Ownership Clause FAQ

An ownership clause clarifies who owns various types of intellectual property and information in the context of NDA discussions. It typically addresses:

• Pre-existing IP: What each party owned before entering the NDA
• Disclosed Confidential Information: Who retains rights to shared secrets
• Derivative Works: Works created by modifying or building on disclosed information
• Joint Developments: Inventions or works created collaboratively during discussions
• Improvements: Enhancements to either party's existing IP
• Feedback: Suggestions or ideas provided about the other party's products/services

The goal is to prevent disputes about who owns what after the NDA relationship ends, especially if the deal doesn't happen or the parties become competitors.

You do. Sharing confidential information under an NDA does not transfer ownership. The standard rule, typically reinforced by ownership clauses, is:

• The disclosing party retains all right, title, and interest in their confidential information
• Disclosure creates no implied license, assignment, or transfer of rights
• The receiving party gets permission to view and use the information only for the stated purpose

These are fundamentally different rights:

Ownership:

• Complete control over the IP
• Right to sell, license, modify, or destroy
• Right to prevent others from using
• Generally permanent (subject to expiration of patents/copyrights)

Licensing:

• Permission to use someone else's IP
• Subject to terms and conditions set by owner
• Can be exclusive or non-exclusive
• Typically limited in scope, duration, and purpose
• Can be revoked (depending on license terms)

In the NDA context: The receiving party typically gets an implied license to view and evaluate the information, but no ownership rights. The ownership clause makes this distinction explicit.

Joint inventions during NDA discussions can create complicated ownership situations. Without clear agreement, several outcomes are possible:

Default rules (without contract provisions):

• Patents: Joint inventors are joint owners. Each can use, license, and sell without the other's permission or accounting (in the US). This often leads to problems.
• Copyrights: Joint authors share ownership. Each can license non-exclusively but must account to the other for profits.
• Trade secrets: Both parties may have rights to use, creating potential conflicts.

How NDAs handle this:

• Some NDAs are silent (risky)
• Some assign joint inventions to the disclosing party (favors discloser)
• Some require separate negotiation for each joint invention
• Some specify joint ownership with defined terms

This is a critical and often disputed question. The answer depends on your NDA's specific language.

Common approaches:

• Discloser owns all improvements: Any enhancement to their technology belongs to them, regardless of who conceived it. (Strongly favors discloser)
• Creator owns improvements: Whoever invents the improvement owns it, subject to confidentiality restrictions. (Favors receiver)
• Joint ownership: Improvements based on disclosed information are jointly owned.
• Silent: The NDA doesn't address it, leaving uncertain legal territory.

If you're the receiving party: Negotiate to limit improvement assignments to direct modifications of their technology, not independent inventions merely inspired by what you saw.

Generally no, especially if your NDA includes a proper "feedback" clause. A well-drafted feedback provision:

• Assigns all feedback to the party receiving it (you)
• Waives any claims the feedback-giver might have
• Allows you to freely use suggestions, ideas, and recommendations

Without a feedback clause: The other party might argue they contributed to your IP development and deserve:

• Credit as a joint inventor (for patents)
• Joint authorship (for copyrighted works)
• Compensation or royalties
• A license to use the resulting product

Protecting your pre-existing IP requires both contractual and practical measures:

Contractual protections:

• Pre-existing IP carve-out: Explicitly state that each party retains full ownership of IP existing before the NDA
• No implied license: Confirm that sharing your IP doesn't grant any rights
• Independent development rights: Reserve your right to continue developing your own technology

Practical measures:

• Document what you have: Before discussions begin, create a dated record of your existing IP
• Limit what you share: Only disclose what's necessary for the purpose
• Mark your materials: Clearly label confidential information as yours
• Track disclosures: Keep records of what you shared and when

Include comprehensive ownership protections in your NDA:

• Clear ownership statement: "All Confidential Information shall remain the sole and exclusive property of the Disclosing Party."
• No license language: Explicit statement that no license is granted
• Improvements clause: Any improvements to your technology are assigned to you
• Feedback ownership: Ensure you own any feedback provided about your materials
• Return/destruction requirement: Require return or destruction of all materials upon termination
• No derivative works: Prohibit creation of derivative works

Also important:

• Keep records of what you disclosed and when
• Mark all materials with proprietary notices
• Limit disclosure to what's truly necessary

You can try, but consider the trade-offs:

Benefits of claiming improvements:

• You capture any innovations they develop based on your technology
• You prevent them from patenting improvements to your technology
• You maintain complete control over your technology's evolution

Potential downsides:

• Sophisticated counterparties will push back or refuse to sign
• May discourage the other party from providing valuable feedback
• Could be unenforceable if the "improvement" is mostly their independent work
• May damage the business relationship

Middle ground approaches:

• Grant them a license to use improvements they develop (you keep ownership)
• Joint ownership of improvements
• Right of first refusal to license their improvements
• Limit to improvements that primarily incorporate your disclosed technology

This is one of the most concerning scenarios for disclosing parties. Your remedies depend on what they actually did:

If they used your specific confidential information:

• Claim trade secret misappropriation
• Seek injunction to stop the competing product
• Sue for damages (potentially including lost profits)
• Enforcement is stronger if you can prove they used specific disclosed information

If they used only general knowledge (no specifics):

• Much harder to enforce if your NDA has a residuals clause
• May still have claims if they violated purpose restrictions
• Non-compete clause (if any) may apply, but enforceability varies

Prevention is better:

• Include strong purpose limitation clauses
• Consider non-compete provisions (where enforceable)
• Avoid residuals clauses that favor the receiver
• Document what you disclosed to prove misappropriation

As the receiving party, protect these key rights:

• Pre-existing IP: Clear statement that your existing IP remains yours
• Independent development: Right to develop similar technology independently without using their confidential information
• Residual knowledge: Ability to use general knowledge retained in memory
• Your own improvements: Ownership of improvements to YOUR technology, even if inspired by discussions
• Future freedom: Avoid overly broad assignment clauses that capture your independent work

Usually not in its broadest form. Broad improvement assignment clauses can capture far more than the disclosing party is entitled to.

Problems with broad improvement clauses:

• May capture your independent innovations
• Can cover work only tangentially related to their technology
• May extend to your pre-existing development roadmap
• Could affect your entire business if broadly interpreted

Negotiation strategies:

• Limit scope: Only improvements that directly modify their specific disclosed technology
• Require substantial use: Only improvements that substantially incorporate their confidential information
• Carve out your work: Exclude improvements to your own technology
• Add time limits: Only covers work during the NDA term, not afterward
• Require joint development: Only captures work done together, not your independent work

Not legitimately, but you need to protect yourself.

The problem: Without proper documentation and contractual protection, disputes can arise about what existed before the NDA relationship began.

Protection strategies:

• Pre-existing IP definition: Ensure the NDA defines and protects pre-existing IP
• Documentation before disclosure: Create dated records of your existing developments before NDA discussions begin
• Exhibit listing: Consider attaching an exhibit listing your pre-existing IP
• Version control: Maintain clear version histories showing development timelines
• Independent witnesses: Have third parties who can verify your prior development

This is a serious concern that works both ways. If you disclosed technology that they later patent, you may have defenses:

Potential defenses if they patent your disclosed technology:

• Prior art: Your disclosure (if documented) could invalidate their patent
• Prior user rights: In some jurisdictions, you may have rights to continue using technology you developed before their patent
• Contract claims: If the NDA prohibited them from using your confidential information to file patents

Prevention:

• Include language prohibiting patent filings based on your confidential information
• Document all disclosures carefully with dates
• Consider provisional patent filings before disclosing
• Be strategic about what you disclose