Key Takeaways

  • Pre-existing IP refers to intellectual property created before a collaboration or agreement, retaining ownership with the original creator unless otherwise transferred.
  • Agreements should clearly define background (pre-existing) and foreground (newly developed) IP to avoid disputes.
  • Employee and contractor agreements must specify ownership and assignment of inventions to protect company interests.
  • Careful IP management in joint ventures and consulting arrangements prevents unintended loss of rights.
  • Different types of IP (patents, copyrights, trademarks) may have unique implications under pre-existing IP clauses.

Pre-existing intellectual property rights are rights previously enjoyed before entering into a new business relationship. In general, each party retains pre-existing IP ownership, although the specifics should be outlined in an agreement.

Drafting an Agreement to Safeguard IP Rights

Intellectual property rights arise from various situations, many of which are covered by written agreements. These situations include:

  • Consultant services
  • Employee developments
  • Joint development arrangements
  • Acquisitions

When dealing with pre-existing intellectual property, it's important to draft an agreement to protect one's ownership. When negotiating an agreement, take care to ensure the owner's rights are specifically identified and protected.

In many cases, intellectual property is developed for a company by individual employees, through joint efforts with third parties, or through outside parties retained by the company. In these cases, careful consideration must be made regarding who owns the intellectual property. Keep in mind that a company's ability to exploit and use developed intellectual property is a key concern for any agreement.

An effective IP agreement will consider various provisions and definitions. As such, it's important to have legal counsel when drafting an agreement to make sure all terms and conditions are met, and that the goals of each party are outlined clearly.

Understanding Background IP and Foreground IP

In intellectual property agreements, it is crucial to distinguish between background IP (also called pre-existing IP) and foreground IP. Background IP refers to intellectual property owned or controlled by a party prior to entering a new project, agreement, or collaboration. Foreground IP refers to intellectual property created during the course of a project.

Clarifying the pre existing IP meaning within contracts ensures that each party knows what pre-existing assets are being contributed and what new IP will be jointly or separately owned. Without clear definitions, disputes can arise over whether certain innovations fall under pre-existing or newly developed IP.

Key elements to address in an agreement include:

  • Identification of background IP: List patents, copyrights, trademarks, software, or trade secrets each party owns at the outset.
  • Permitted use of background IP: Specify whether and how background IP may be licensed for project purposes.
  • Ownership of improvements: Clarify if improvements or modifications to background IP become part of foreground IP or remain with the original owner.

Failing to define these rights may lead to unintended licensing obligations or loss of ownership over valuable pre-existing assets.

Employee Assignments and IP Ownership

Ownership of intellectual property rests with the inventor, not the company the inventor works for. Because of this U.S. law, an inventor employed by a company must transfer their IP ownership to the company via an appropriate written document.

Gaining ownership allows a company to better protect the invention through costly patent applications and legal enforcement of ownership rights. However, without the inventor's permission, the invention remains the property of the individual who created the product or process and the company has no rights to the invention.

The United States Patent and Trademark Office (USPTO) allows companies to pursue patent applications under special circumstances without the inventor's signed agreement. Although filing for a patent doesn't resolve ownership issues, it does help protect the invention.

Another thing to keep in mind is that, although the company may obtain a patent, the inventor is free to exploit that patent. In theory, the inventor could go as far as sharing the patent with competitors to make a profit.

The best way to avoid these worst-case scenarios is to have a written agreement and proof of IP rights. When several inventors are working within a company, it's important to obtain assignments from each inventor to avoid issues, including recently departed inventors who may be trouble tracking down in the future.

Be sure to include any relevant provisions in your employment agreements to safeguard these situations where former employees refuse to sign over IP ownership. The employment agreement should contain language which states that employees assign all inventions created during employment to the company. Once signed, this employment agreement proves that each employee had an obligation to assign IP rights to their employer.

With respect to copyrights, the employment agreement should include a clause stating that all parties agree work produced on the job was “made for hire.” Using language such as “hereby assigns” instead of “agrees to assign” places the assignment in the present, not in the future, so no further transfer of ownership rights is necessary. The company can simply provide this document with the employee's signature to the USPTO.

Key Considerations for Protecting Pre-Existing IP in Employment and Consulting

Even when employees or consultants work on new projects, it is vital to protect pre-existing IP assets they bring to the role. Employers should ensure employment and consulting agreements specify:

  • Disclosure obligations: Require employees or contractors to disclose any pre-existing IP they intend to use.
  • License terms: Outline if and how pre-existing IP will be licensed to the employer for project use.
  • Non-assignment clauses: Confirm that pre-existing IP remains the property of the individual or third party, unless explicitly assigned.

This is especially important in technical roles where employees may use prior code, designs, or patents. Without such clauses, employers risk disputes over ownership or may unintentionally infringe third-party rights.

Additionally, companies should maintain an internal record of declared pre-existing IP to track its use across projects and avoid contamination of company-owned intellectual property.

Development or Consulting Agreements

Most companies seeking to produce new technologies seek assistance from outside parties. Unfortunately, company rights can be compromised if a proper agreement isn't in place before consulting with an outside party or otherwise contributing to joint efforts.

Research and development personnel often enter into a non-disclosure agreement (NDA) before starting discussions on joint projects, but a non-disclosure agreement alone isn't enough to protect the company's interests in intellectual property rights. In fact, terms related to IP rights, restrictions, responsibilities, and confidentiality are not included in most NDAs, so the parties involved must enter into a more comprehensive written agreement.

Don't allow R&D personnel to lose sight of NDA limitations. They should only enter into further agreements once an agreement regarding IP rights has been addressed and signed. Unless everyone involved enters into the agreement before development begins, the company can lose some of its IP rights as well as leverage in negotiations.

Avoiding Ownership Disputes in Collaborative Projects

Collaborative projects can complicate IP ownership, especially when multiple parties contribute existing and new intellectual property. To minimize risks:

  • Document each party’s pre-existing IP: Require detailed schedules of background IP contributed by each partner.
  • Negotiate licensing rights carefully: Determine if background IP will be licensed on an exclusive or non-exclusive basis for project purposes.
  • Define derivative works: Specify how derivative works or improvements to background IP will be owned.

For example, if a contractor uses their pre-existing software library within a client’s project, the agreement should clarify whether the client receives a license to that library or ownership of the specific implementation.

In joint development scenarios, clear agreement language prevents later conflicts over who owns what IP, especially if the collaboration leads to valuable innovations or patents.

Frequently Asked Questions

  1. What is the meaning of pre-existing IP?
    Pre-existing IP refers to intellectual property created or owned before entering a new agreement or project, which remains with the original owner unless transferred.
  2. Why is it important to define pre-existing IP in contracts?
    It avoids disputes by clearly identifying which intellectual property belongs to each party and what is contributed for project use.
  3. How is pre-existing IP different from foreground IP?
    Pre-existing (background) IP exists before the project; foreground IP is developed during the project.
  4. Can employees keep ownership of inventions they create?
    Not if an employment agreement assigns IP to the employer; otherwise, under U.S. law, inventors initially own their creations.
  5. What happens if pre-existing IP is not disclosed?
    It can lead to legal disputes, unintended infringement, or uncertainty over ownership and licensing rights.

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