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Intellectual property (IP) ownership can be a complex topic, especially when there are multiple parties involved. IP can refer to your business’ ideas and creations, which you may use for your own benefit and profit. However, your business may create IP as a service for your customers, or you may be contracting another business to do this for you. Either way, it is important that you account for any IP rights in your service agreement. This way, you can protect your business interests and avoid any intellectual property disputes in the future. Therefore, this article will go through four IP mistakes to avoid when signing a service agreement in New Zealand.

What is a Service Agreement?

A service agreement can be a broad document that sets out the nature of your contractual relationship when you provide or receive services. You may also know it as a:

  • contract for services;
  • service-level agreement;
  • professional services agreement; or
  • general service contract.

Your agreement sets out the terms and conditions between the contractor (the party providing the services) and the client (the party receiving the services). Whenever engaging in a relationship of this nature, you should have a written contract for transparency and avoiding potential disputes. A service agreement can apply to any kind of contracted services relationship, whether it be a one-off or an ongoing obligation.

Depending on the nature of the services you have contracted, or someone else has contracted you to do, there will likely be IP issues at play. Therefore, the following paragraphs detail mistakes that you should avoid with this agreement.

1. Failing to Clearly Bind Individuals

In your services agreement, you need to clearly identify who all of the individuals involved are. This fact becomes especially important if you are dealing with a company that can enter into contracts. When dealing with IP, this may cause issues later when determining who exactly owns the IP that that service agreement creates.

Therefore, where possible, you should try to have an individual agree to an undertaking (a kind of promise) to fulfil their end of the contract. This way, you are binding an individual that you can follow up with, rather than a company that may be difficult to contact. 

For example, say you are a sole trader contractor creating IP for a company. You want to ensure you have a signature from an individual representing that company promising they will comply with specific provisions, such as ownership or confidentiality.

2. Not Setting Out IP Ownership in the Service Relationship

No matter which party you are in a service agreement, clarity of IP ownership benefits everyone. Therefore, in your service agreement, you need to clearly define:

  • what the contractor’s IP is;
  • any confidentiality necessities;
  • who owns the IP the contractor may create;
  • any applicable licences for using IP;
  • any moral rights waivers; and
  • any other ownership clarifications.

If your service agreement includes an IP licence, then you need to set out the exact terms of that licence for all parties to understand.

For example, if you are paying a contractor to create IP using your business name or logo trade marks, then you need to grant them a licence to use those existing trade marks. This way, you can make sure you are adequately protecting your IP ownership rights using the necessary contractual formats.

Make sure that you are clear about the terms of any licence you grant, such as its:

  • duration;
  • exclusivity;
  • geographical applicability;
  • usage requirements; and
  • performance requirements.

Be sure to specify any clauses that still apply even after the service agreement finishes.

3. Not Accounting for Other Parties

Your service agreement should also apply to any relevant third parties to the service relationship, such as the contractor’s employees. In doing this, you can prevent unintended parties that the agreement does not necessarily cover from stealing your IP. 

For instance, if your contractor’s employee infringes your IP rights, depending on your service agreement, you can pursue the contractor for some form of compensation.

You should also include an assurance that the person you contract for the service assures that they will not infringe on any other third parties’ IP rights. This way, you can avoid any infringement liability yourself.

4. Providing Vague Descriptions of IP

Lastly, you need to ensure that you have clearly defined what that IP is when referring to any IP in your service agreement. You can do this in the definitions or schedule sections. If the service provider is creating IP for you, clearly distinguish between this IP and what you already own.

For example, if you are engaging a contractor to write a catchy jingle for your advertisement, specify the nature of this IP and what IP of yours they can use to create the jingle.

Key Takeaways

You may provide services as part of your business or engage the services of a contractor to create something for you. Either way, you need to carefully read through your service agreement to ensure you do not create IP concerns for your business in the future. If you would like more information or help with IP in your service agreement, contact LegalVision’s IP lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is a service agreement?

When you contract someone to do a service for you, or your business provides services, then a service agreement can set out the nature of this relationship. It sets out exactly what services the client is paying for and other important details.

What IP matters do I need to cover in a service agreement?

You should make a clear distinction between IP that exists prior to the service agreement and who owns it. The owner may need to grant a licence to relevant parties as well. Additionally, you should specify who owns the IP that the service provider may create.

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