It’s Not Fair – Then Don’t Sign the Agreement!

Recently a number of things have been written about or talked about in the news or in business circles which essentially revolve around contractual obligations.  Two or more parties enter into an agreement which says certain things can happen, some things are options that can be exercised, and some things aren’t defined or addressed.  One party fully understands this “standard” agreement and enforces it as needed to accomplish its objectives and protect its interests.  The other party doesn’t really believe that the agreement “options” will ever be exercised or doesn’t pay attention to the details.  Both sides inevitably are surprised when the agreement is enforced.  One party because “of course” the terms are enforceable; the other party because the terms are being enforced and options exercised.

One instance that is of particular interest involves intellectual property rights.  All too often organizations enter into agreements – verbal and written – in which the long term implications are not understood or addressed.  Or they may be addressed but one party doesn’t believe that clause will ever be exercised.

Whether it is the government imposing rights, restrictions, obligations, or options in return for grants, or it is another capital source establishing milestone requirements, or it is a contractual license, sublicense, vendor, or other relationship, the safest assumption is that at some point if the conditions related to certain parts of the agreement are met (or not met) any or all parts of the agreement will be enforced or exercised.

If a government grant agreement says the government retains an unrestricted right to use the technology or intellectual property developed without compensation to the creator and they may take that intellectual property for their use and provide it to another party that may or may not have been involved in the creation of the IP (a subcontractor or your competitor), then in signing that agreement or accepting the funds you are accepting those terms and options.  To say “well I didn’t think they meant it” or “I didn’t read that” or “”I didn’t understand that” or “they didn’t do that with so-and-so” doesn’t hold a lot of water.

These types of issues also arise with franchise and license relationships, vendor/purchaser relationships, and so on have similar issues at times.  For instance, you may have a vendor create a piece of IP (for example, website look and content).  You have an agreement for the copyright to be surrendered to you.  But if you don’t pay the vendor, then you don’t get the copyright surrendered to you.

Again, you hire someone to work as an independent contractor or as an employee. They perform work on IP, and don’t pay them…

Another variation, you hire someone who has a “day job” working on the same type of IP for another organization.  The individual surrenders his/her claims to the IP, but they aren’t able to surrender the rights of their employer to the work (and depending upon employment agreements the employer may have rights to anything that employee has created).

Understanding the elements of contractual relationships whether they are written or verbal agreements, typical agreements or not, is important to protecting your IP, the revenue potential of your business, and the value of the business.  Saying “that isn’t fair” is a sign that some gaps were left somewhere in your processes.

When looking at a situation “that isn’t fair,” put your organization on the other side of the equation.  What would you expect of the other party in an agreement which has clauses and conditions to protect that organization and the other party doesn’t live up to the terms?  Are you willing to do something which is not in your organization’s best interest because the other party says “that isn’t fair”?  Expect to live up to the agreements you make.  Yes there may be differences of opinion when things go wrong, but having documentation and evidence of the “work” and the “issue” will keep your organization ahead of the game.

Copyright ©2006 FOCUS Resource, Inc.

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