IP Licensing and Assignment:
7 Commandments

  • Mar 16, 2023
  • 06 min read
IP Licensing and Assignment

For someone living under a rock, let me explain what Intellectual property is. It's a legal term that describes any creative or innovative work created by an individual or organization. It usually includes patents, copyrights, trademarks, trade secrets, and the like. It's like giving your significant other the password to your Netflix account, except this time, it's for something much more valuable, for instance, the secret recipe for your grandma's apple pie.

What is an Intellectual Property

What is an Intellectual Property (IP) Assignment Agreement?

The assignment in the current context is just a fancy word for selling. Therefore it results in transfer of an owner's rights, title, and interest in the intellectual property rights to someone else.

What is an Intellectual Property (IP) Licensing Agreement?

Where all the exclusive rights conferred by law on the owner of intellectual property are transferred by him to another person to the exclusion of all including himself without any restrictions in time or other conditions, it is said that an 'assignment' has taken place.

In the case of a license, the licensor permits the licensee to use its intellectual property per the license agreement's terms and conditions. The licensor may also give an exclusive licence to the licensee to the exclusion of all, including himself, but the ownership in such property does not pass on to the licencee; it remains with the licensor only.

What is an Intellectual Property (IP) Licensing Agreement

As a 90s Kid, the closest thing I can come up with is the game of Monopoly. You know, you have all these rules and regulations for buying properties, and you can't just take whatever you want. You have to ensure you get the right pieces and amount. It's a lot like being a kid and playing the game. But instead of having fun, you're dealing with lawyers, contracts, and money. That's why I always say when it comes to IP licensing agreements, you gotta know the rules of the game! So, let's dive into these damm rules:

  1. Step 1 - Know Thy IP

    As the types of intellectual property that can be assigned may include patents, trademarks, copyrights, and trade secrets, the first step in drafting any IP License Agreement is the identification of the IP being assigned.

    Furthermore, IP may also be registered or unregistered and it is quite likely that different sets of rights are granted for a specific form of IP. Lastly, the rights to one form of IP will also vary in different jurisdictions.

    Once the form of IP involved has been identified, then it is possible to include a clear specification and definition of the IP that will be licensed under the IP license Agreement.

    Software IP Transfer / Assignment Agreement

    For example, a typical Assignment agreement transferring the ownership of some software would include grant rights for:

    1. Patents, if any, used in the software,
    2. Associated technical information and know-how, and
    3. Trademark under which the said software has been marketed or distributed so far.

    In this case, the IP Assignment Agreement must clearly identify and set out the provisions granting rights for each of those mentioned three intellectual properties.

  2. Step 2: Know Thy Parties

    Although self-evident, it is essential that the Agreement clearly mention and identify the parties to the agreement along with details such as legal name, addresses, and the place of incorporation of each of the parties.

    It is essential to note that the individual or entity who is eligible to give the authorization and the one who will be utilizing it should be mentioned in the Agreement.

    Moreover, the and the date when the Agreement will be effective, should also be included in the Agreement. It is necessary that the true names of the parties are used when distinguishing them and only those who sign the Agreement are legally bound to the Agreement's conditions. For instance, if there is any uncertainty regarding the "shell" corporation being solely responsible for accomplishing obligations or providing compensations, it could be worth contemplating including the parent company to the Agreement as a guarantor.

  3. Step 3: Know Thy Rights

    Any IP assignment agreement must include a provision that transfers ownership of the IP from the assignor to the assignee in perpetuity. However, things get a little more complicated when an IP holder wants to do a partial assignment, also known as IP Licensing.

    In the case of IP Licensing, this clause prescribes "who gets what" and provides specific permissions regarding the Intellectual Property being licensed. It is crucial to consider the business and other objectives of the right holder to customize this clause in such a way that is in line with them. These customisations can be classified in 4 broad heads:

    1. Degree of Exclusivity
    2. Right to Sublicense
    3. Scope of Grant
    4. Implied Rights and Other Restrictions

    For more details on these four points, you can refer to a very boring video created by my younger version:

  4. Step 4: Show Me the Money!

    The agreement must specify the consideration, which can be in the form of money, services, or anything of value (like cryptocurrencies, even though a bunch of people will argue against that) is being provided in exchange for the IP assignment.

