In developing and protecting the IP of your E-Commerce company, you will have to be careful with contracts. Contracts and IP go hand in hand. No contract that is signed by your company is unimportant and all must be reviewed to make sure that you are maximizing and not damaging IP assets. This is because through contracts, IP rights may be sold or licensed or even given away. Bad contracts can result in litigation and unnecessary expense.

The risk areas are contracts with employees and contractors, development agreements, web design agreements, agreements to license your product or IP to another company (“licenses-out”), agreements to license a product or IP from another company (“licenses in”), distribution agreements, domain name and trademark license agreements, and patent licenses, cross licenses and pools. This is only a partial list.

Whenever you are using employees, contractors, consultants, or other companies to develop your IP (e.g. a contractor writing software), it is essential that there be a contract with that person or entity before work is started. Even the earliest start of work can give rise to important rights, and the contractor may become the author or owner of its work, or possibly a joint owner. Contracts must specify who owns IP that is created and how the IP will be treated in the future.

The greatest economic value of IP comes from its use in licensing. This can be in the form of product licensing (e.g. licensing out a product that contains IP, such as a software program, or course materials) or in the form of pure IP licenses (e.g. a license whereby another company is given the right to practice a patent).

As noted above in Checklist Item # 3 & 6, it is important to have contracts that clearly state what rights you have or have given to others to use IP.

In most countries, contracts need not be long or even overly formal. But they must be clear and contain the right language concerning IP rights. As noted above, it is important to get expert legal advice in this area. Often it is useful to have a legal adviser provide you with a set of forms that can be used as starting points in various situations involving IP. This way you can operate efficiently, but it is always a good idea to check with your legal adviser before concluding a legally binding agreement involving IP, no matter how simple it seems.

It is a good idea for an E-Commerce business to archive copies of all contracts that affect IP. This is an important record keeping discipline so you can look up matters that may become important at a later date. One example is that contracts affecting IP will be very important if your E-Commerce business is involved in an acquisition, merger, sale of assets, or investment transaction. Pay attention to provisions in contracts that interfere with your ability to sell, license, assign or transfer your company’s IP.

For More Information:

On licensing and IP, see

• SME web page on "Licensing of Intellectual Property, a Vital Component of the Business Strategy of Your SME"