IP issues when working with contractor or on contract

Companies engage with contractors/consultants all the time to perform services or carry out engagements. It is therefore important for both companies and contractors/consultants to understand the IP issues around these engagements.

From the company perspective, the company should ensure that it retains ownership and control of all IP developed during the engagement. If the consultant/contractor is a company, then the services or engagement agreement should specify that the consultant/contractor is responsible for ensuring that each of the consultant/contractor’s employees performing work on the project has either agreed or agrees in writing to assign all IP rights. The company will then have a cause of action against the consultant/contractor if it fails to obtain the assignments.

Express language should be included in the services/engagement agreement as evidence of contractor/consultant agreement that it will not retain any rights in the developed IP. For example, if a company hires a contractor/consultant to develop a logo or website, the contractor/consultant will own any copyrights to the logo or website unless those rights are expressly transferred to the company in writing. In addition, moral rights such as the right of integrity of work and the right to attribution also attach to the copyrighted works. These moral rights may prevent the company from modifying the logo or website after the fact. To avoid issues, the company should secure IP assignments from consultants/contractors that address these issues and ask the consultants/contractors to waive their moral rights. The service/engagement agreement should also require the consultant/contractor to: Identify any sub-contractors used and obtain assignment and waiver of all IP rights from all sub-contractors used.

From the point of view of the contractor/consultant, the contractor/consultant should look to retain ownership of any pre-existing or background IP that it is likely to utilize to perform the engagement. This can be achieved by:

  • Clearly defining the consultant/contractor’s pre-existing IP that is likely to be used in performing the services within the services or engagement agreement.
  • Notifying the company if pre-existing IP is incorporated into the IP developed in the course of the engagement.

If the pre-existing IP is further developed during the engagement, and the consultant/contractor wishes to practice the developed IP, then the consultant/contractor should look to obtain a license to ensure that the consultant/contractor has freedom to practise the developed IP. Ideally, the service agreement should grant a license to the consultant/contractor to allow use of IP developed during the course of the engagement.

During the term of the engagement, the consultant/contractor may independently develop IP that is not related to the scope of work under the agreement. Then the consultant/contractor that develops the IP will retain the ownership rights in the IP and the service agreement will typically exclude such IP from any grant of rights to the other party.

In most cases, the company will retain ownership of all IP developed during the engagement, and the service agreement usually requires that the contractor/consultant takes every possible effort to ensure proper assignment of all IP rights to the company. If the contractor/consultant is a company with employees, then the contractor/consultant should ensure that each of its employees working on the project agrees in writing to assign all IP rights. This may include, for example, ensuring that all documents necessary for such assignments be executed by its employees.

If the consultant/contractor works with a sub-contractor during the course of the engagement, then the sub-contracting agreement should clearly specify that all IP developed during the course of the engagement will be assigned to the consultant/contractor. Furthermore, there should also be language to require the sub-contractor to identify any further sub-contractors used. The subcontractor should also agree in writing to obtain assignment and waiver of all IP rights from all further sub-contractors used.

Author: Ramesh Rajaduray & Margot Davis

Please note this piece does not constitute legal advice.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s