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Written by : Liz Hoffnagle
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hi today I'm here in Cinque Terre Italy behind me you can see the remote villages of the Cinque Terre which literally translated means the five lands or the five villages that make up the Cinque Terre as you can see there are steep and rugged cliffs behind them falling into the sea for centuries starting from the Italians to the Greeks people have escaped to these villages to escape from persecution because they are so remote you literally can't get to them and enjoy the natural beauty that exists here and the reason that I'm here today is because this rugged beauty that was completely inaccessible is a very good metaphor for discussion of background and foreground intellectual property now to begin the metaphor this beauty has been here for years it's natural it's always had it for centuries but nobody could appreciate it because it was cut off the man that is of course until the train came giving everyone access to the Cinque Terre now thousands of holidaymakers flock here every single day for a wonderful time in the Sun in our metaphor the train is foreground intellectual property and the natural beauty is background intellectual property the commercial transactions especially high-tech commercial transactions there's usually a section of the parties contract devoted to what IP rights the buyer obtains in the deal most of the time the rights are limited to use of the IP in the product as the product is intended to be used however standard contracts from buyers are increasingly trying to expand these rights to begin with the parties will come to the bargaining table with their own IP that has been independently developed for example the manufacturer will likely have IP that it's had for a long time in its base product sometimes the buyer will also have its own IP often related to implementing the product specifications this is known as background intellectual property or background IP in our metaphor gingka Tara's natural beauty is the background IP from this starting point the parties will negotiate what rights they have to this background IP usually neither party gives the other party any of its background IP the manufacturer has limited use of the buyers background IP to make the buyers product and the buyer has limited use of the manufacturer's background IP to the extent the use is connected with the product being used as its intended that's it sometimes though the buyer will want the right to the manufacturers background IP to manufacture the product itself upon termination of the contract this is a very rough end run around an IP escrow agreement and you need to be aware of something like this also buyers may insert language into the contract giving it rights to create derivative works of the IP manufacturers should be vigilant to protect against giving these rights away generally these IP rights are in addition to the intended use of the product and if a buyer wants these rights to the IP that are in addition to its intended use they must pay a premium for these once the parties start doing business together IP can be created for example the manufacturer may improve the product over time the buyer may contract with the manufacturer to create something new specifically for the buyer and or a manufacturer may have a base product that it adapts or customized to the buyers cup specifications this creation of new IP after the parties begin training is what is referred to as foreground intellectual property or foreground IP whether a buyer is entitled to use the foreground IP outside of the intended use of the products depends on what is being purchased it boils down to this is the buyer pain for the unrestricted rights to the IP that's where the trained part of our metaphor comes in what's more important to chinco theta the background IP of its natural beauty or the foreground IP of the train to get people here that's not often an easy answer both are required and that is why the contract has to clearly state these rights let's quickly look at three scenarios just discussed the manufacturer has to be really careful about its contracts related to foreground IP because any manufacturing improvement to a base product during the term of the contract could fall under a broad definition of foreground IP if the manufacturer has transferred the rights to foreground IP to its buyer they may not be able to sell its improve base product to anyone except the buyer also if more than one buyer has the same foreground IP rights then the manufacturer could be in breach of contract whenever improved whenever it improves its base product accordingly manufacturers have to be very careful about the breadth of the definition of foreground IP and limit the transfer of that where appropriate in the second scenario where a custom product is designed and produced by the manufacturer for the buyer the manufacturer will likely want to charge a premium for this work because it's likely selling unrestricted foreground IP rights if the buyer does not want to pay the premium the contract needs to clearly state that the manufacturer is free to sell products that incorporate the foreground IP to third Arty's finally the most difficult issue is where the manufacturers based product is specifically adapted to the buyers needs if a buyer shows the manufacturer how to adapt the manufacturers base product to the buyers specifications the buyer will not want to man the manufacturer using that IP in a product it sells to anyone else especially a competitor of the buyer as such the buyer in that situation should own the foreground IP however if the manufacturer is the party that figures out how to adapt its base product and does not charge the buyer for the adaptation then the manufacturer should own the foreground IP conversely if the manufacturer does charge the buyer for the adaptation the buyer has a good argument that it has purchased the unrestricted rights to that foreground IP in all three of these scenarios the conflict is whether the buyer is buying the background IP for which it has little grounds for an unlimited title versus the foreground IP for which it has better grounds for unlimited title the manufacturer will likely think it's base product or background IP is what brings value to the product and what creates value thus to the manufacturer no IP rights outside of the intended use of the product or transfer conversely the buyer may believe that the real value is the IP used in adapting that base product to its specific needs thus to the buyer since the price is largely for this foreground IP the buyer thinks it's bought an unlimited right to the foreground IP for example I represent a client that manufactures sturdy high-tech equipment that can be used in the electrical components of trains buses city infrastructure and electrical plants its customers come to it with difficult computing problems my client is one of only a handful of companies that know how to implement these solutions in a product strong enough to handle some rough conditions now in my clients mind the real value in the product is the base product customization to fit the customers ne
Thanks for your comment Charley Becklin, have a nice day.
