What is Intellectual Property?
Intellectual property (IP) is legally defined as a work or invention that is the result of creativity to which one has rights and for which one may apply for a trademark, patent, copyright, or other appropriate protection to keep others from using it without permission.
The transferring party (“assignor”) transfers to the receiving party (“assignee”) its property in intellectual property rights, such as patents, trademarks, industrial designs and copyrights.
In technology business, it is often the value of intellectual property (IP) assets that investors fund or acquirers pay for. IP assets could span a wide variety of things such as algorithms, databases, computer software and code, supplier and customer lists, graphics or images, text, audio or visual works, product or process design and other works of authorship.
What is Intellectual Property Assignment Agreement?
An IP assignment agreement is a contract that transfers the rights to the intellectual property from the creator to another entity, such as an acquiring company.
Startup founders should have complete ownership, in writing, of all intellectual property assets during the formation of the company. Not only is the legal ownership a requirement for most investors, but it can also keep patent trolls and companies that want to copy your products at bay.
When you hire an individual for your startup, you may (and should) ask her to sign the IP agreement to assign to your company, in advance, any ideas, work products, or inventions related to the business of your company. This is to ensure that your company owns the intellectual property and not the employee(s).
Type of Intellectual Property Assignment Agreement
A technology assignment agreement assigns your startup any intellectual property before you form the company. The developer(s) may retain individual intellectual property rights under certain circumstances, or they may sell the rights to you for equity or cash.
An invention assignment agreement assigns a new company ownership of any relevant intellectual property created by employees after the company is formed. The agreement typically includes the founder(s) and employees as signatories to a confidentiality agreement and an invention assignment agreement.
Checklist for Intellectual Property Assignment Agreement
You should include a couple of key points in the agreement for the best legal protection.
- The employee must promptly disclose to your company any inventions, ideas, discoveries, and work product related to your company’s business that were made during the period of employment.
- Your company is the owner of the inventions, ideas, discoveries, and work product.
If you are hiring an employee to invent or develop a work product, the rights to those inventions and work products are yours if they were created at your request and expense.
This last is an important point when hiring a software developer. The developer is strictly hired to create a work product, namely a software program or application. If the developer completes the project and then leaves your company, the intellectual property rights are yours.
However, it wouldn’t hurt to have that developer sign an intellectual property assignment agreement, just to prevent problems in the future.
Key Clauses of Intellectual Property Assignment Agreement
There is no standard form for assignment agreements so each must be carefully worded and signed by the employee or developer for it to be binding. If the agreement is part of the employee handbook or other employee guidelines, you need to work with an attorney to make certain it will still be legally binding if the signature is on a separate employment agreement document.
In general, most assignment agreements have at least three provisions in common.
The assignment clause requires employees to assign their inventions to your company, so you have total ownership of the intellectual property. This provision could be narrowed to employee inventions only or broadened to include nearly anything the employee creates.
Your IP lawyer should include following assignment clause into the IP agreement:
1. The actual assignment – In consideration of $XXXX, the Assignor ( the party transferring the IP) assigns, transfers and conveys to the Company/Individual any and all current or future rights, title, and interest in the Property.
2. The timing of assignment – In consideration of $XXXX, the Assignor agrees to assign all future rights to the Company/Individual immediately upon their creation. The Assignor will do all things necessary to assign any Intellectual Property it creates or obtains to the Company/Individual.
3. Previously owned IP – The assignment includes any and all rights that the Company/Individual has with respect to infringement of the Intellectual Property in the Property before the date of this Agreement.
4. “All things necessary” – The Assignor must do all things necessary (including signing documents) to ensure that the Company obtains full ownership of the Property.
5. Moral Rights – The Assignor consents to the infringement by the Company of any Moral Rights that the Assignor may have in any of the Property.
6. Third Party Confidentiality/Trust – To the extent any rights held by the Assignor under third party confidentiality agreements cannot be assigned, the Assignor agrees to hold such rights on trust for the benefit of the company.
Your IP lawyer should include following warranties into the IP agreement:
The Assignor represents and warrants that:
- It is the sole and absolute owner of the Property;
- It has the authority and capacity to assign the Property in full;
- The Assignor has not licensed or encumbered any right, title or interest in the Property to any third party;
- It has procured consent with respect to the infringement of Moral Rights of every author or joint author of the Property;
- The Property does not infringe any third party’s Intellectual Property rights or Moral Rights; and
- The Assignor has no other obligations to any third party that are inconsistent with the rights and obligations set out in this Agreement.
