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IP Rights in Independent Consultant and Contractor Agreements
Practical Law Legal Update 1-620-2633 (Approx. 3 pages)
IP Rights in Independent Consultant and Contractor Agreements
| Published on 24 Nov 2015 • USA (National/Federal) |
The ownership of IP rights in work product an independent consultant or contractor creates under contract with a company can be the subject of heavy negotiation. The company that engages the contractor to produce the work product typically expects to acquire outright ownership of all associated IP rights. The contractor, in turn, may resist transferring its IP rights in the work product in favor of granting the company a limited IP license. To avoid future conflict, the parties must expressly resolve these and other IP ownership issues in a well-wrought contractor or consultant services agreement.
Companies frequently engage independent consultants and contractors to provide services that result in the creation of intellectual property (IP). The company may engage the contractor or consultant for a specific research or development project or to perform more general services that result in unanticipated technological developments. Whether incorporated into a company’s products or used for internal business purposes, contractor-created technologies can be among a company's most valuable assets.
Factors Affecting IP Ownership
In the US, where a third-party contractor, consultant, or other service provider creates designated deliverables or other work product when providing services to a company, the service provider generally owns the IP rights in these materials if the company has not obtained an assignment of these rights. However, there are important exceptions to this general rule. To properly negotiate and draft an independent contractor or consultant services agreement, counsel must have a thorough understanding of:
- The controlling IP ownership rules under applicable law.
- The exceptions to those rules.
- The application of these rules and exceptions to both:
- the work product's subject matter (for example, software); and
- the circumstances of the work product's creation.
More fundamentally, counsel must be clear on whether the independent contractor is in fact an independent agent under applicable law. Whether the service provider is properly classified as an independent contractor or employee can have a critical impact on the company's IP rights in work product produced either during or after the termination of the parties' relationship.
Practical Law Intellectual Property & Technology has developed useful resources to help determine a company's IP rights in its service providers' work product and to provide for the transfer of these rights to the company in cases where the company does not acquire them by operation of law. These include: