Top mistakes businesses make with IP contracts
IP is a part of almost any business today. If your company creates, uses, or manages intellectual property of any sort, executing IP contracts is practically indispensable. Understanding the dos and don’ts of such agreements is key to protecting your rights and avoiding potential legal headaches down the line. A well-drafted IP contract doesn’t just protect your assets, it’s an opportunity to properly monetize your work.
Let’s discuss some costly mistakes that businesses make with IP contracts
Mistake 1: Disclosing an idea before proper protection
It’s difficult to benefit from the competitive advantage of an IP where the innovative idea or trade secrets are disclosed before it is legally protected. Many startups have lost opportunities because they prematurely shared their innovations without putting the right measures in place. Especially for certain IP rights like patents and trade secrets whose whole value lies in confidentiality
Mistake 2: Relying on generic or over-recycled contract templates
It might be tempting to use generic contract templates downloaded off the internet in a bid to avoid investing in legal expertise. This can, however, backfire, and you’re left with a patchwork agreement with loopholes, especially because there are so many distinct types of IP agreements: Licenses, Assignments, Service Agreements, Non-Disclosure Agreements, Technology Transfer, etc. Each of these deals with IP but has different purposes and demands precise terms.
Mistake 3: Not including a confidentiality clause or NDA in your agreements
Entering any business agreement where the disclosure of confidential information is foreseen without having a confidentiality or non-disclosure agreement in place is risky. This is more so when the contract in question has to deal with any form of intellectual property.
Mistake 4: Not identifying which IP asset is owned by the business
A common pitfall for entrepreneurs is overlooking who generated IP for the company. Many businesses erroneously assume that they own the IP created by employees or contractors without explicitly stating so in a contract. The rule varies depending on the jurisdiction, but usually, copyright works generated by an employee during their employment are owned by the company, except the contrary is agreed. However, where a third party, like a consultant or designer, is engaged, it will be a huge oversight if the company fails to sign the IP to itself.
Mistake 5: Assuming that he who pays the piper owns the tune
This is a rampant IP misunderstanding in the business world. Believing that simply paying for a service (whether it’s software development, design, or writing), automatically grants you full ownership of the intellectual property involved is wrong. Under most jurisdictions, the creator retains ownership by default unless such rights are signed over in writing.
Mistake 6: Underestimating the importance of an IP lawyer
If you’re entering into any kind of arrangement that relates to IP rights, it is wise to consult an IP professional first. With proper guidance, your interests will be well-represented and your creative assets fully secured. An IP lawyer would give sound opinions on ownership rights, and catch any ownership issues that could arise.
Now that you understand mistakes to avoid with IP contracts, here are best practices to imbibe when executing an IP contract
Secure before you share. Your ideas should be protected before disclosing it even to potential investors or partners.
A good practice for businesses is documenting the process of developing an idea, as this would be vital evidence in case of a dispute.
Resist the urge to recycle old contracts or use generic templates without legal input.
Using old contracts to conduct new businesses is also bad practice.
NDAs or confidentiality clauses are non-negotiable with employees, vendors, or partners. Outline who owns what. In the case of jointly developed IP, define ownership.
Never rely on assumptions. Include clear work-for-hire or IP assignment clauses in employment contracts.
Have a qualified IP lawyer on retainer to assist throughout the process. Your contracts should be drafted or at least cross checked by a professional to ensure it complies with the law and is enforceable.
