Contracts or agreements may be used to establish or preserve intellectual property rights, or to confer them on another party. Because of the breadth of agreements in which parties can engage, this topic is presented here in general terms. Contract law is complex, and is usually handled by attorneys with particular expertise in this area. Antitrust, franchise law, and international trade issues often are encountered, and legal advice in negotiating intellectual property agreements is highly recommended.

Examples of contracts involving intellectual property issues include:

A. Confidentiality or Non-Disclosure Agreements

These agreements often are included as part of employment agreements, and are signed between an inventor and a third party or between parties in a license relationship. Confidentiality agreements also may be used to preserve the status of information as a trade secret or as confidential information.

These types of agreements often are used between businesses considering new products or business proposals. Inventors also use these types of agreements to describe an invention to another party without triggering the time bar problems previously described. Key provisions of these agreements are:

  • The identity of the parties and the individuals it applies to;
  • The permitted use(s) of information received; and
  • The duration of the obligations.

It is important to recognize that these agreements usually do not deal with the treatment of new inventions developed by one or both parties. Those provisions are usually addressed in joint development agreements (see Section D below).

B. Agreements Transferring Intellectual Property

Examples of these types of agreements include patent, copyright and trademark assignments. In situations where an employee makes an invention and applies for a patent, an assignment is usually part of the formal papers he or she signs during the application process. By signing this document, the employee transfers all legal title to the invention to his or her employer. Agreements to transfer intellectual property ownership are often signed when an employee first begins working at a company. Assignment agreements also are used to transfer ownership in existing intellectual property assets, for example, when a company acquires another company.

C. License Agreements

These agreements are used to give limited intellectual property rights to another party. Patent, trademark, and software license agreements are included. A license agreement's provisions can take an almost endless variety of forms. For example, a license may grant rights to another party applicable worldwide or to a limited geographic region. Particularly in the case of patent licenses, limitations on the type of products that can be sold— such as their performance capabilities, size, shape, etc.—also can be provided for in the license agreement. Licenses can be exclusive, in which only one party is granted rights under the development, or non-exclusive, which enables the owner to transfer similar rights to other parties. Royalty payments also are often provided for in the license agreement. Such payments can be on the basis of an initial up-front payment of money or as a "running royalty," in which royalty is paid based on the volume of sales or production.

D. Joint Development Agreements

These types of agreements are entered into between parties cooperating to develop a new product or method. They generally involve a description of each party's expected contributions during a development program.

These agreements usually also specify the ownership of intellectual property assets brought to the relationship and of those that are developed during the cooperative program. Joint development agreements frequently include confidentiality agreement provisions.

E. Option Agreements

These agreements apply to situations where a party wishes to consider taking a license or an assignment of rights, but needs time to explore the commercial opportunities more fully. For example, a company may wish to evaluate an invention developed by an outside inventor to determine if it will meet its requirements and specifications, and can be manufactured within cost targets.

To find out more please access our IP Primer page.