How do you protect Intellectual Property rights in an international technology agreement?
There are two legal regimes that apply to intellectual property (“IP”) rights in technology agreements: 1) contract law, and 2) IP law. Privity of contract applies between the parties to a contract such that only the parties to the contract can enforce any rights or obligations under the contract. IP laws are a subset of property law and as such, can be enforced against anyone. It seems then that everyone is covered, including third party infringers. However, each area of law has very different remedies. Additionally, there is a lack of uniformity in contract law internationally and gaps in IP laws and treaties. Consequently, the governing law of the contract should be carefully chosen to ensure that the most beneficial remedy (whether in contract or IP law) is available for breach. Making the right choice requires IP due diligence and an analysis of the remedies available for foreseeable breaches.
Technology agreements typically relate to assets like software licenses (e.g. enterprise use of Microsoft Word), technology ownership (e.g. sale or ownership in a joint venture), cloud services (e.g. streaming services), and professional services (e.g. information technology professionals provided by a vendor). The IP rights transferred in these agreements can take any form, including patent, trademark, copyright, know-how or trade secrets.
In the international context, the World Trade Organization’s (“WTO”) Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) treaty applies to the commercialization of IP rights. While Articles 7 and 66(2) of TRIPS both note the importance of technology transfer, particularly for least-developed country members, the treaty does not provide a harmonized approach for technology agreements, like the CISG does for the sale of goods. As such, it is up to individual member-states to establish IP laws for technology assets.
Regardless of whether member-states do or do not have a comprehensive protection, enforcement and dispute resolution system in place, the parties to a commercial contract can use the contract to mitigate risk, incentivize protection, and identify a dispute resolution model. The important points to include in the contract are:
- definition of the IP
- identification of ownership
- terms and conditions of any licenses granted
- confidentiality of the IP, including trade secrets and know-how
- indemnities for breach of IP rights by the licensee or a third party
- conditions for termination and renewal, and
- dispute resolution
It must be noted, however, that a private contract cannot contradict statutory IP rights or more importantly, exceptions and limitations, under IP law. For instance, copyright is subject to a statutory fair use right. That right cannot be waived by a licensee in a contract.
Finally, there is quite a bit of debate and case law on whether and when courts will uphold exclusive remedies and limitations on remedies parties include in a contract. Therefore, if parties seek to identify negotiated remedies for breach in a contract, the wording of such clauses should be drafted in accordance with the case law of the governing law jurisdiction.