- Liz Hoffnagle, Staff Member
all right let's cover a topic that i often see get confused in agreements that we work on for clients i'm going to talk about intellectual property ownership there are really that's a little bit of a misnomer i'm going to talk about ownership and then also licensing because those are the two competing ways that intellectual properties should change hands under the terms of an agreement so ownership when you assign ownership also commonly referred to as work for hire however they're kind of whittling away what work for hire means so you should have language that assigns ownership of intellectual property if you wish to give ownership in an agreement so if you wish to just give the intellectual property any content that you create any creative work and by ownership i mean you give it to the other party you no longer have any rights any control you relinquish all of that to that other party that's giving ownership or assigning ownership now a license is different a license is where you provide permission to use in a limited capacity for a limited time maybe in a limited geographic region and for a limited purpose the intellectual property the creative work but you maintain the right to revoke that license you maintain control over it you can go use that creative work other other places whatever you want to do with it because you own it still you haven't given ownership of it over to someone so you can kind of think of a license like letting people borrow that intellectual property that creative work so a lot of the time you might see photos in articles or blogs that were licensed for the use in that article or blog but that photographer still owns that photo they can then sell it to national geographic or license it to others whereas if they assign ownership which is typically what you would see in maybe like a wedding photographer contract if they're shooting your wedding you would want ownership of the images of you and your family and your friends from your happiest day ever and so that would be where assignment of ownership should be present in that wedding photographer's agreement now this isn't as clear as it sounds in the language of an agreement because it's not as easy sometimes to decipher what a license versus an assignment is in a contract because the language can be rather verbose it can be a lot of language it can be confusing words like revocable in perpetuity and in the universe and all of these different things that may be obscure whether it is a license or it is ownership being assigned but it is tremendously important not only for you if you're someone that's a creative professional but also the person that's hoping to receive ownership of your branding or your photos whatever it may be you need to make sure that that intellectual property provision in the agreement is spelled out correctly and provides either the license or the ownership like you desire it to because if it doesn't you're in a totally different scenario and also for creative professionals out there you should be charging more for ownership than you should be for a license because they're getting the whole kitchen and the kitchen sink or whatever they're saying and they get to do whatever they want with it versus a license where there's limitations and you can revoke it so those should be different costs in my mind that's what i recommend at least and so it's super important to make sure that you a know what type of ip ownership or license you'd like to see for whatever engagement you have a contract for b that it's spelled out correctly and reflects that desire that you have in the agreement and of course that the parties understand which is which so that one doesn't think they're getting ownership but they get a license or vice versa that's important can avoid some disputes that way and also keep in mind that whether or not you assign or license is relevant to if you have an independent contractor or if they have an end client so let's say you have a contractor that provides you with some creative work but they only gave you a license and you're giving ownership to your end client you don't have ownership to give if you only got a license from that contractor and that can cause issues additionally if you then are going to go to your end client and give ownership and you didn't get ownership definitely a problem for you and you're not going to be able to save face there with your end client if the contractor comes out of the woodwork and tries to claim that also additionally if you license someone to your end client and they expected ownership and that was never discussed that could be a problem and also all of this dovetails into whether or not someone can register a trademark a copyright a patent in the creative work that is the subject of the agreement if someone only receives a license and they go to register a trademark a copyright a patent chances are they can't and they may even get in some trouble by the original artist because they didn't have the right to register that and registrations are public records so the other person might find out about it so intellectual property ownership ownership of creative work license and ownership assignment of ownership those are the two main ones there are some nuanced versions and kind of like hybrid versions that you can get into but it's important to make sure you know what you want going into the contract and that the contract accurately reflects it and that both parties to the contract understand what's in there to avoid disputes to avoid issues to avoid headache to avoid having to hire me a lawyer although you know i want to work with you you can hire us we're affordable we're fun but if you don't need us you don't need us and if you know what you're doing in these regards you don't need us so hope this was helpful hope it helps you avoid some situations that aren't so fun thanks for tuning in
Thanks NAS1 your participation is very much appreciated
- Liz Hoffnagle
About the author
I've studied sexology at University of Redlands in Redlands and I am an expert in coding theory. I usually feel indescribable. My previous job was businessman I held this position for 21 years, I love talking about volleyball and tai chi. Huge fan of Marshmello I practice flag football and collect match-related items.
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