What intellectual property clauses should be included in an IT services agreement?
When entering into contracts for the provision of IT services, special attention should be paid to the section on intellectual property. Clauses in such agreements should define the rights, obligations and responsibilities of the parties to ensure a clear distribution of rights to the created objects and results of work. In this article, Stalirov&Co’s IT lawyers provided practical advice to IT companies on drafting an IT services agreement, namely the section on intellectual property. Below you will find a list of provisions that should be included in your contracts.
Definition of intellectual property
The agreement should define in detail what is meant by intellectual property. This concept may include software, algorithms, interface design, databases, logos, code copyrights, patents, etc.
Transfer of intellectual property rights
The contract should specify what rights are transferred to the customer upon completion of the work. This can be a complete alienation of rights or only limited use with certain conditions, in particular, on the basis of a license. A clause in a full alienation agreement can be written as follows: the client has the exclusive right to independently own, use, and dispose of intellectual property from the moment of obtaining rights to it. The client’s exclusive rights to objects extend to both the completed object and any component or element.
The moment of transfer of intellectual property rights
Lawyers advise IT companies to indicate that exclusive intellectual property rights are transferred to the client only after full payment for the services rendered. This eliminates the risk of performing work but not receiving payment, so the moment of transition should be payment in full. If the client fails to fulfill its payment obligations, the IT company retains all exclusive property rights to the intellectual property created in the course of the contract.
Privacy and security
The parties must maintain the confidentiality of intellectual property information and apply organizational and technical security measures.
Guarantees on the part of the IT company
The agreement may include a list of guarantees for the client, in particular, that the contractor guarantees that all materials used in the provision of services are original, are not copies and do not infringe the copyright or other rights of third parties.
Separate provisions of the agreement should address the use of intellectual property owned by third parties. As a rule, an IT company cannot use third-party intellectual property without the client’s consent. If necessary, you should obtain a license or other permission from the owners of such facilities.
Another clause in the contract should be devoted to the use of outsourced solutions, namely external packaged libraries, testing tules, and other tools. To do this, write in the contract that the IT company and the developmentteam can use intellectual property covered by free and open source software licenses.
In addition, the contract must contain the following disclaimers. An IT company is not responsible if open source software ceases to be open source and requires intellectual property rights. The Client will cover the costs of such software at its own expense. If an error occurs in the results of work due to a change in the status of open source software, the IT company is not obliged to correct it free of charge.
Indemnification and liability
The agreement should define the liability of the parties in case of infringement of intellectual property rights, including the obligation to compensate for damages and reimburse the costs of asserting rights.
Clauses in IT service agreements should ensure that the parties clearly define intellectual property rights, use, protection and liability. It is important that the agreement is detailed, clear and takes into account the specifics of a particular project or service. A properly drafted agreement will help avoid conflicts and misunderstandings between the parties, as well as ensure the free and safe use of the development results. Therefore, the inclusion of appropriate intellectual property clauses in the contract is a key element of a successful IT transaction.
Author: Valeriy Stalirov, CEO of the IT law firm Stalirov&Co
