a set period of time after they leave your employment. This type of agreement should also include a provision that your business is the owner of any IP developed while the person is working for your entity. Be aware, however, that these agreements must be carefully crafted to be enforceable and in California, they are unenforceable.

It is additionally wise to require all of your employees to password-protect their company computers with passwords, which are updated regularly. You should limit access to your confidential data to only those workers who must have it to properly perform their job duties. Your business should also back-up its digital data routinely.

If you need assistance creating any of the above contracts or you have questions regarding your company’s contractual needs, contact Leslie S. Marell for help. We serve as general counsel to clients who do not require, or choose not to employ, a full-time lawyer in-house. Call today to schedule your initial consultation.

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5 Important Tips for Your New Business Venture

When you are starting a new business, it is easy to feel overwhelmed by all of the decisions you have to make. The decisions you make now can have lasting consequences, so it is important to get them right. Below are five important tips to help ensure that your new business gets off to a successful start:

Legal Structure

There are several different types of business entities to choose from, each with its advantages and disadvantages. To learn more, please read our blog titled “Which Legal Structure is Best for Your Start-Up?” It is important for you to confer with a business attorney to ensure you select the legal structure that is most beneficial for your business.

Written Contracts

New business owners often fall prey to relying on oral promises that aren’t fulfilled. Getting your agreements in writing is the best way to protect your interests. This includes creating a written agreement between the founders of the business which outlines each owner’s percentage of ownership and how the daily business decisions will be made.

Intellectual Property

Intellectual property can include anything from your company name, to its logo, to the type of products you sell. All business owners should take the initiative to legally protect their intellectual property. If your entity fails to obtain the proper patent, trademark or copyright, it could result in you have no legal recourse if another party infringes on your rights. One important step in protecting your private information is to require all employees to execute a non-disclosure agreement.

Employees

There are a wide variety of laws governing an employer’s relationship with its employees. It is imperative that you educate yourself regarding the laws, rules and regulations that apply to your industry and your specific business.

Get help

When your business is first starting out, you will likely be tempted to try to save money and handle things on your own. Unfortunately, this approach can end up costing you significantly more than the cost of retaining a professional. One mistake could be the end of your business before it even gets off the ground. Don’t let that happen – get the legal assistance you need.

If you have questions regarding business law matters, contact us today to schedule an initial consultation. Leslie S. Marell has been practicing business and commercial law for over 25 years. She is established in private practice and has extensive legal experience counseling companies in the areas of business contracts and transactions, purchasing, sales, marketing, computer and technology law, employment law and day to day legal matters. Let us provide your company the advice and guidance you need.

 

 

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Four Agreements Your Business Should Have

Every business is unique and has its own legal needs. However, in my experience, four important contracts which are needed to safeguard an entity’s interests include:

Non-Disclosure Agreement

A non-disclosure agreement (also called a “confidentiality agreement”) is important to every company in every industry. This type of contract obligates third-parties to keep your private information confidential and limits the use of it to only permitted purposes set forth in the agreement. Without such a document, there are no restrictions on how or what the third party does with your confidential information. If the third-party breaches a non-disclosure agreement, it entitles you to recover remedies such as an injunction to stop the unlawful disclosure and/or damages. Even if the non-disclosure agreement is never used in litigation, it has a powerful effect by informing the third-party that they are privy to non-public information and there will be legal consequences if they violate the trust you are putting in them to safeguard it.

Purchase Order

When a transaction involves a buyer and a seller of goods or services, the purchase order (PO) becomes part of a contract between them. The PO should set forth the description, quantity, price, applicable discounts, payment terms, date of shipment, authorized signature, and any other important information relevant to the purchase. A buyer can implement PO tracking to manage inventory, improve clear communication, and create a sales history.

Sales Terms & Conditions

Outlining the sale terms is vital to protecting your business. It is a necessary document when you are doing business with your customers who issue you a PO. The terms and conditions of a transaction include topics such as exclusion of warranties, limiting remedies and narrow indemnification language. It is important to work with your legal counsel to identify issues that could have a detrimental impact on your business and properly address them in the sale terms of your contracts.

Intellectual Property Assignment Agreement

An Intellectual Property Assignment Agreement should be signed by all applicable independent contractors and vendors that work for your company when they are hired. Don’t make the mistake of believing that your business automatically owns the work produced by an independent contractor simply because you are paying them for it. An independent contractor is treated differently under the law than one of your full-time employees. To ensure that your entity owns the independent contractor’s contributions, you must have a written agreement that transfers the copyright to your company.

If you need assistance creating any of the above contracts or you have questions regarding your company’s contractual needs, contact Leslie S. Marell for help. We serve as general counsel to clients who do not require, or choose not to employ, a full-time lawyer in-house. Call today to schedule your initial consultation.

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Part Two: Intellectual Property Copyright Ownership

As I discussed in a previous blog, under copyright law, the author who creates an “original work of authorship” owns the copyright to that work.  An “original work of authorship” includes designs, specifications, software, documentation, photographs, website development, artwork, or multimedia work.

This means that when your company outsources the design or development of any work, your company will not automatically own the copyright to the work created by the supplier/ independent contractor/ customer even when you’ve paid them for it. In order to acquire ownership, your company must obtain a written assignment (transfer) of copyright ownership signed by the author of the work.

