Cautious Framing of IP Agreement in the Business Transaction

Intellectual property plays a significant role in increasing the stake of the company. Previously, it was assumed that only tangible assets hold the major proportion of the company’s valuation but this was changed gradually. Now the intangible assets have a major stake in the company’s valuation. The importance of intangible assets which are intellectual property has increased the need for its effective management in business and corporate transactions. In such corporate transactions, the IP issues generally tend to be overlooked. Most of the issues on which the attorneys focus are the financial statements, tax implications. But it needs to be understood that such IP issues form a very important part of the contractual agreement/transaction between multiple parties. Undoubtedly, in an agreement related to IP, it must be drafted more comprehensively due to the special feature of IPs. In all such agreements, the scope of the agreements must be clearly defined to not create any such ambiguity.

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Agreements

As specified, the agreements must clearly define the boundaries and the obligation of each party agreeing. So special care must be taken to ensure the same. There can be multiple IP agreements that are usually used in the course of business such as license agreements, assignment agreements, and joint development agreements. For the agreement purpose, the IP assets which are owned and used must be scrutinized for further transaction. The list must even include those IP which is registered or even unregistered trademarks, trademark applications, patents, patent application and even copyright which are registered or unregistered. The list must also contain a domain name, trade secret, etc. Such listing helps the company effectively scrutinize the IP valuation that will further help the transaction purpose in terms of the agreement.

In agreements between multiple parties, the parties agreeing must have the defined rights and obligations before entering into collaboration or in research and development efforts. That is why the agreement must clearly define the scope of what it wants to address. Companies entering into agreements have existing products or IPs with them. Hence the agreement must ensure respect for the IP of all the stakeholders. The agreement must clearly define to which IP will be subject to the agreement and which will be not. After the subject analysis, the agreement must identify those aspects outside the agreement’s scope.

When one talks about a joint venture, the agreement dealing with the same must ensure the obligation of the parties dealing with the same. The party must be clear that each party must hold the contract till the end and must have the mechanism to ensure that the other party must not breach the contract. 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.

If there is an agreement in terms of research and development between multiple parties, it is important to understand that in the pursuit of collaborative R&D, there are chances that one company must get an overview of the other party’s R&D. Hence, the agreement must clearly define the confidentiality clause defining the issue of confidentiality expectation. That must define the information which tends to be confidential or proprietary for which the strong steps are taken to make it confidential and that confidentiality must be maintained even after the term of agreement gets over.

Also concerning agreement involving multiple parties it is important to ascertain the ownership of IP which can be complicated. The joint inventor of the patent gets similar rights as that of the actual inventor and is allowed to make, use, and offer to sell, or sell the patented invention without the consent of the other inventors or owners. Therefore, the agreement must specify and define the scope of the ownership of IP and the use thereof. The settlement must be done as per the consensus reached where each party can get agreed on the role which they want to play. One party can agree to license the same and the other party can execute the IP. The structure can be framed as per the mutual discussion among the parties.

Author: Saransh Chaturvedi an associate at IP & Legal Filings, in case of any queries please contact/write back to us at support@ipandlegalfilings.com.