Effective Agreements' Blog

Intellectual Property Agreement Template: 5 Warnings

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The Concern

The use of a search phrase that led to my website worried the heck out of me: “Intellectual Property Agreement Template”. My assumption is that whoever typed that phrase into the search engine wanted to accomplish one (or more) of three things with the Agreement:

• Protect existing intellectual property;

• Agree with another party to create intellectual property; or

• Allow another party access to its intellectual property  while maintaining some level of control.

It is unlikely that a downloaded template will accomplish any of these tasks without significant adaptation by someone knowledgeable about intellectual property (IP) and agreements. Entering into a an contract creating a strategic business alliance, or even a simpler relationship, without carefully addressing the above is highly risky. 

Intellectual Property Agreement Template - 5 Warnings

1. Please do not download a template from the Internet and try to adapt it to your needs unless you are very knowledgeable about intellectual property and its licensing. Your IP is probably your most valuable asset - don't risk it.

2. Be sure you know what your intellectual property is and what portion of it is really important. I have seen a start-up fail to get venture capital funding because the management team insisted its "secret sauce" IP was a mechanical device, when it was really the underlying software. They tried to sell the former when they should have been licensing the latter;

3. At the same time, you may be selling equipment, but be sure to determine if there is software included in the sale. If so, grant a (very restrictive) license in the sales contract. Be certain that you do not accidentally “sell” the software, even if it is just firmware;

4. Once you determine what makes up your key IP remember this rule (even if you forget everything else): you never sell IP, especially software - you license it. The only exception is when you are selling a product line or the company. Get a good law firm involved early if either is the case.

5. Be very careful with your license. Just two examples:

   1. For hardware, be sure the recipient cannot “reverse engineer” or “create derivative works” from your equipment or its embedded software;

   2. For Software, both of the above plus the recipient gets permission to sub-license (if called for) but not to pass that ability on to its licensee.

It would be deeply appreciated if readers will comment on this post. Am I being paranoid about a search phrase?