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What rights can you not sign away in a contract?

The power to contract is extremely broad, but that doesn’t mean the power is limitless. You can’t contract to perform illegal activities and you certainly can’t contract away constitutional rights. Contracts won’t be enforceable if they’re unconscionable and, in making enforceability determinations, courts give significant weight to public policy.

 

Two examples of such public policy considerations relevant to many commercial agreements deal with (i) an author’s moral rights; and (ii) each person’s right to compete in the marketplace.

 

1. Moral Rights

 

Moral rights: an author’s rights to attribution, integrity, and association of his or her work.

 

Moral rights prohibit other people from distorting or modifying the work to the prejudice of the author. As a result, only the author may have these rights, and they cannot be assigned to anyone else. However, by waiving those rights in a contract, an author can promise not to use those moral rights against others.

 

If other IP rights in the work have been transferred to you, depending on how you intend to use the work, the author’s moral rights may need to be waived. For example, if you intend to conduct research, a waiver of the moral rights would allow you to use the material as a part of a bigger project. If moral rights are not waived, any integration or modification to the author’s material would be an infringement of the author’s moral rights.

 

To avoid liability and ensure that you have complete rights to use the work of the author, a standard moral rights clause should be included in any IP agreement. For example, most software development agreements will include a moral rights waiver clause in addition to an assignment of IP clause.

 

Source

2. Right to Economic Competition: Non-Disclosure, Non-Solicit, & Non-Compete

 

Our economy is based on competition in the marketplace, and the courts have been reluctant to enforce contractual provisions that place unnecessary restraints on trade. In other words, the courts have placed limits on the extent to which they will permit a person to ‘give away’ their right to compete in the marketplace.

 

At the same time, the courts have tried to balance  ‘restraints on trade’ with legitimate efforts to protect a business’ confidential information, or efforts to protect against unfair competition.

 

The enforceability of the ‘restrictive covenants’ clauses: non-disclosure (of confidential information), non-solicitation (of employees or customers or business opportunities), and non-competition (with the business of the company), will depend on whether the particular clause is too restrictive.

For example, a temporary restriction on competition might be justified in order to prohibit an employee from using knowledge about the employer to unfairly take advantage of the employer and to cause injury to the employer’s business, but a restriction that goes so far as to make it impossible for the individual former employee to earn a living in their chosen profession will not likely be enforced.

 

To be enforceable, a non-competition clause (for example) must include limitations of time, geography, and scope of activities. For all restrictive covenants, the clauses must be unambiguous and reasonable (reasonably necessary to protect the other party) in order to be enforceable. Courts are hesitant to enforce restrictive covenants and only do so when it is necessary to prevent unfair business practices.

 

Source

 

If you are subject to a restrictive covenant, make sure you understand the specific limitations to your activities, and seek legal advice about whether it is enforceable against you.

 

If you choose to include a restrictive covenant in a contract with another party, take the time to ensure that the limitations are clear, reasonable, and that you have objective evidence to show that they are only as restrictive as is required to protect your legitimate interests. Otherwise, if they are too restrictive, they might be completely unenforceable – and you will end up with no restrictions.

 

Clauses of this nature can be found in a variety of agreements, such as

 

For agreement templates and samples of clauses discussed here, check out Clausehound’s Small Business Law Library!

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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As an Inventor, Should I Sign an Invention Assignment Agreement?

An Invention Assignment Agreement, often known as an Intellectual Property (“IP”) Transfer Agreement, is an agreement where one party assigns its intellectual property rights to the other party, either absolutely or subject to compliance with the terms of the underlying agreement.

 

This means the inventor (eg. software developer) assigning his/her rights can no longer claim the property as their invention. The property now belongs to the person to whom the rights have been transferred.

Be on the look-out for these obligations!

As the agreement is generally brought forward by the company, an IP Transfer Agreement often favors an ‘assignee’. Here are some clauses to look out for if you are the inventor, or ‘assignor’:

  • Assignment of Intellectual Property – As the inventor, you should confirm what specific rights you are transferring to ensure that the company does not have sole right over any IP you will be using for future products you develop independently. You may choose to exclude your background IP and your IP toolsets from the assignment of intellectual property.

  • Release – some agreements will include a clause that states the assignor will not bring any legal action in relation to the transfer of their IP. This could prevent you from suing for any breach by the assignee of the underlying contract.

  • Third Party Infringement – The to-be-owner of your IP  will often want to ensure that the invention they are receiving does not contain any intellectual property of another third party, or that if it does, there is no breach of the third party’s rights. They want to confirm they will not have unexpected legal proceedings due to this transfer. The inventor should make sure that by transferring their invention, they are not using any third party IP without permission from the third party.

  • Other Representation and Warranties – Depending on the assignment, the assignor may include a number of representations and warranties, including: (a) no licenses granted to third parties; (b) the assigned IP is original work and has not been copied; and (c) there are no pending legal proceedings in relation to the assigned IP.

Should I sign?

There can be a number of reasons to sign an IP Transfer Agreement, including:

  • You are developing/have developed the work solely for the sale of such work, and the transfer is a condition of payment for the work;

  • You are an employee or shareholder of the assignee company; or

  • You are selling a company and the purchaser has made the IP transfer to the company a condition of the sale.

For examples of IP Transfer Agreements and the clauses discussed in this blog, check out Clausehound’s Small Business Law Library!

This blog was co-authored by Vi Vo.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Rights Grabbing Agreements Transfer Copyright to Subject of Photo

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Photographers normally own the copyright to their photos, unless they are hired to take the photo, in which case, unless the agreement specifies otherwise, the person who hired them owns the copyright. Some artists, including Taylor Swift, have required photographers to sign “rights grabbing agreements” where after the photographer is paid by whichever magazine or website secured a press pass, the ownership in the photos passes to Swift.

Businesses may wish to consider similar types of agreements for photographers who attend corporate (eg. promotional) events. This will permit the business to use the photographs for advertising, and other business purposes without violating the photographer’s copyright in the photos.

Read the article here.

Take away:

  • Businesses who host promotional events may benefit from requiring photographers to sign ‘rights grabbing agreements’, thus acquiring copyright in photographs taken by photographers they have not hired.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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IP Transfer Agreements Should Carefully Define the IP to Be Transferred

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Read the article here.

Who among us has not been tempted to enter a contest to win fabulous prizes?

For businesses who are in the market to collect data, photographic material and other IP at a very low cost, contests provide an almost endless source of material, provided that the rules are drafted carefully to transfer every conceivable type of possible IP to the contest organizer.

This article is about the Official Rules and Regulations of the Flip-Flop Friday contest sponsored by CTV Regina. This contest was about submitting photos depicting feet in flip flops. The Rules governing the contest are extremely sophisticated. For example Rule 7 is about the representations and warranties regarding the photos that entrants are presumed to make by entering the contest: by entering the contest, the entrants represent and warrant (among other things) that the photos they submit are their own original work and that they do not infringe on any third party IP rights. Under the Rules, all IP of every type in the photos is transferred to the contest organizer absolutely to use at their discretion forever. Rule 11 defines the IP (excluding the photos) owned by the contest sponsor and or its affiliates.

IP is defined as including, but not limited to trade-marks, trade-names, logos, designs, promotional materials, web pages, source codes, drawings, illustrations, slogans and representations.

Read the article here.

Take away:

  • IP Transfer Agreements should be drafted carefully to cover exactly what the parties intend to transfer. It is unclear whether extremely broad transfers, such as those often used in contest rules, are completely enforceable.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

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