Intellectual property (IP) is crucial for the success and longevity of a business. It distinguishes a company from its competitors and can be one of its most valuable assets. However, it’s vital to understand how to protect your business’s intellectual property and ensure that you own the works created for your company.
When hiring an independent contractor to design or develop works for your business, it becomes even more important to be aware of your intellectual property rights. For example, if you hire a software developer to write code for an app your business is creating, who actually owns the code? By default, the independent contractor will own the copyright over the works they create, even if they are creating them for your business.
IP Ownership For Employees And Independent Contractors
One of the first questions that will arise when talking about IP ownership is whether the person who created the work did so while engaged as an employee or as an independent contractor. This is an essential distinction to make because it generally determines who owns the IP and copyright over the works.
As a general rule, employers will own the IP of works created by their employees if it is carried out “during the course of employment.” If a person is employed to create works as part of their job, the IP will belong to their employer. However, this rule does not apply to IP created by independent contractors.
The law stipulates that IP created by an independent contractor will belong to the contractor unless there is a contract or agreement that says otherwise. In situations where there is no contract, businesses are generally understood to have an implied license to use the IP created for them by contractors. The independent contractor will retain ownership over that IP unless the business has the work assigned to them, such as through an IP Assignment Deed.
Therefore, it’s crucial to ensure that IP ownership is transferred from the independent contractor to your business. If you don’t do this, it’s possible for the contractor to stop you from using the works you paid them to make!
How to Protect Your IP with Intellectual Property Contracts
So, what contracts should you use to protect your IP? There are two main ways to go about contracting:
- a Contractor Agreement or
- an IP Assignment Deed.
A Contractor Agreement
A Contractor Agreement (or variations of this contract, such as a Developer Agreement or Service Agreement) deals with more than just IP. It is a robust contract that is generally used when you initially engage an independent contractor to carry out work. It sets out the terms of engagement around things like payment, liability, expected standards of services, and what happens if something goes awry.
The Contractor Agreement can also include an IP clause in which the contractor assigns ownership of the IP they create to your business. This clause clarifies who the creator of the work is and who owns it.
IP Assignment Deed
Alternatively, you can choose to use an IP Assignment Deed, as it is a good way to ensure ownership over IP is assigned to your business. The sole purpose of this deed is to transfer ownership of IP from one person to another—in this case, from the independent contractor to your business.
An IP Assignment Deed can also be used if work has already been created, but there was no contractual agreement relating to the ownership of IP.
Non-Disclosure Agreements (NDAs) and Confidentiality Agreement
You may also want to think about having Non-Disclosure Agreements (NDAs) and Confidentiality Agreements. These contracts are a good way to protect your business’s IP and other confidential information, especially if you’re engaging in confidential commercial discussions with people outside of your business.
NDAs and Confidentiality Agreements stop people from using or sharing confidential information that has been disclosed to them. They are always good to have organized early on in new relationships with independent contractors, such as when money has not yet been exchanged, or if development of a work has not yet started.
Why Protect Your Intellectual Property?
It’s worth noting that IP protection is not limited to works created by independent contractors. It also applies to things like patents, trademarks, and trade secrets. These forms of intellectual property can be critical to a business’s success, and it’s essential to protect them from infringement and unauthorized use.
Patents, for example, protect inventions and give the patent holder the exclusive right to use and license their invention for a set period of time. If someone else tries to manufacture, use, or sell the same invention without the patent holder’s permission, they are infringing on the patent and can be sued for damages.
Trademarks protect the branding of a business and can include things like names, logos, and slogans. Trademark infringement occurs when someone uses a similar mark that could cause confusion with an existing trademark, leading to dilution of the original mark and potential loss of business.
Trade secrets are confidential information that gives a business a competitive advantage. This could include customer lists, manufacturing processes, or software algorithms. Trade secret protection can be critical for businesses, especially those in highly competitive industries. If a trade secret is leaked or stolen, it can have serious consequences for a business’s success.
To protect these forms of IP, businesses can use various legal tools, such as patents, trademarks, and trade secret agreements. It’s important to consult with legal professionals to ensure that the appropriate measures are in place to protect your business’s intellectual property.
Why Own Intellectual Property?
One of the main reasons why it’s so important to properly address intellectual property ownership is because it can have a significant impact on your business’s ability to operate and succeed in the long-term. For example, if your business relies heavily on proprietary software or other intellectual property assets, but you don’t actually own those assets, you may find yourself in a very difficult position if the creator of that property decides to stop allowing you to use it or if they go out of business altogether.
To avoid these types of scenarios, it’s crucial to take proactive steps to ensure that your business has full ownership and control over its intellectual property assets. This can involve a range of different strategies, from creating clear contracts and agreements with independent contractors to filing patents, trademarks, and copyrights as appropriate.
One important aspect of managing intellectual property ownership is to make sure that all employees and contractors who work on developing intellectual property assets for your business understand their rights and obligations with respect to those assets. This includes making sure that everyone involved in the development process is aware of any existing patents, trademarks, or copyrights that apply to the project, as well as any licensing agreements or other legal arrangements that may impact their ability to use or distribute the resulting product.
Another key consideration is to be aware of the different types of intellectual property that your business may be dealing with, and to take appropriate steps to protect each of these assets in the most effective way possible. For example, if your business relies on proprietary software, it may be necessary to file for patents or copyrights to protect that software from being copied or stolen by competitors. Similarly, if your business relies on a unique brand name or logo to differentiate itself from competitors, it may be necessary to register that name or logo as a trademark to prevent others from using it without your permission.
Ultimately, the key to managing intellectual property ownership effectively is to take a proactive, strategic approach that involves clear communication, careful planning, and ongoing vigilance. By working closely with legal professionals and other experts in the field, you can develop a comprehensive strategy that not only protects your business’s intellectual property assets, but also positions your company for long-term success and growth in a rapidly evolving marketplace.
Conclusion
In conclusion, ownership of intellectual property is a critical aspect of business success, and it’s essential to protect it from unauthorized use and infringement. When engaging independent contractors, it’s crucial to have clear contractual agreements in place that address IP ownership. Using contracts like Contractor Agreements or IP Assignment Deeds can help ensure that your business owns the IP created for it by independent contractors.
Additionally, businesses should be aware of other forms of IP, such as patents, trademarks, and trade secrets, and take steps to protect them. Consulting with legal professionals can help businesses ensure that their IP is properly protected and that they are in compliance with relevant laws and regulations. By taking these steps, businesses can safeguard their intellectual property and set themselves up for long-term success.