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The pitfalls to watch out for when protecting your IP

Looking after the intellectual property in your business is an absolute must, and you should be very careful in any contract or relationship to protect ownership and how it is used.

The question of IP ownership may seem reasonably straightforward – it’s your product or solution, therefore it’s your IP and you own and protect it. But there may be occasions where you agree with a customer that they own the developed IP, for example because they are paying you to develop a solution exclusively for them.

In this scenario, if your customer owns the IP, they have the discretion to use that IP as they see fit. On the other hand, even if you create the IP, you will not be able to use the IP for whatever purpose unless the customer grants you a licence to use their IP for a specific purpose. For example, to provide future technical support or help in respect of the IP.

Since you will be restricted in how you can use the IP once the ownership is vested in the customer, it is crucial to define the scope of the IP owned by the customer and what remains yours to avoid any unintended restriction.

Normally, if you have agreed with the customer that they own the developed IP you still own the background IP -  which you can continue using without having to obtain a licence from the customer.

If the IP is not created for a specific customer and you wish to freely use it to sell to other customers, then the contract must make it clear that you own the IP and you grant the customer with a licence to use such IP.

You should also consider the licence terms carefully to reflect the commercial agreement in respect of the IP. For example, the duration, revocability, sub-licensing, territory or royalty payment of the licence etc. You should also look to protect your IP against unwanted use by the customer – for example by reselling your materials despite the licence only allowing internal use.

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