Updated November 18, 2020:

An IP ownership clause is necessary for a contract, as it states who owns intellectual property. You'll want a contract in place if you own a business for several reasons, but you might not understand what the legal implications are. The agreement states the terms of you providing a service or product that indicates some type of intellectual property, such as patents, copyrights, or trade secrets. It's smart to hire an experienced and skilled attorney to help with drafting and negotiating the agreement.

Contracts: Make Sure There Is an Intellectual Property Ownership Clause

It is essential to remember that every word in the contract has a legal effect, and clarity is important. The intangible property interests and rights may be valuable to your company going forward. For this reason, it's important that the contract is concise and clear when it comes to addressing who owns the intellectual property. This is an advantage if your company has ownership of the property. If that's the case, there needs to be an express, clear provision that identifies the property and states that ownership is with the company.

An example of this is a work-for-hire agreement that refers to an author's ownership of their original works under an agreement. If they hire someone to create a software program or design graphics for the business, the company gets the product but not the copyright. This is according to United States copyright law, unless there's a clause expressly and specifically stating copyright ownership is vested in the company. The product's creator would get the copyright and exclusive rights granted to the copyright holder according to federal law.

What Is Intellectual Property?

There are different types of intellectual property, with the main two being patents and copyrights. Copyright is to be understood as the rights that protect someone's original works, either developed now or later, which can be reproduced, perceived, or communicated with the help of a device or machine.

Works of authorship include the following:

  • Musical works
  • Architectural works
  • Literary works
  • Choreographic works
  • Dramatic works
  • Graphics, sculptural, or pictorial works
  • Audiovisual works

The word patent refers to the rights that protect discoveries or inventions that can help with any useful or new process, manufacture, machine, or composition of matter. It can also include plant patents for asexual reproduction of a certain type of plant, including hybrids, cultivated sprouts, newfound seedlings, and mutants. Computer programs are tricky, as they're in an area between two different types of intellectual property. Those that are part of a new and useful process might be eligible for patent protection, while some programs that have a minimal original expression might be eligible for copyright protection.

Who Owns the Intellectual Property?

The American Association of University Professors adopted a statement when it comes to copyright, but it hasn't officially answered the question of patents. It's the assumption that if a faculty member creates the intellectual property, they own it. This applies to patents as well. Intellectual property that's made, originated, or created by a faculty member should be the exclusive and sole property of the author, faculty, or inventor.

However, they may choose to voluntarily transfer the property in part or in full. There are three areas where a university or college can claim copyright ownership. This includes special works that are known as made for hire, contractual transfers that are negotiated, and joint works.

Made for hire includes if the university or college specifically tells a staff member to create a work, or the work is made due to the employer's job requirement or duty. Another situation is if the faculty author decides to transfer the copyright voluntarily, whether in part or in whole. This transfer will be in the form of a document that's written and signed by the author.

The last scenario is if the university or college worked together to create a joint work. They can have joint ownership due to this clause. This applies when they've contributed certain facilities or services to produce the work beyond what's normally given to faculty members to get their course materials ready.

If you need help with IP ownership clause, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.