The “Works for Hire” doctrine is an exception to the above general rule. However, those items considered “works for hire” are very limited and likely do not cover many of the projects companies typically outsource.

THE BUYER’S POSITION

Buyers assume that if they pay for the development of the work, design, software, services they should own the intellectual property rights to such development. At first blush, that position seems logical:  The Buyer pays for it, the Buyer should own it. The Buyer may also want the ability to be able to incorporate the work into other products, or modify the original work.  Additionally, the Buyer is concerned that the Supplier might sell or license the work to the Buyer’s competitors.

THE SUPPLIER’S POSITION

 Most frequently, the Supplier’s pre-existing intellectual property will be used in the development of the deliverable. The Supplier has likely spent many years and significant money developing its IP. If the Supplier transfers ownership to the Buyer of the entire work, the Supplier will end up giving up far more than it actually realized or intended:  The Supplier may lose its rights to its pre-existing/ background technology and, therefore, the assets to its business.

ISSUES TO CONSIDER

Many Buyer proposed IP assignment clauses are very broadly written to say that the Supplier will assign to the Buyer ownership to all IP contained in the entire deliverable/ work product. The problem with these clauses is that the Buyer is requesting ownership to IP not only for which it paid but for the Supplier’s pre-existing IP as well.

  • CARVE OUT SUPPLIER’S PRE-EXISTING TECHNOLOGY

A key step to resolution is to take the Supplier’s pre-existing technology “off the table” in terms of ownership. The Supplier will want to retain all ownership rights to its background IP and that’s certainly not unreasonable since the Buyer typically has not paid for the development of that background IP.

Supplier should prepare a separate exhibit to the contract that identifies in as much detail as possible the pre-existing technology to be included as part of the deliverable. It often is not possible to identify all the items of the Supplier’s background technology that will be used, so the contract should allow for additional items to be added later.

  • DETERMINE YOUR GOAL

If the Buyer is having the Supplier semi-customize a standard product or software, the Buyer often insists on ownership rights to the customized portion without giving thought to the underlying reasons. Generally speaking, the ownership of the code or design applicable to the customization will not be of much value.

Perhaps the Buyer is concerned that the Supplier will use the customized portion (paid for the Buyer) in product the Supplier sells to the Buyer’s competitors. If that were the case, a narrowly written restriction against performing the same sort of customization for Buyer’s direct competitors would be more to the point. (CAVEAT: Work with your lawyer in writing these “restrictive covenant” clauses because they must be carefully worded.)

Perhaps the Buyer wishes to include the technology in other products. In this case, the Buyer will want to discuss the possibility of acquiring a nonexclusive license to use the pre-existing technology with an exclusive license for the IP developed.

SEVERAL APPROACHES TO RESOLUTION

ALTERNATIVE 1:   Ownership by Supplier with Exclusive License to Buyer

One option is for the Supplier to retain ownership of the work (defined to exclude pre-existing technology) but give the Buyer the exclusive license to use it. If an exclusive license gives the Buyer the right to use the work in every possible context at every possible location, it would be the functional equivalent of ownership. In practice, however, the parties usually agree to limit the Buyer’s use rights. For example, the Buyer’s right to use the work may be limited as to duration, area (worldwide or domestic), or market. The Supplier has the exclusive right to modify the work and may sell or license it to others outside the Buyer’s area of exclusivity.

This arrangement often benefits both the Buyer and Supplier. The Buyer is assured that the Supplier will not sell or license the work to competitors during the term of the exclusive license. At the same time, the Supplier retains control over the work and will have the opportunity to earn income by licensing/ selling to others outside the area of the Buyer’s exclusivity and/ or after the exclusive license expires.

ALTERNATIVE 2:   Ownership by Supplier with Non-Exclusive License to Buyer

The most favorable ownership arrangement for the Supplier may be for the Buyer to be given only a nonexclusive license to use the work (defined to exclude pre-existing technology). This means that the Supplier is free to license/ sell the work to anyone else; including the Buyer’s competitors. This type of ownership arrangement should result in the lowest possible price to the Buyer, because the Supplier may earn additional income by licensing the work to others.

In nonexclusive license arrangements, it is not uncommon for the Supplier to agree to pay the Buyer a royalty for each license it sells to third parties. This often seems fair because the Buyer paid to have the work created in the first place. The total cumulative royalty is usually limited to the total price the Buyer paid the Supplier for the work. The royalty can be a percentage of the total price paid for each license or a set dollar amount. While this is a common solution, there are no industry guidelines for the amount of such royalties.

The Buyer may object to licensing of custom modifications for which it has paid to competing companies. One solution is hybrid:  the Supplier agrees to a one or two year exclusive license to the Buyer for the particular modifications before those modifications are made available to other users.

ALTERNATIVE 3:   Joint Ownership

Yet another option is for the Buyer and Supplier to jointly own the work. Under a joint ownership arrangement, each party is free to use the work or grant nonexclusive licenses to third parties without the other’s consent (unless they agree to restrict this right). Normally, joint owners must account for and share with each other any monies they earn from granting such licenses. However, in most circumstances, it is not practical or desirable in the Buyer/ Supplier situation.