Dids Macdonald, OBE., CEO of ACID, looks at who owns intellectual property and why the small print counts

Most designers will know that when you create a new product or design you are automatically creating intellectual property rights which have a value. In other words, you own them, they are your property, and you can decide how they can be used, by whom and under what circumstances. IP rights are like any other form of property and they can be dealt with in a variety of ways. Apart from the obvious, by protecting your original creations, they can be shared, sold, licensed, assigned or used in other ways such as in franchising.

Over the years we have been asked many questions about the use of IP agreements in commercial relationships, so we have picked just a few where the use of a simple agreement could help to avoid a subsequent problem.

Q) I am working with another freelance designer on what we think are unique designs for a range of tableware that we hope to launch shortly. We are also good friends and have informally agreed that we both own any IP rights created because eventually we want to licence these to a manufacturer. We really want to make a go of this venture but in the unlikely event that we decided go our separate ways, who owns the IP rights?

A) Clarity of ownership is key and doesn’t have to be complicated. Relying on informality and not recording the basis on which you are working together can make life very complicated if, for example, the relationship changes or goes wrong.

Q) I am a surface pattern designer, and a giftware manufacturer wants to buy my design and apply it to a new product range. I do not want to sell the design outright as I would like to have the option of using it myself in the future. How can I best protect myself?

A) Basically, you want to allow another to use your design but retain ownership and receive financial benefits from doing so. The best option is to licence the use of the design to the manufacturer. The starting point should be to have a Licence/Royalty Agreement drawn up. It is important that the agreement is reduced to writing for several reasons:
• It provides commercial certainty to both parties as to what the agreement between them is.
• There is no ambiguity as to what the manufacturer is licensed to do, how long it is licensed to do it for, on what types of products it can use the design and whether you will be at liberty to grant licences to others.
• The terms of payment can be specifically set down, such as whether you will be paid a one-off licence fee or a percentage royalty per sale made by the manufacturer or a combination of both.

Q) I am a freelance designer who is regularly commissioned by clients to produce a wide variety of products and designs. I have a problem where a client is alleging that they own the rights in the product I have created. We did not have a written agreement; the deal was concluded informally over the telephone. How can I ensure I am better prepared next time?
A) Often there is a misunderstanding or myth that if you commission and pay for a new design to be created, the commissioner owns the IP rights. Now, as a result of a clarification in the 2014 IP Act, the artist, creator designer automatically owns the IP rights of any commissioned work, unless there is a written agreement between the designer and commissioner to assign the IP rights. So, it makes sense to deal with the issue of ownership of commissioned works before any work is undertaken when preliminary negotiations are underway. If you already have your own written terms of business, the matter of Assignment of IP Rights can be incorporated into those terms as additional clauses dealing expressly with IP ownership. Another example of reducing an understanding between two parties to writing, there is no ambiguity.

Q)  A manufacturer has asked to see some prototypes and samples of my work so that they can give me an idea of the costs of producing the product for me to commercially exploit. Is there anything I should be aware of and what can I do to ensure I
am protected?
A) This is a relatively common situation, and the risk is that an unscrupulous manufacturer could decide to take your product, produce it themselves and sell it as their own. Many people approach commercial situations with good intentions;
however, it is wise to err on the side of caution. There is a simple way of maximising your protection in this situation with the use of an Intellectual Property Agreement. This is a short agreement that you would give to the manufacturer and ask them to sign before sending them any prototype, or sample of your designs. The agreement outlines that you are the owner of the samples and any intellectual property rights. The manufacturer by signing the agreement would acknowledge that and agree not to do anything with the samples without your written consent. Of course, even if they sign the agreement this does not mean they will not do anything wrong. There is no guarantee. However, if they have signed the agreement then you have in writing their
confirmation that you own the designs and that they will not misuse them. Without such an agreement they could complicate matters by alleging you gave them permission.

Q) I am starting a new business; is there anything I should have in place for trading with customers?
A) ACID offers a Standard Terms and Conditions of Business generic agreement. The template is a basic set of trading terms and conditions with additional clauses that can be added or taken out depending on the circumstances, but with emphasis
on ensuring any intellectual property issues are covered. This will allow you to clearly set out to customers the terms upon which you do business. For example, how long will a customer have to pay for the goods or services? What happens if they do not pay? What is the procedure for returns? Are you to retain ownership and title until payment is made? Without a set of written terms and conditions it can be difficult
to know on what terms you are conducting business, which makes any disputes costly and time consuming to resolve. This way, by having a set of terms and conditions, the terms are clearly set out. The generic agreement can also be amended to be
tailored specifically towards your business needs.

Q) I am worried that by asking the company I am dealing with to sign agreements that they will refuse to deal with me or assume I think they are not trustworthy. Should I still insist they sign the documents?
A) Yes! The first sign of concern in such a relationship should be when the other party is not keen to have formal agreements in place. After all, if they are a bona fide company who do not intend to use your designs without permission there should be no problem with formalising the agreement. Remember that the agreements are also for their benefit. Having simple terms in place in writing also allows them to conduct the relationship with clear boundaries. Also, it demonstrates that you
take intellectual property rights seriously and wish to do things correctly. ACID has built up a menu of different template IP agreements available to support different aspects of commercial relationships where IP is involved, and ownership needs clarity. The good news is that once an investment has been made into creating the right sort of agreements, they are re-usable and can form part of your IP armoury. Our advice is always to get a lawyer to check out any additional wording that you may require. Taking time to check the small print can pay dividends should you ever need to rely on it!

You can find a range of generic agreement templates on the ACID website here.

Read the article in the latest edition of Gift Focus here.