Clarifies ownership rights for intellectual property created during the confidential relationship, including background IP, work product, and derivative works.
High Complexity
What This Clause Does
An intellectual property ownership clause in an NDA defines who owns the rights to any inventions, creative works, software, designs, or other IP that may be developed during or as a result of the confidential relationship. This clause addresses three critical categories: (1) Background IP that each party brings to the relationship, (2) Work product created during the engagement, and (3) Derivative works or improvements made to either party's existing IP.
Why This Clause Matters
Prevents Ownership Disputes: Without clear IP provisions, parties may disagree about who owns innovations developed during collaboration, leading to expensive litigation.
Protects Core Assets: Background IP provisions ensure that sharing confidential information does not inadvertently transfer ownership of your pre-existing technology or trade secrets.
Enables Commercialization: Clear ownership allows the appropriate party to freely use, license, or sell the IP without needing permission from the other party.
Defines Contribution Rights: When both parties contribute to development, the clause determines how joint ownership or licensing arrangements will work.
Supports Future Investment: Investors and acquirers require clear IP ownership documentation before funding or purchasing a company.
Legal Context
IP ownership in the U.S. generally follows the "first to invent" principle for patents and "authorship" for copyrights, but these defaults can be modified by contract. The work-for-hire doctrine under copyright law and the "hired to invent" doctrine for patents create special rules for employment relationships. NDAs with IP provisions must be carefully drafted to comply with state laws governing employee inventions (such as California Labor Code Section 2870) which limit an employer's ability to claim IP created on an employee's own time without company resources.
Intellectual Property Ownership
Each party shall retain all right, title, and interest in and to its own pre-existing intellectual property ("Background IP"). No license or other rights in either party's Background IP are granted by this Agreement except as expressly stated herein.
Any intellectual property developed solely by one party during the term of this Agreement shall be owned exclusively by that party. Any intellectual property developed jointly by the parties shall be jointly owned, with each party having the right to use, license, and exploit such joint IP without accounting to the other party.
Basic Version: Simple ownership preservation language suitable for exploratory discussions. Does not address work product assignments or detailed licensing terms.
Intellectual Property Ownership and Assignment
1. Background IP. Each party retains all right, title, and interest in and to any intellectual property owned by or licensed to such party prior to, or independent of, this Agreement ("Background IP"). Neither party acquires any ownership interest in the other party's Background IP by virtue of this Agreement.
2. Work Product. Any inventions, works of authorship, designs, know-how, ideas, and other intellectual property that the Receiving Party creates, develops, or conceives solely using the Disclosing Party's Confidential Information ("Work Product") shall be owned exclusively by the Disclosing Party. The Receiving Party hereby assigns to the Disclosing Party all right, title, and interest in and to such Work Product, including all patent rights, copyrights, trade secret rights, and other intellectual property rights therein.
3. Derivative Works. Any improvements, modifications, or derivative works based on either party's Background IP shall be owned by the party that owns the underlying Background IP, unless otherwise agreed in writing.
4. License Grant. To the extent the Receiving Party incorporates any of its Background IP into Work Product, the Receiving Party grants to the Disclosing Party a non-exclusive, perpetual, royalty-free, worldwide license to use such Background IP solely as embodied in such Work Product.
5. Further Assurances. Each party agrees to execute such documents and take such actions as may be reasonably necessary to perfect the other party's rights under this section.
Standard Version: Comprehensive IP ownership framework with clear assignments, derivative work rules, and license-back provisions. Appropriate for most business collaborations.
Intellectual Property Ownership, Assignment, and Rights
1. Company Ownership of All Work Product. All inventions, discoveries, concepts, ideas, works of authorship, software, designs, know-how, data, improvements, and other intellectual property of any kind (collectively, "Work Product") that the Recipient or any of its personnel creates, develops, conceives, reduces to practice, or contributes to, either solely or jointly with others, during or as a result of the Recipient's access to the Company's Confidential Information or during the term of this Agreement, shall be the sole and exclusive property of the Company.
2. Assignment. The Recipient hereby irrevocably assigns to the Company all right, title, and interest worldwide in and to all Work Product, including all patent rights, copyrights, trademark rights, trade secret rights, moral rights, and all other intellectual property rights therein. This assignment includes all rights to sue for past, present, and future infringement.
3. Works Made for Hire. To the extent any Work Product qualifies as "work made for hire" under applicable copyright law, it shall be considered work made for hire for the Company. To the extent any Work Product does not qualify as work made for hire, the Recipient assigns all rights as provided above.
4. Waiver of Moral Rights. The Recipient waives any and all moral rights in the Work Product, including rights of attribution, integrity, and disclosure.
5. Background IP License. If the Recipient incorporates any of its Background IP into Work Product, the Recipient grants the Company an exclusive, perpetual, irrevocable, royalty-free, worldwide license, with the right to sublicense, to use, reproduce, modify, distribute, publicly display, and create derivative works of such Background IP.
6. Assistance. The Recipient shall, at the Company's request and expense, execute all documents, render all assistance, and take all actions necessary or desirable to apply for, prosecute, perfect, and enforce the Company's intellectual property rights in the Work Product. The Recipient hereby appoints the Company as its attorney-in-fact to execute such documents on the Recipient's behalf if the Recipient fails to do so within ten (10) days of the Company's request.
7. Disclosure. The Recipient shall promptly and fully disclose to the Company all Work Product and shall maintain adequate written records of all Work Product.
Warning - One-Sided: This version grants the Company extremely broad IP rights, including exclusive licenses to Background IP and attorney-in-fact powers. Recipients should negotiate for narrower scope, carve-outs for independent work, and non-exclusive Background IP licenses.
1
Document Your Background IP: Before signing, create a written schedule of your pre-existing IP that you want to protect. Attach it as an exhibit to the NDA to prevent later disputes about what you owned beforehand.
2
Negotiate Carve-Outs: If you are the Receiving Party, negotiate exceptions for IP developed on your own time, using your own resources, and unrelated to the Disclosing Party's confidential information.
3
Limit Assignment Scope: Push back on broad assignment language. IP assignments should be limited to work directly derived from or incorporating the other party's confidential information, not everything created during the relationship.
4
Request License-Back Rights: If you must assign IP, negotiate for a license back to use that IP in your own business, especially for improvements to your Background IP.
5
Address Joint Development: If both parties will contribute to development, clearly define how joint IP will be owned, managed, and commercialized before work begins.
6
Check State Law Compliance: Ensure the clause complies with state laws protecting employee inventions (like California Labor Code 2870). Non-compliant provisions may be unenforceable.
Overly Broad Assignment Language
Watch for phrases like "all IP created during the term" without limitation to IP derived from confidential information. This could capture your independent innovations that have nothing to do with the other party.
Exclusive License to Your Background IP
Never agree to grant an exclusive license to your Background IP. This prevents you from using your own pre-existing technology in other projects or with other clients.
No Background IP Definition
If the agreement does not clearly define or acknowledge your Background IP, you risk the other party claiming ownership over your pre-existing technology.
Power of Attorney Provisions
Clauses appointing the other party as your "attorney-in-fact" to sign IP documents on your behalf are dangerous. They can be used to register patents or copyrights without your knowledge or consent.
Waiver of Moral Rights
Blanket moral rights waivers may be appropriate for corporate work but are problematic for individual creators. Consider whether you need attribution rights or the right to prevent distortion of your work.