Buffl

Understanding Contracts 2 10B

MJ
von Monika J.

Lydia Barlow works … a self-employed graphic designer here in Chatsworth. Her speciality is the design of marketing material for new companies. Niall King has just started a new business. Niall's business is a travel company aimed … people aged 21 to 25 who wish to travel in the free time they have between finishing university and starting work. The name of Niall's business is Pure Adventure Travel Ltd.

Niall meets Lydia to plan a brochure to advertise his travel company. He wants her to design a colour brochure … 40 pages. He tells Lydia that his budget for the design is £12,000. They sign a contract for services. Niall provided the contract. A month later Lydia provides Niall with the brochure and an invoice … £12,000. Niall is delighted and pays Lydia the £12,000 immediately.

Six months later, Niall puts some of the text and pictures from the brochure … his website. Lydia sees the website and contacts Niall. She says that she did not give permission for her work to be used in this way and she requires additional payment. Now the two parties … the agreement are … dispute. How could this dispute have been avoided?

If you are the buyer of work that is creative in nature you need to make sure that you have the right to use any intellectual property connected with the work. There are two ways to do this.

  • make sure that the supplier transfers ownership … the intellectual property to you at the time of payment. This is often called an assignment of rights

  • if there is no assignment, make sure that the supplier gives you permission to use the intellectual property. This is usually known as a licence. When you have a licence to use something you are known as the licensee.

What is the difference … an assignment of IP rights and a licence to use the intellectual property? The assignment of IP rights means the absolute transfer of those rights in return for payment. The owner of the IP rights usually has to guarantee to the buyer, known as the assignee, that the rights are sold free of any encumbrance. An encumbrance is a third party interest in the rights and might mean that the rights do not belong solely to the seller. The right to start legal proceedings for infringement of intellectual property rights belongs to the assignee.

Licensing can be more advantageous to the supplier. He or she continues to own the intellectual property but makes money … allowing others to use it, subject to certain restrictions. A good checklist when granting a licence is:

  • Is the licence limited to a particular territory?

  • Is the licence exclusive or non-exclusive?

  • How long will the licence last?

  • How much and when does the licensee have to pay?

  • What other restrictions are there on the use of the material?

The best option in the case above would have been for Niall to have included a clause in his contract with Lydia under which she assigned all of the intellectual property rights in the design work to him to use in any way that he wished.

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Author

Monika J.

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