Identifying And Avoiding Pitfalls In Intellectual Property Agreements

Intellectual property (IP), like other forms of property, is an asset that can be subject to contractual obligations and agreements between multiple parties. Due to the unique nature of IP as compared to physical assets, the provisions governing IP agreements also have unique characteristics. Parties to these agreements must take special care to ensure that the scope of the agreements are clearly defined, in addition to making each party's obligations explicit. IP agreements can come in a variety of forms, such as license agreements, assignment agreements, and joint development agreements. This article focuses on joint development agreements.

Joint development agreements are generally between multiple parties seeking to define their respective rights and obligations prior to collaborating or synching their research and development efforts. Both parties to these agreements must be careful to explicitly define the scope of the agreement or project. The parties to these agreements typically already have existing products or IP. It is therefore critical to ensure that the agreements:

• delineate the parties' existing IP,
• specify the products, services, and IP that are subject to the joint development agreements, and
• identify any aspects of the parties' businesses that fall outside of the agreement.

As with any joint venture, both parties want to be sure that the other party will hold up their end of the agreement and have the proper corrective mechanisms if the other party does not. For example, agreements involving patents should clearly define which party will bear the responsibility of filing patent applications and directing prosecution, and bear the associated expenses.

In joint development agreements, both parties typically permit the other party to have a limited inside look at their internal research and development. Both parties should be careful to define confidentiality expectations associated with this access. For example, these agreements must define:

• what is considered confidential or proprietary information,
• how long information must be maintained as confidential, and
• what steps must be taken to ensure that information remains confidential.

A recent Federal Circuit case, SiOnyx LLC v. Hamamatsu Photonics K.K., highlighted the complications stemming from these confidentiality obligations.

Ownership of IP can be complicated. With respect to patents, it is important to remember that every joint inventor or owner of a patent is allowed to make, use, offer to sell, or sell the patented invention without the consent of the other inventors or owners. Accordingly, any joint development agreement must define which party will own the IP generated as a result of the venture. There are many suitable arrangements to address this aspect of IP agreements. For example, either one of the parties may agree to own the IP outright, while the other party will be permitted to practice the IP for an agreed upon fee or payment. Alternatively, both parties could agree to form a new entity that will own the jointly developed IP. Failure to clearly specify this aspect can result in serious complications with respect to enforcing the rights associated with the IP, as shown by another recent Federal Circuit case, AntennaSys, Inc. v. AQYR Technologies.

Just like any contract or agreement, the agreements and provisions that govern IP can be complex. Due to the unique nature of IP, it is critical to specifically define the rights and obligations of each party to these agreements. Special attention should be paid to the provisions regarding ownership, confidentiality, and the scope of these agreements to ensure that each party understands their rights and obligations, and that the joint venture will be lasting and productive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.