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Intellectual property (IP) is often a crucial business asset. Whether you are developing creative inventions or distinctive logos, IP can be vital to your project and business. If you commission third parties to create IP for your business, correctly transferring IP to your business is critical. Without an accurate and legally sound IP assignment, you could face numerous legal and financial challenges. This article explores the potential pitfalls of not having an IP assignment and the risks it could cause your business.
What is an Intellectual Property Assignment?
An IP assignment transfers intellectual property ownership rights from the original owner (the assignor) to another party (the assignee). The assignment grants the assignee the exclusive rights to use and exploit the IP commercially, meaning they can prevent others from using the IP without their permission.
Under English law, the assignment must be in writing and signed by the assignor to be legally effective. The assignment document should clearly describe the transferred IP and specify any conditions or limitations. Securing a correct IP assignment ensures you have total control over your IP, allowing you to use, sell, or licence it without restrictions.
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You should draft a written IP very carefully. For instance, it should carefully identify and describe the relevant IP, including all pertinent registration numbers and documentation. It should detail the IP being transferred as clearly as possible, including the rights extent, conditions, and warranties. Once correctly executed, the assignment may require recording with the relevant IP office for patents and trademarks.
Examples
In addition to standalone IP assignment agreements, it is vital to include IP assignment clauses in all relevant contracts with freelancers, contractors, or external companies to prevent ownership disputes and ensure your business obtains complete control over the IP created for your business.
Typical examples where you may need an IP assignment include engaging a third-party copywriter to write articles for your website or a graphic designer to design a new logo and wish to obtain full ownership of such materials.
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What Can Go Wrong Without an IP Assignment?
If you work with external freelancers or companies to create IP, several risks arise without a correct IP assignment, including:
You Could Face Ownership Disputes
Without an IP assignment, you risk disputes over who owns the IP. If freelancers or external companies were involved in its creation, they might claim ownership, leading to costly legal battles that drain your resources. Ownership disputes can arise because, under English law, the default position is that the creator owns the IP unless an agreement states otherwise.
You Could Lose Business Opportunities
Clear ownership of IP is often essential for monetising it. Without an IP assignment, you may struggle to attract investors to your business. Unresolved IP issues can deter potential investors or buyers, resulting in missed revenue opportunities. Investors typically require clear proof of IP ownership before committing funds, and without it, they may view your business as a risky investment.
Clear IP ownership is also critical during mergers, acquisitions, and other transactions and projects such as licencing deals. If your company lacks proper IP assignments, it can prejudice potential deals or significantly reduce your company’s valuation. The due diligence process often scrutinises IP ownership rigorously, and any ambiguities can create problems and even impact completing a transaction. Buyers will want assurance that the IP they acquire is free from ownership disputes and can be used freely, particularly where the IP is valuable.
As such, investing in well-drafted assignment agreements is vital to ensure that your company owns the IP it has commissioned third parties to create.
How Can Legal Advice Help Your Business?
Working with IP and commercial lawyers can help you draft and review agreements relating to IP transfer. Legal expertise can help you identify potential issues and ensure all necessary legal protections are in place where you are obtaining IP rights. Lawyers can help you navigate complex issues, including whether your assignment should be executed as a contract or a deed and any required formalities to ensure it is legally valid.
Lawyers can also assist in negotiating the terms of the IP assignment with external parties, ensuring that the agreement is robust and reflects the value of the IP being transferred. This can include negotiating complex clauses such as IP indemnities. Additionally, lawyers can help you understand your rights and obligations under the assignment, providing you with complete clarity and confidence.
Key Takeaways
Failing to secure an IP assignment can lead to significant legal and financial repercussions. You can protect your assets, maximise revenue opportunities, and avoid costly disputes by ensuring clear IP ownership. Prioritising IP assignments is a vital step in safeguarding your IP rights. Legal advice is valuable in this process and can help ensure your business enters into correctly drafted and robust IP assignment agreements.
If you need help assigning IP rights to a contract, LegalVision’s experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
1. What is an intellectual property assignment?
An intellectual property assignment is a legal document that transfers ownership of IP rights from one party to another. It is vital to ensure complete control over the relevant IP.
2. Why is an IP assignment important when working with external freelancers or companies?
With a clear IP assignment, you are more likely to avoid ownership disputes, lost revenue opportunities, infringement challenges, and complications during mergers and acquisitions.
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