Pennywise, IP (Intellectual Property) Foolish

Often business individuals, whether working alone or as the owner of a small business or start-up technology company, do not fully understand the impact contracts and other agreements they make will have on their ownership of intellectual property.  A young and/or growing business is often cash constrained; they’d rather save money for the costs of the patent process than have attorneys review every agreement.

And all too often the reality is that the money “saved” has a costly price when related to intellectual property ownership.  Intellectual property rights are significantly impacted by the type, nature, and scope of agreements.  Agreements with employees, independent contractors, vendors, lenders, strategic partners, investors, and customers all can have an impact on who owns the intellectual property, if intellectual property can be protected (patents), and whether or not you have a business at the end of the process.

Imagine this scenario:  you are given the opportunity to act as a subcontractor on a larger project to develop a product.  You are given a contract between your company and the primary contractor.  The contract states this:

“All intellectual property developed during the length of the contract belongs to the primary contractor.”

You question the clause and are assured they won’t enforce it.  You really do want to close this deal.  Your attorneys and other consultants have advised you there are no circumstances under which you should sign an agreement without its being reviewed for impact on intellectual property, projects for other clients, etc.  Here’s the dilemma – the primary contractor implies that if you don’t sign the contract immediately, you might not get the chance.

What do you do?  If you want to be sure you’ll have your own intellectual property and your company at the end of the contract, you walk away and have the contract reviewed.

The phrase “all intellectual property” may be subject to “interpretation”.  Written as it is now, however, means that ALL – everything, whatever you work on regardless of for whom, where, when, whatever you put to paper – it ALL belongs to THE PRIMARY CONTRACTORS!  How can it possibly be worth saving the cost of a contract review if you are potentially signing over the heart and soul of your own company?  What will you have left if you are working on unrelated intellectual property within your own company and the clause does truly mean ALL?

Are you guilty of being pennywise and IP foolish?  If you have not been INVESTING in your business future by having various legal agreements reviewed, have been writing your own employment or independent contractor agreements, or have been using template documents from the internet or from reference books, it may be time to take a comprehensive look at where you and your business stand with regard to IP ownership.

If you (or your company) aren’t engaged in technology or other intellectual property development, if you aren’t working on projects for multiple customers to develop products or other intellectual property, then you may not be as concerned. Intellectual property, however, is not limited to product patents or technology.
You may want to ensure that your employees and independent contractors cannot take information regarding business processes that enable you to stay ahead of the competition straight to that competition!    In some instances, a non-compete or non-disclosure agreement isn’t enough.  Investing in strategic legal advice can keep your business viable and its IP and business processes protected.

Here are some of the agreements that can create exposure for you and your business:
•    Employment contracts
•    Independent contractor agreements
•    Subcontractor agreements
•    Grants
•    Secured debt agreements
•    Vendor agreements
•    Customer purchase orders and contracts

Be cautious, be cognizant, and be IP-wise.

Copyright © 2004 F.O.C.U.S. Resource, Inc.

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