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Almost every business that sells goods or services to customers will need sales terms and conditions. You usually set these out in a document which details the terms and conditions that apply to your sales relationships. Crucially, it binds customers and clients that you sell to, so it is an essential document to have. One aspect of your sales terms and conditions will concern your intellectual property (IP), which you will set out in a corresponding IP clause. The exact contents of this clause should suit your business, but there will be common issues that you should include. Therefore, this article will go through five key issues to cover in an IP clause of your New Zealand sales terms and conditions. 

IP Identification and Definition

Firstly, you should ensure that your IP clause details what IP is relevant to the sales relationship. You should refer to both specific IP assets and catch-all phrases covering both future and potential IP. Subsequently, your IP rights may include:

  • trade marks, both registered and unregistered;
  • copyright;
  • trade secrets;
  • patents; and
  • designs.

Furthermore, on top of these IP rights, you should detail specific IP assets where appropriate, such as:

  • your business name;
  • branding assets;
  • know-how;
  • software;
  • your logo;
  • any products covered by IP rights;
  • website content; or 
  • slogans.

This way, your customers will know what IP your business has and how you have protected it. As a result, they may be less likely to infringe on this content knowingly.

Clarifying IP Ownership

Another key issue is to clarify who owns your IP, especially in cases where IP ownership may change hands. Depending on what you are selling, you may assign or license your IP rights to customers as part of a sale, which you should outline in your sales terms and conditions. However, you are likely to retain ownership of your IP in most cases, allowing customers to use your IP with a licence. 

IP ownership becomes an important issue to clarify if a customer commissions you to create IP for payment, as they usually own it as the commissioner. If you want to amend this and retain ownership, make it clear in your IP clause. In addition, if you assign any IP rights to your customer, you should also clearly state whether the customer is to license back any of that IP to you for your future use.

Powers Available to You When Dealing With Infringement

Once you have detailed what IP rights you have and established that you own those rights, you should include details regarding infringement. Detail what infringement of these IP rights look like, including:

  • copying;
  • passing off;
  • prohibited conduct under licence terms; or
  • confidentiality breaches.

Detail a customer’s responsibilities regarding your IP if they complete a sale with you and what your powers are when they do not fulfil those responsibilities.

For example, you may have rules against customers modifying your copyright software code, which you should detail in your IP clause. You may also require the customer to repay you for the customer’s infringement of your IP rights. You should also detail what you will do if you find that someone has done this, ranging from sending a letter demanding they stop to legal action.

Licensing

As the paragraphs above mention, you are likely to include some form of licence in the IP clause of your sales terms and conditions. You permit someone to use the IP you own, according to your specifications, when you grant them a licence. In return, you may gain royalties or other monetary payments. For example, when a customer pays for a product or service, part of that payment may contribute as licence fees. You set the terms of this licence with a licence section in your IP clause.

For example, your licence may grant your customer permission to use your products covered by trade mark rights as part of the sale. 

You may set other requirements as well, such as geographical or time limitations.

Overseas Application

If you sell your goods or services online, you may sell to overseas customers. When this is the case, your IP rights likely will not apply in the countries your customers live in. As a result, you may not be able to rely on New Zealand law if an international party infringes on your IP rights. Therefore, with your sales terms and conditions, you need to make it clear that: 

  • New Zealand law applies to your IP; and
  • customers agree to follow this rule when they purchase from you.

If you have IP rights in different countries, such as registered trade marks, be sure to detail these protections where appropriate.

Key Takeaways

Your sales terms and conditions set out both you and your customers’ responsibilities when purchasing a product or service from you. In addition, you must include an IP clause that covers various IP concerns in this sales relationship, such as licensing and who retains IP ownership. Its exact nature will vary according to your industry, but having these important issues detailed on your document will aid you greatly if there is an IP dispute in the future. If you would like more information or help with your IP clause in your sales terms and conditions, 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 clause?

An intellectual property clause is a clause in a contract, such as sales terms and conditions, that details the intellectual property aspects of the relationship. It usually sets out what intellectual property rights are important in the contractual relationship and who owns them.

What is an intellectual property licence?

When you grant an intellectual property licence as the owner of said intellectual property, you grant another party permission to use that asset. You retain intellectual property ownership rights, but the other party can use or commercialise that intellectual property according to your terms.

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