Protecting your software and other IP assets is very important in protecting your business. Consider implementing some important practices to increase your protections and controls. By considering these tips and including some of these provisions in your IP License Agreement (IP Licenses), you reduce the risk of your software or other IP being transferred without your consent and you will be in a stronger position in the event of a dispute.
- Current positions and trends in the law to be aware of: The current guideline under general contract law, is that a contract that is silent on assignment and/or transfer is considered freely assignable/transferable unless adverse consequences (which are material) exist for the non-assigning party or a statue or public policy specifies otherwise (see Restatement (Second) of Contracts § 317(12) (1981), and also see UCC § 2-210 (1)(a)(2003). This differs with the transferability of IP Licenses as a Licensee’s rights are generally not assignable unless the IP License contains the express permission for its assignment or the Licensor otherwise provides such express consent (see Practical Law Company, IP Licenses: Restrictions on Assignment and Change of Control, Ziff and Deming, Practical law Publishing 2012/ https://www.skadden.com/sites/default/files/publications/Publications2679_0.pdf).The parties to the IP License need to consider clauses that are necessary to prohibit or permit the assignment/transfer of the agreement depending on various future circumstances, for example a sale or merger of a business, a reorganization, or even a mere name change for example a sale or merger of a business, a reorganization, or even a mere name change.
- Ensure that you are comfortable with your potential client and want to do business with this entity. Conduct an internet search, even a financial/accounting search to check out your potential clients or customers, employees and suppliers. Ensure that this client is an individual or company you want to do business with and would want to work with or even recruit. Does this client anticipate upcoming changes in its business that would affect the IP License, such as changes in control, sale, name or branding changes, acquisitions, reorganizations, that can be shared with you? If these changes are brought to your attention upfront, the IP License can contain the necessary language to allow for this as mutually agreed between the parties.
- Document who your client is and ensure that the client provides clear and convincing evidence of any organizational changes that could affect the IP License (Need to keep the original Licensee organization intact as a whole, not sell off parts). Communication with your client(s) is key. Ensure that the client provides you with any documentation regarding a sale, acquisition, change in ownership or control, even a name change so that the proper changes to the IP License can be made documenting the changes and providing a paper trail showing who is the Licensee and therefore, who has authorized rights to use the IP in accordance with the IP License.
- Make your license grant as clear and protective as necessary. Check and double check that you have thought of and covered for any future scenarios that could come up. Consider all present and future aspects that you want to protect with your IP and license grant and ensure that you include the words “non-transferable” and “non-assignable” as part of the license grant and as you see fit to protect your business and your IP.
- Consider whether it makes sense to include language regarding a transfer fee upfront within your IP License. You may consider adding language within you IP License, within the license grant, that any permitted transfer would require a transfer fee to the Licensee at the time of such transfer.
PLEASE LOOK FORWARD TO PART TWO OF THESE IP LICENSING TIPS COMING TO YOU SOON ON THIS WEBSITE FROM WALTZ, PALMER & DAWSON, LLC
Should you have any questions about protecting your IP from unauthorized transfers within your IP license, please contact Waltz, Palmer & Dawson, LLC at (847) 253-8800. Waltz, Palmer & Dawson, LLC is a full service law firm with various areas of expertise to assist you and your business, including: Business Law, Commercial Real Estate, Estate Planning, Wills and Trusts, Probate, Guardianship, Family Law and Litigation.