IP Transactions

Assignments

 

IP rights may be acquired by obtaining an assignment of the particular IP rights, or in the context of a sale and purchase of assets of an existing business, or a sale and purchase of shares in the company that owns the IP rights.  Appropriate terms must be used for an effective transfer to be made depending on the type of IP involved and whether the right exists by virtue of original creation, commercial use, registration and/or pending application.  There may be legislation that stipulates that an assignment will not be effective unless it is in writing, signed by a particular party or both parties, and recorded with the relevant Registry.

 

Co-ownership

 

It is possible for IP rights to be owned by more than one party but co-owners should set out clearly their respective rights in relation to the freedom to exploit the IP by themselves or to license other parties to use the IP.  The agreement should lay down whether consent will be required should one of the parties wish to assign or mortgage his share, and provide for the event of infringement of rights by other parties.

 

Licenses

 

Licenses can be an effective way to generate revenue without investing in production and avoiding or minimizing market risks.  Minimally, a License Agreement should set out clearly:

 

    1. The IP that the Licensee is permitted to use, exclusivity, the manner of use, the scope of use by reference to geographical boundaries, range of products and/or types of services.  It is important for the Licensor to regulate the use of the IP and see that there is no wrongful use that would damage the value of their IP and jeopardize their ability to further exploit the IP they own.  As the IP is being used by the Licensee, goodwill may be generated or improvements made, and the agreement should provide for how such goodwill or improvement should be dealt with.

 

    1. Compensation for the permission to use the IP could be in the form of a lump sum payment, payments of agreed amounts at particular time intervals or payment of royalties calculated as an agreed proportion of actual volume of manufacture or sales achieved, or combination of the above.  The agreement should set out the repercussions in the event of failure or delay in payment.  Where the quantum payable would depend on actual output/sales of the Licensee, the Licensor should have access to the Licensee’s records and right to audit.

 

    1. It is common for a License Agreement to contain provisions on the Licensee’s obligations to report and assist in the event of infringement or counterfeits in the market, and on what the Licensor and/or Licensee would be entitled to do to enforce the IP rights.

 

  1. The term of the license should be stated, possibly with certain prescribed minimum quantities for continuance of the license or renewal for further periods.

 

Francise

 

A franchise also involves licensing a body of IP but usually the Licensor/Franchisor has to offer is more comprehensive including  a certain method of operations or conducting business, systems for collecting payments and recruiting and training personnel, prescribed sources of supply of raw materials, support for marketing and/or after-sales services.  Typically, Franchisees have little ability to negotiate terms of the franchise as the Franchisor would have laid down standard terms that its Franchisees are expected to sign up to.  On the hand, Franchisees hope to be able to quickly get the business off the ground and achieve substantial sales by benefiting from the support in terms of guidance, training and marketing provided by the Franchisor.

 

Joint Ventures

 

A party with capital and/or experience or know-how in a particular market-place or access to infrastructure may be interested to co-operate with a party that possesses IP so that they can together exploit the IP and share the rewards.  Various parties can agree to co-operate according to the terms of a Joint Venture Agreement or they can become shareholders in a Joint Venture Company constituted to exploit the IP.  Apart from providing for how the various parties should contribute to the venture and share the benefits, they should also provide for resolution of issues in the event that they do not achieve consensus.  The parties should set out conditions when the relationship would have to end or the Joint Venture company would have to be dissolved, not forgetting to provide as to who would then be entitled to ownership and/or use of the IP that initially contributed and IP that may be subsequently created or generated.

 

Due Diligence

 

 Whether in the context of a License, a sale and purchase of assets or shares, or a joint venture, a certain level of due diligence should be conducted on the IP involved.  Beyond merely checking if certain claimed registrations are valid and subsisting in the name of a particular party, it may be appropriate to procure an expert opinion on the IP, for example whether the claimed IP can realistically be enforced and/or withstand attack by other parties.

 

Employee's Invention

 

Employees of a company would often have access to and be permitted to use the company’s IP. It is likely that certain employees would be involved in the creation of IP as part of parcel of his job. Employment contracts should set out clearly the employee’s and company’s rights and obligations, for example the obligation to preserve the confidentiality of certain information and not to use such information after leaving employment of the company, or the particular circumstances when the company rather than the employee would be entitled to ownership of IP created by the employee. It is common for employees to be asked to execute actual assignment of rights rather than merely relying on the terms of the employment contracts and this could be contemplated in the employment contract itself so the employee will not be surprised by any such request.

 

Commissioned works

 

Some matter that a business needs may not be created internally but by external parties.  This could include brand name and logo design for the company or for a particular type of products/services that the company intends to offer, photographs, drawings or texts required for the company’s catalogues, brochures or promotional materials, a musical jingle for a marketing campaign, product packaging designs or customized computer programmes.  The Commissioning Party should agree from the onset with the Commissioned Party as to who will own the rights to the IP created.  Unless clearly stipulated, it is possible that the author/creator of the works retains ownership and the compensation paid by the company merely allows the company to use the created work for a particular purpose or time period.