(Second Edition)

Kenneth L. Port,  Jay Dratler, Jr.,  Faye M. Hammersley, Esq.,  Terence P. McElwee,
Charles R. McManis, and Barbara A. Wrigley

On-Line Problem Supplement
Copyright © 2005   Carolina Academic Press.   For permission, see CMI.

Chapter 7

Problem 9:  Evaluating Ownership and Licensing Terms

You are reviewing a proposed contract for Contair in which a vendor will create a software program "from scratch" for Contair's use, both by Contair and by Contair's customers.  Consider the proposed intellectual property clauses below and determine where each clause falls on the scale from (1) to (8) in Note 1 at the end of Chapter 7 of the main volume.  Also, consider what additional questions you might ask Contair and the vendor to adequately assess the proposed language of each clause.
    Sample Clause 1
    (a)  Contair and Vendor shall each retain ownership of, and all right, title and interest in and to, their respective, pre-existing Intellectual Property (as hereinafter defined), and no license therein, whether express or implied, is granted by this Agreement or as a result of the Services performed hereunder.  To the extent the parties wish to grant to the other rights or interests in pre-existing Intellectual Property, separate license agreements on mutually acceptable terms will be executed.
    (b)  Vendor grants to Contair a royalty-free, paid up, worldwide, perpetual, non-exclusive, non-transferable license to use any Vendor Intellectual Property incorporated in any Deliverable, solely for Contair's use of that Deliverable for its internal business purposes.  Vendor shall retain ownership of and unrestricted right to use any Intellectual Property.  The Services performed and any deliverable items produced pursuant to this Agreement are not "works for hire."
    (c)  As used herein, "Intellectual Property" shall mean inventions (whether or not patentable), works of authorship, trade secrets, techniques, know-how, ideas, concepts, algorithms, and other intellectual property incorporated in any Deliverable and first created or developed by Vendor in providing the Services.
    Sample Clause 2

      (i)  "Intellectual Property Rights" means patents, trade marks, service marks, design rights (whether registrable or otherwise), applications for any of the foregoing, copyrights and database rights, and all other similar rights or obligations whether registrable or not in any country and "Intellectual Property" shall be construed accordingly.

      (ii)  "Background Intellectual Property Rights" means Intellectual Property Rights embodied in software, concepts, ideas, information, data, drawings, reports and documentation which are conceived, originated or generated other than in carrying out this Contract.

      (iii)  "Foreground Intellectual Property Rights" means Intellectual Property Rights embodied in any software, concepts, ideas, information, data, drawings, reports and documentation which are conceived, originated or generated in carrying out this Contract.
    a)  The parties agree that ownership and rights of use of Intellectual Property shall be as set out in Clause (b), below.
    b)  Ownership and rights of use of Intellectual Property Rights shall be as follows:
      i)  Ownership of Background Intellectual Property shall not be affected by this Agreement.

      ii)  Foreground Intellectual Property shall be owned by Contair.  Vendor and its personnel shall be entitled to utilize concepts, ideas, techniques or know-how obtained in the course of performance of this Contract for others at any time in the future.  Neither party shall have any obligation to limit or restrict the job duties of its personnel or to pay royalties for any work resulting from these concepts, ideas, techniques or know-how.

      iii)  Vendor shall grant to Contair a non-exclusive, royalty free, world-wide, irrevocable license under its relevant Background Intellectual Property Rights to enable Contair to use, modify, maintain, and exploit the Foreground Intellectual Property.
    Sample Clause 3
    All right, title, and interest in and to any deliverable items, together with any software, documentation, utilities, tools, methodologies, specifications, techniques, and other materials or know-how developed by or on behalf of Vendor during and in the course of providing deliverable items, including any intellectual property rights therein (collectively referred to as "Other Intellectual Property Rights"), shall become the sole and exclusive property of Contairr as a work made for hire.  If any deliverable items or Other Intellectual Property Rights are not considered works made for hire owned by Contair by operation of law, Vendor hereby assigns ownership of copyrights in such deliverable items and Other Intellectual Property Rights to Contair. Vendor agrees to perform, during and after the term of this Agreement, all acts deemed necessary or desirable by Contair to permit and assist Contair, at no more than Vendor's published hourly rates current as of the date of such services, in evidencing, perfecting, obtaining, maintaining, and enforcing Contair's rights and/or Vendor's assignment with respect to such assigned rights in any and all countries.  Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings.
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