Power of Attorney Clause
You should also get Power of Attorney Clause added to the agreement so that your company can register and administer the ownership rights without the employee, regardless of whether the employee is willing and able to assist.
Sample Intellectual Property Assignment Agreement
This Intellectual Property Assignment Agreement (the “Agreement”) is made as of [Date] by and between [Company Name] (the “Company”), and [Assignor Name] (the “Assignor”).
1. Intellectual Property Assignment. The Assignor hereby assigns to the Company, its successors and assigns, in lieu of Rs 4,00,00,000 (Rs Forty Lakh only) (“Consideration”), the entire right, title and interest in and to any and all of the following that exist as of the date hereof: (a) Intellectual Property (as defined below) relating to the Assignor (b) any and all Intellectual Property Rights claiming or covering such Intellectual Property and (c) any and all causes of action that may have accrued to the undersigned in connection with such Intellectual Property and/or Intellectual Property Rights.
2. Intellectual Property Definition. “Intellectual Property” means any and all intellectual property and tangible embodiments thereof, including without limitation inventions, discoveries, designs, specifications, developments, methods, modifications, improvements, processes, know-how, show-how, techniques, algorithms, databases, computer software and code (including software and firmware listings, assemblers, applets, compilers, source code, object code, net lists, design tools, user interfaces, application programming interfaces, protocols, formats, documentation, annotations, comments, data, data structures, databases, data collections, system build software and instructions), mask works, formulae, techniques, supplier and customer lists, trade secrets, graphics or images, text, audio or visual works, materials that document design or design processes, or that document research or testing, schematics, diagrams, product specifications and other works of authorship.
3. Intellectual Property Rights Definition. “Intellectual Property Rights” means, collectively, all rights in, to and under patents, trade secret rights, copyrights, trademarks, service marks, trade dress and similar rights of any type under the laws of any governmental authority, including without limitation, all applications and registrations relating to the foregoing.
4. Further Assurances. The Purchaser agrees to execute any and all papers and documents, and take such other actions as are reasonably requested by the Company, to evidence, perfect, defend the foregoing assignment and fully implement the Company’s proprietary rights in the subject matter assigned hereunder, such as obtaining and enforcing copyrights, patents or trademarks and to fully cooperate in the prosecution, enforcement and defense of such proprietary rights. The Purchaser further agrees that if the Company is unable, for any reason, to secure signatures to apply for or to pursue any application for any patent, copyright, trademark or other proprietary right covering any Intellectual Property assigned to the Company above, then the Purchaser hereby irrevocably designates and appoints the Company its duly authorized officers and agents as the Purchaser’s agent and attorney-in-fact, to act for and in the Purchaser’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights, trademarks and other registrations thereon with the same legal force and effect as if executed by the Purchaser.
6. Representations and Covenants. The Assignor represents and warrants that (i) the Assignor is the owner of the entire right, title and interest in and to the Intellectual Property, (ii) the Assignor has the sole right and authority to enter into this Agreement and grant the rights hereunder, (iii) the Purchaser has not previously granted any rights or licenses in the Intellectual Property, (iv) the Purchaser does not own or have the right to license any other Intellectual Property that is related to the conduct of the Company’s business, (v) the Assignor is not obligated under any consulting agreement, employment agreement, or other agreement or obligation that conflicts with, or would prevent the Assignor from fully performing the Assignor’s obligations under, this Agreement and the Assignor shall not enter into any such agreement or obligation during the period of the Assignor’s employment by the Company; (vi) there is no action, investigation, or proceeding pending or threatened, or any basis for any of the foregoing known to the Assignor, involving the Assignor’s prior employment, the Assignor’s prior work for third parties as an independent contractor, or the Assignor’s use of any information or Inventions of any former employer or third party; and (c) the performance of the Assignor’s duties under this Agreement and the Assignor’s duties with the Company will not breach, or constitute a default under, any agreement to which the Assignor bound, including any agreement limiting the use or disclosure of proprietary information acquired prior to the Assignor’s employment with the Company.
7. Governing Law. This Agreement and actions taken hereunder shall be governed by, and construed in accordance with the laws of the State of [Home State] applied without regard to conflict of law principles.
8. Miscellaneous. This Agreement, including the exhibits, schedules, and other documents and instruments referred to herein, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. If any one or more provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. The terms and provisions of this Agreement may be modified or amended only by written agreement executed by all parties hereto.
IN WITNESS WHEREOF, the undersigned has caused this Intellectual Property Contribution and Assignment Agreement to be executed.
Name: [Name of CEO]
Accepted and Agreed Date:
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