    Simply put, this is the price paid by the assignee for the rights to the IP, and is essential for making a contract valid and enforceable.

  5. Step 5: Know Thy Obligations

    The assignment should include representations and warranties from the assignor that the IP is valid and enforceable and that the assignor has the right to transfer ownership. This clause is typically followed by an indemnity clause, obligating the assignor to indemnify the assignee against any claims or damages arising from using the IP. Basically, it is like if you borrow your brother’s Xbox and promise to cover the cost if you break it.

    In some exceptional cases, the assignment of IP may be subject to certain contingencies beyond the control of either party, such as regulatory approval from authorities like the FDA. Further, the agreement should also include provisions that allow the parties to terminate the agreement in the event of a breach of its terms by the other party.

  6. Step 6: Know Thy Law

    It's actually Governing Law, but “Know Thy Law” just sounded better, don’t you think?

    Like any agreement, an IP assignment should specify the governing law of the agreement and the jurisdiction in which disputes will be resolved. Just like I would prefer my lenient Dad over my Mom to decide my punishment whenever I screw up as a child, parties to the assignment can mutually determine what state's laws will be used to interpret the agreement and which jurisdiction will oversee the enforcement of its terms in case of a dispute.

  7. Step 7: Both Parties Must Say “I do”

    Even though it might be self-evident for most readers, the assignment agreement must be in writing and signed by both parties or their authorised representatives, as the case may be.

Concluding Thoughts

If you have reached this post, after googling the phrase “Free Template for IP Assignment Agreement”, I can guess what question must be on your mind, “whether I should hire an expensive lawyer to draft the IP assignment agreement?”

I wish I had a straight answer to this question. Like most situations in life, the answer depends on many factors. The most important being the current or future value of the IP in question. Ultimately, planning a small family gathering on your own makes sense, but it's prudent to consult a professional if you plan to host an important fundraiser.

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I'm a lawyer and foodie who loves tech, and AI 🤖! For the past 10 years, I have been making law & tech play nice with each other 🤝


Frequently Asked Questions

An IP Assignment Agreement is a legal document that transfers the rights, title, and interest of intellectual property from one party (assignor) to another (assignee). The assignor can choose to transfer all or a portion of their IP rights, and the agreement typically involves a one-time payment or ongoing royalties.

In the case of a license, the licensor permits the licensee to use its intellectual property per the license agreement's terms and conditions, but the ownership in such property does not pass on to the licensee; it remains with the licensor only.

The key components of an IP Assignment Agreement include:
  1. Identification of the intellectual property being assigned: This involves specifying the type of IP, such as patents, trademarks, copyrights, or trade secrets.
  2. Parties involved: Clearly mention and identify the parties, including their legal names, addresses, and incorporation details.
  3. Rights and permissions: Outline the specific rights being transferred or licensed, including any limitations or conditions.
  4. Consideration: Specify the compensation or value provided in exchange for the IP assignment, such as money or services.
  5. Representations and warranties: The assignor ensures the validity and enforceability of the IP and may provide indemnity against claims or damages.
  6. Governing law and jurisdiction: Determine the applicable laws and jurisdiction for interpreting and enforcing the agreement.
  7. Must be in Writing: The IP Assignment Agreement must be in writing and signed by both parties or their authorised representatives.

Whether to hire a lawyer for drafting an IP assignment agreement depends on various factors, primarily the value and complexity of the IP involved. For simple assignments with lesser value, using free templates or consulting online resources may be sufficient. However, for valuable or complex intellectual property, it is advisable to seek professional legal assistance to ensure the agreement accurately protects your interests and complies with relevant laws.

Yes, an IP assignment agreement can be terminated under certain circumstances. The agreement should include provisions that allow either party to terminate the agreement in the event of a breach of its terms by the other party. Additionally, exceptional cases beyond the control of either party, such as regulatory approval requirements, may also lead to the termination of the agreement. The specific termination conditions and procedures should be clearly outlined in the contract.

The consideration in an IP assignment agreement refers to the value or compensation provided by the assignee (party acquiring the IP) to the assignor (original owner) in exchange for the IP rights. The consideration can take various forms, such as monetary payment, services, or any other valuable consideration agreed upon by both parties. It is essential to clearly specify the nature and amount of consideration in the agreement to ensure a valid and enforceable contract.