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When drafting a business contract for a business sale, you should keep your intellectual property in mind. Intellectual property (IP) issues are a key part of your business contracts, particularly IP assignment clauses. However, while your IP is a key asset that brings value to your business, there are certain circumstances where you may wish to assign your IP rights and ownership to someone else (or within your corporate group). Therefore, this article will go through five tips when drafting an IP rights assignment clause in New Zealand.

1. Clearly Identify All Parties

While deceptively simple, this is important. You (as the assignor) transfer your IP ownership to the other party (the assignee), and this would not be valid if you assigned your rights to the wrong person or entity. 

If multiple people own the IP, you will need all of their signed consent to assign your IP rights, which you should establish in your IP clause. Additionally, for registered IP rights, you must notify the Intellectual Property Office of New Zealand (IPONZ) of the ownership transfer, and do all other things necessary to register the ownership change.

2. Identify What You Are Assigning and Exchanging

In your assignment clause, you need to clearly define the IP that you are assigning. If there are any issues later on, this definition will be what you rely on in a dispute. Therefore, you must be:

  • comprehensive;
  • clear; and
  • unambiguous.

If you assign your IP rights as part of a company merger or business sale, establish these IP definitions before you complete the merger or sale. That way, you can establish the value of your assets and what you should receive in return for the assignment.

You may specify IP works such as:

  • drawings;
  • instruction manuals;
  • business know-how;
  • pricing strategies;
  • distributor databases;
  • written work;
  • trade secrets; or
  • future IP.

This clarification becomes especially important for employment contracts, where employees agree to assign any IP they create for the business to their employer. Therefore, it is best to be as specific and clear as possible to avoid difficulties determining IP ownership throughout their employment.

3. Include Confidentiality Provisions

IP can cover a variety of works, including some that you may not expect. For instance, the unique way that you run or manage your business may qualify as a trade secret, which is a form of IP.

Trade secrets can also include secret recipes, formulas, or methods.

Trade secrets do have some inherent protections under the existing law, but you should also protect these with confidentiality provisions in your agreement where possible. Doing so means that neither the assignor nor the assignee can spread this information without proper authorisation.

For example, if you are the assignee receiving new and unfinished projects, you do not want the assignor to spread confidential information regarding those projects.

4. Include Measures for Moral Rights

Moral rights are certain rights that the authors/creators of copyright works have. They gain the right to:

  • have others know they created that specific work;
  • not be falsely attributed as the creator of work; and
  • object to derogatory treatment or change to a work that harms their reputation.

These rights persist even if you assign your copyright ownership, so you will need to address them in your assignment clause. Some assignees want waivers of moral rights, which means that you agree not to enforce your moral rights against them. However, if you do not want to waiver your moral rights, you must negotiate this with the other party.

5. Seek Legal Advice

IP is a complex legal area, and your IP and its associated goodwill is usually the most valuable part of any business transaction. Therefore, you should seek legal advice from an IP professional when negotiating any agreement that includes an IP assignment clause. That way, you can ensure that you gain the benefits you want and efficiently negotiate to meet your needs. 

If there is a dispute in the future and it turns out that both parties to an assignment did not receive independent legal advice, the validity of your assignment clause may be in question.

Key Takeaways

Drafting an IP assignment clause can be complex, but they are critical, given IP is typically the most valuable asset of a business. Having an appropriate IP clause ensures you adequately protect your interests going forward. If you would like more information or help with your IP assignment clause, contact LegalVision’s IP lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is an intellectual property assignment?

When you assign your intellectual property, you transfer your ownership of intellectual property rights to another person or party. You may receive a lump sum or other benefit in return.

What is the difference between intellectual property assignment and licensing?

When you assign intellectual property, you give up your ownership rights. However, when you licence your intellectual property, you retain your ownership rights and grant permissions to another party to use or sell your intellectual property within certain agreed parameters.

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