Rights and Ownership Options in Technology Development Agreements

This article appeared in Technology Licensing Primer
Massachusetts Continuing Legal Education, May 2002

Overview

In any technology development project — from short-term contract programming to long-term outsourcing relationships, from product customizations to Web design agreements — the question of who owns the resulting developments is often a source of intense negotiation. It may also be an enormous red herring. Experienced negotiators who understand intellectual property recognize that there are many alternatives to sole and exclusive ownership that may suit either or both of the parties equally well. This article will examine these alternatives as a means to assist negotiators in protecting their (and their client’s) interests in a development relationship without allowing IP ownership disputes to sidetrack the deal.

There are three basic approaches to this issue, namely:

The party developing the technology, customization or design (the “Developer”) owns the intellectual property in the resulting work product (the “IP Rights”); the party commissioning (and paying for) the work product (the “Client”) gets some type of license.
The Client owns the resulting IP Rights; the Developer may or may not receive back a license to the work product and associated IP Rights; and
The Client and Developer jointly own the IP Rights, often with stipulated limitations on the rights each may exercise – for example, the Developer agrees not to use the co-owned IP Rights in serving the Client’s competitors – or with cross-obligations that each party owes the other – for example, each party must account to the other party for its pro rata share of net revenues derived from exploiting the work product or IP Rights.

Lying beneath these primary structures are complex issues. For example, if the work product is a derivative work of preexisting elements, or a compilation created out of preexisting components, how does ownership of the IP Rights affect use of these preexisting items? If one party owns the IP Rights and the other receives a license, what are the terms of the license regarding scope, exclusivity, geography, duration and transferability? This article will identify, but not always resolve, these complex issues, by focusing on each of the three basic structures and considering issues that may arise and answers that may be offered.

Article Outline

I. Introduction

II. Developer Owns, Client Licenses

III. Client Owns, Developer Licenses

IV. Client And Developer Co-Own

V. Conclusion

To read the full article, Special Contractual and  Intellectual Property Rights Considerations, please download the PDF.

Or for more information, please contact the author Howard G. Zaharoff.

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