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This article looks at the term "intellectual property" in the context of technology licensing. It classifies patents as intellectual property and knowhow, which often licensed with patents, as confidential information.
Intellectual property or industrial property as it is still sometimes known, is a form of property, like physical goods or a house or office block, but which is "intangible".
It includes:
These are rights which cannot be touched physically. Although they may be recorded in a document, such as patent specification or a book (protected by copyright), the right itself is intangible.
It is these rights which are known collectively as intellectual property.
In drafting licence agreements it is sensible to include a definition of "Intellectual Property Rights". Ensure it includes as many rights as possible (where the licensee) or perhaps as few as possible where a licensor.
It is rarely sensible to separate rights attaching to the same licensed technology.
For example, it would be confusing to license a manufacturer to use a patent to make goods to a specification, but not to license accompanying design rights which protect the appearance of the article, unless the licensee would be licensed to make the goods but only under their own different design.
The aim of the licence agreement will be to ensure that there is no confusion and both parties are clear as to what their rights are. Never leave a clause vague hoping the draughtsman will have the benefit of the doubt if the matter comes to court. It is risky strategy. Reach commercial agreement with certainty or there is little point in having a written contract at all.
The definition should usually be inclusive, i.e. stating that it includes the rights listed and any other intellectual property rights. For example from 1 January 1998 in the UK (and much of the EU) database right was created. This protects some databases that lost copyright protection or never had copyright protection in the first place. A contract which licensed copyright would not necessarily therefore also license database right.
"License clause
The Licensor licenses the Licensee with the Intellectual Property Rights...."
The clause would go on to describe how and where the rights were licensed.
"Definition clause
Intellectual Property Rights includes all patents, patent applications, utility models, copyright, database right, trade marks and similar such rights throughout the world".
Many such clauses will also include knowhow rights, rights to trade secrets and rights in unregistered trade marks (known as "passing off" rights in the UK). Although these rights are not strictly "property" or "intellectual property" the licensee will want rights to use the knowhow and often the knowhow is more valuable than the base patent right. Sometimes this extends to "showhow" and involves the licensor training the licensee in use of the technology, rather than passing over written information.
There is no problem with including such rights in the definition of IPRs, although strictly inaccurate and a licensee must ensure it receives full rights to use all such valuable knowhow.
For tax purposes the strict distinction between intellectual property rights and knowhow rights use to be important. In the UK stamp duty until the April 2000 budget was payable on assignments (but not most licences) of intellectual property rights, but not of transfers of knowhow, which is not for tax purposes either classed as property.
Advice should be sought from tax lawyers or accountants at an early stage in transactions to ensure proper, but lawful, avoidance measures are taken.
No stamp duty is paid when intellectual property is assigned since the April 2000 UK budget. Where shares are transferred in a company which owns IP rights however 0.5% duty is charged.
Who owns rights in commissioned intellectual property works is a perennial problem in practice. The writer has had countless client disputes over this one issue. The different IP rights in the UK are not consistent either. For example in the absence of agreement to the contrary where a copyright work is commissioned the author will retain copyright and just give the commissioner who is paying, a licence or right to use the right. However for registered and unregistered design rights the position is the reverse. Many articles are protected by both rights, so getting contracts clear in the first place is the only way to resolve these issues.
The EU technology transfer regulation 240/96 contains a definition of both patents and knowhow (see http://www.europa.eu.int/comm/dg04/lawenten/en/techtft.htm)
Lawyers expert on IP law are listed at http://www.chambersandpartners.com.
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