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Written by : Al Chaton |
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welcome to law Pat's legal education videos my name is Damon Murdock I've been a lawyer here for over 10 years today we're going to talk about interrelated license agreements a lot of time when you set up your corporate structure you might have a holding company and then under your holding company you have a subsidiary and that subsidiary is wholly owned or sometimes 100% owned by the parent company sometimes you also have an IP company where the IP company is wholly owned by the holding company and the subsidiary is using the technology of the IP company in any case what you want to do is make sure that your IP is not held by the company that's actually trading the reason is is that your trading company is the company that takes on liability and if something ever happened you don't want to lose all your intellectual property so what most people do is they set it up so that the holding company owns the intellectual property or the IP company holds the other intellectual property and then from there it's licensed from the holding company down to the subsidiary and when you prepare this License Agreement a lot of times it says the subsidiary is allowed to use the intellectual property during the term for a fixed period of time and the subsidiary will pay the holding company and annual royalty now what happens if the subsidiary goes down and it's closed down and all the intellectual property that has been developed by the subsidiary on top of the original IP that was given to it by the holding company well you could lose all that intellectual property so we need to look at how do you protect your IP from a situation where your subsidiary eventually goes in or liquidation I don't like talking about administration or liquidation but that's the fact it's a reality and it happens especially happens in two high-growth companies mostly because of cash flow issues now let's look at this License Agreement what we normally do is we draft in a way that we license the IP down to the subsidiary we pay a royalty from the satheri subsidiary back up to the parent company and we have it for a fixed term we also draft what's called a default event clause the default event Clause says that if anything happens to subsidiary such as it having a debt that it can't pay going into administration liquidator appointed the company decides to wind it up any of those scenarios then the IP that's held by that subsidiary is automatically reverted back to the holding company not only does it revert back up to the holding company of the IP that was originally given to it or licensed to it that includes all the add ons the modifications anything that's been developed on top of that you might even also include client lists what's important is to get it right and if you can get it right it protects you but what's the most important thing to do is to have a PPS a clause that's the personal property Securities Act and you want a clause that secures the parent company interest in the subsidiary that is the PPS a allows companies to register an interest against another company so it's similar to financing your car you buy a car you get finance on your car you have possession in your car but although you own your car there's still a registered charge against it by the finance company if you don't pay your debt now that finance company can come back and take your car from you this is very similar you have a PPS a or PPS AR which is a personal property security registration on behalf of the holding company against the subsidiary so if anything happens to the subsidiary you can walk in and you can take your IT IP back and drink it back up to the holding company now what's also important is once you sign that License Agreement generally speaking you have 20 days to perfect your interests that means that you have 20 days to lodge an application with the PPS or pursuant to the PPS a so then you have that charge registered against your subsidiary what's also important to know is that if you don't register the PPS a and you do nothing until the company the subsidiaries put into administration or put in liquidation there's a real risk that your License Agreement or your protections that you thought you had via the License Agreement won't actually exist and that's because there is a section of the Act which says if you don't put affected in two months from the agreement coming into place and if you do not effect it until six months before the acne winding up or they the liquidation or the appointment of administrator if you put a PPS are against the subsidiary within six months from that event happening there's a good likelihood that the administrator or the liquidator will be able to overturn your registration so at the end of the day it's really important to get a lawyer most likely to look at your license agreement and if you don't get a lawyer to look at a license agreement make sure you get a contract that's be prepared by a lawyer don't just find it off the internet these are very tailored documents that are between related entities thank you for watching our video for more videos make sure you subscribe to the all paths on YouTube channel for more information visit la paz website wwlp.com a year I'll see you next time
Thanks for your comment Haywood Zablonski, have a nice day.
- Al Chaton, Staff Member
hello my name is Ruth Carter and I'm a licensed attorney in Arizona and this is your question of the day so somebody asked me what can an individual expect regarding their own rights even if they're employed when they develop invent or create something for instance my dad has invented a bunch of stuff and he's listed as an inventor on about 20 patents how does the relationship work between employees and their employer what about my friend who doesn't have the right to further develop something she's worked on for years okay so the rules regarding patents and other IP are different so if you are an inventor of something you have to be listed on the patent application now that's the rule but many times companies have their employees sign contracts as part of their employment agreement that says that they will assign all rights to any intellectual property created to the company so you can be listed as an inventor on a patent but not on the patent make sense okay now if your job involves creating something for the company whether it's software marketing materials any original works everything that you create within the scope of your employment automatically is owned by your employer and the employer is the author of the work not you this is if you are an employee if you are an independent contractor you have to have a written assignment for the employer to own whatever you created but employees everything you create within the scope of your job is authored and owned by the company and companies can put in your employment contract as part of like non-compete agreement that anything that you create during your during the scope of your work is owned by the company and you cannot in the future compete with the company in a way that would leave them at a disadvantage so that is why you see situations where someone worked on a project for years and then once they leave the company they can't work on that specific type of project for another company because it would violate their non-compete agreement assuming non-compete agreements are legal in the state under which the employment contract was written do you know complicated did this get this is this is why we have lawyers so yeah I would say when you are looking at your employment paperwork read it carefully so that you understand what rights you give up in exchange for being able to be an employee at a company so that you understand what you do and don't own because a lot of people assume that because they worked on something they own it and then you see situations where someone leaves the company and then maybe puts up a personal portfolio of their work with copies of things they've worked on in the past and what they're doing is committing infringement against their employer because they actually own it the employee does it so if you have any questions about the rights in your state about non-compete agreements or intellectual property rights please consult a lawyer in your community because of course watching this video does not create an attorney-client relationship with any viewer it's merely legal information not legal advice if you need legal advice go hire somebody that's all I have for now please subscribe to the channel as I put up new content every week and until then I will catch up with you later take care
Thanks Everett your participation is very much appreciated
- Al Chaton
About the author
I've studied power engineering at Connecticut College in New London and I am an expert in policy sociology. I usually feel ecstatic. My previous job was dairy technologist I held this position for 29 years, I love talking about modeling and quiting. Huge fan of Heath Ledger I practice formula 1 and collect for sports cards.
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