Updated November 5, 2020:

Understanding an intellectual property clause is just one function of a business owner. IP clauses are noted in most any agreement made among parties when intellectual property is involved.

Intellectual Property Clause: Overview

According to the U.S. Constitution, Congress grants the power to promote the progression of the arts and sciences. This is done through the security of the exclusive right to their own writings for a limited time. This clause is typically referred to as the patent and copyright clause.

The Intellectual Property Clause is found in almost any agreement, though independent contractor agreements and licenses are both very important with major differences.

If you are a business owner, you have likely entered into contracts with other individuals. It is important that you completely understand the legal implications with regard to contracts, especially if they require production of a good or service that implies any form of intellectual property, like a copyright or patent.

This is a quick overview of what could have potentially bad results that can cause a company to fall if it is not properly following the provisions that protect IP rights.

It is best to hire an attorney that has the expertise in negotiating and drafting this type of agreement. You always need to remember that all words in a contract have legal implications.

An intangible property right and interest can be very valuable to your company. In these cases, it is vitally important that your contract is clear and concise when addressing who owns the IP.

It can be a benefit to your company to hold the ownership of the intellectual property. In this case, you should insist that your company contains a contract with clear provisions that identifies both the IP in the agreement and who will retain ownership.

A work-for-hire agreement that relates the ownership of original pieces of work created under said agreement is a great example. If you hire someone to take a picture of you while standing in front of your business, this is a work-for-hire agreement.

Currently, U.S. copyright law, unless otherwise specified as a work-for-hire agreement where the ownership will remain in your company, your business will get the product but not the full rights to the product.

Instead, the person that created the product will keep the copyright and the exclusive rights provided to the holder of the copyright in the eyes of the law.

Common Intellectual Property Clauses

Common Intellectual Property clauses are used in most agreements and clarify which party retains ownership of IP. Unless the agreement states differently, it will not affect who owns the IP.

Some common variations to these clauses describe how an IP that is created during the agreement by anyone privy to the agreement will be owned by either the individual who created the IP or as two-party co-authors.

Intellectual Property Clauses in Licenses

IP clauses make it clear in license agreements that the only IP rights that will be exchanged are any that are licensed in the License Grant clause.

Licenses are not considered a sale, transfer, or an assignment. It has no impact on the ownership. A licensee will not own the IP that is licensed; rather, the licensor will keep the ownership.

The IP clause in a license is to make certain that the license is only a license. It will not affect the ownership of the licensor of the IP. Any current goodwill in a licensed IP is to the benefit of the licensor instead of the licensee.

In addition, this clause can spell out how any modifications to the licensed IP is owned.

  • If the license is modified or improved on the IP, the question becomes who owns the change. If it is held by the licensor, he or she is required to grant it back to the licensee to utilize the change.
  • If there are any updates or modifications during the agreement, the question becomes if the licensor will automatically receive a license for the changes or if a new license is required.

Who owns any modifications can be negotiable and will vary.

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