Contracts Matter: Properly Documenting Intellectual Property Arrangements
Too often when persons create works which are protectable by intellectual property (IP) law, and they acquire exploitable rights in relation to these works in areas such as copyright or trade mark, these persons do not properly document how these works are to be used, particularly where this use is permitted to third parties. In these cases, where there may be future disputes between the owners of the works and these third parties, there is nothing that speaks to rights, payment and other important considerations, and it becomes the word of the owner against the third party as to what was actually agreed. Written contracts are therefore vital, as, in the event of disputes, they provide some irrefutable evidence of what was agreed between the parties.
Some arrangements required to be in writing
One lucrative stream of income for the owner of a copyright work, such as a song or short film, can be to assign specific rights, which are exclusive to the owner of the work, to a third party. Some of these rights include the right to copy the work, perform the work, play or show the work in public or broadcast the work. Where copyright in a work is being assigned, the Copyright Act provides that this must be by an agreement in writing, executed by or on the behalf of the person assigning the work, and the assignment may be for all the copyright, or it may be limited. Since the effect of assignment is that the person to whom the work has been assigned is entitled to all or some of the privileges of ownership, it is clear why a contract for assignment is so important. This contract will protect both the assignor and the assignee by setting out details such as how much the assignor is to be to paid for the work, and, where the assignment is limited, how long the assignee may use the work and what the assignee may do with the work,
The owner of copyright work may also licence this work, and while there is no requirement for a licence to be in writing, it is prudent that it is, and that the contract sets out clearly the terms of the licence. The contract should set out the duration of the licence, the rights being licensed, whether the licence is exclusive, how the licence can be terminated, and how much the owner of the work is to be paid for the grant of the licence. An agreement in relation to the licensing of a work will prove to be very useful should any question arise in relation to matters such as payment, or where the person to whom the licence has been granted is in breach of the terms of the licence.
Another very important consideration in relation to the use of copyright work relates to royalties. Royalties are payments to the owners/rights holders of a work for the use of that work. For example, where a song is played on the radio, royalties may accrue to the person or persons with ownership rights in the songs, each time the song is played. In a song, for instance, where there may be multiple persons with rights in the final product, such as the artiste, the composer or the publisher, it is particularly key to document, in writing, who is entitled to what. Usually where there are several rights holders, the contention may arise where there is success in the work, and resulting income, which leads to claims by the various parties in relation to the part or percentage of the work attributable to them. A written and detailed contract would assist in mitigating such contention, as each party would be aware, from the beginning of the arrangement, what their entitlement will be.
Like copyright, there may be financial benefit to the owners of trade marks, to assign or licence their trade marks. For the assignment of trade marks, the Trade Marks Act provides that this must be documented in writing. The assignment of a trade mark may be in whole, or limited to certain circumstances, for example, it may be assigned for a limited number of goods and services, by reference to all the goods and services for which the mark is registered, or the actual use of the mark may be limited depending on location. Again, the importance of such an arrangement in relation to a mark being made in writing, is that, since the person to whom the mark is assigned will be able to exercise certain rights in relation to mark, it must be clearly defined what such person is permitted to do with the mark, and the monetary value to the owner of the trade mark for this permission.
In relation to the grant of a licence in respect of a trade mark, this is also required under the Trade Marks Act be in writing, and executed by or on the behalf of the party grating the licence. A licence may be limited or general, and where a licence is limited, it may specify the categories of goods and services for which the licence is being granted, and how and where the trade mark can be used. This is important so that the owner of the trade mark can control the actions a third party can do in relation to the trade mark. A properly drafted licence agreement will reduce any misunderstanding between the parties in relation to what can and cannot be done in relation to the trade mark and other key considerations relating to the mark.
Where people create works, it often with a view to, at some point, extracting some value from that work. That is why it is imperative for the owners of copyright works or trade marks to protect their rights in relation to these IP. One crucial way of doing so, is to ensure that all arrangements in relation to the IP are properly documented. While some arrangements are required by law to be in writing, and for others, their documentation is a matter of prudence, copyright and trade mark owners, must be sensitized to the fact that what is not written is more easily refuted. They must, therefore, when making any sort of agreements in relation to their IP, get all contractual arrangements in relation to the works or marks in writing, because in the event of dispute, it is what is documented that will matter.
Lisa Rhooms is an Associate at Myers, Fletcher & Gordon, and is a member of the firm’s Commercial Department. Lisa may be contacted via firstname.lastname@example.org or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.