Introduction
For not-for-profit (NFP) organisations, collaborations in technology and research are crucial for innovation and often generate valuable intellectual property (IP). This IP is a significant organisational asset that, when managed effectively, can be used to raise funds, protect the NFP’s reputation, and open opportunities for strategic partnerships.
To protect these assets, NFPs must use clear legal agreements that define the rights and responsibilities of all parties involved. This guide explains the critical differences between an IP license, which grants temporary permission to use technology, and an IP assignment, which permanently transfers ownership, helping your NFP navigate these agreements effectively.
Understanding Intellectual Property in NFP Collaborations
What is Intellectual Property for an NFP?
IP refers to property that results from creative and intellectual efforts, which can be owned, sold, and transferred just like physical property. For NFP organisations, IP is created through various activities, including developing a name and logo, creating publications, or designing a website.
The most common types of IP an NFP might create or use include:
| IP Type | Description |
|---|---|
| Copyright | Automatic protection for original works in a material form, such as literary works (reports), artistic works (logos), computer programs, and films. |
| Trademarks | A sign (e.g., word, logo, phrase) used to distinguish your NFP’s goods or services from those of others, forming a key part of branding. |
| Patents | Protects new or improved products and services, granting the owner exclusive rights to commercially exploit an invention for a limited time. |
| Designs | Protects the visual appearance of a product, including its shape, configuration, or pattern. |
| Confidential Information | Valuable, non-public information (trade secrets) that provides a competitive edge, such as client lists, strategic plans, and internal processes. |
Why Your NFP Must Protect Its IP Assets
An NFP’s IP is a valuable asset that requires careful protection to support the organisation’s mission and sustainability, as protecting assets is crucial for fulfilling your charity’s purpose. Protecting IP is essential for several key reasons that go beyond simple ownership.
Properly managing and protecting your IP assets serves three primary functions for your organisation:
| Primary Function | Explanation |
|---|---|
| Financial Asset | IP can be used to generate funds to support the organisation’s purposes, for example, by licensing training materials to others for a fee. |
| Identifier | Branding elements like a name and logo are IP that help the public identify the organisation and build recognition and trust. |
| Reputation Protection | IP protection safeguards the organisation’s goodwill, reputation, and creative work from being misused by others. |
Understanding an IP Assignment Agreement
An IP assignment agreement facilitates the permanent transfer of ownership of IP rights from one party to another. This transaction is similar to selling physical property, where the original owner sells the rights in exchange for a specified sum.
Once the assignment is complete, the seller relinquishes all control, involvement, and claims over the IP. This type of agreement is commonly used in two main scenarios:
- When a business acquires another company’s IP assets
- When an individual creator sells their IP to an organisation
To be legally effective, an assignment must be documented in a clear written agreement, a process often managed by commercial and business lawyers, that is signed by both the assignor (the seller) and the assignee (the buyer). This formal documentation ensures there is no ambiguity about the transfer of ownership.
Understanding an IP License Agreement
An IP license agreement is a contract where an IP owner, known as the licensor, grants another party, the licensee, permission to use their IP. Unlike an assignment, the licensor retains full ownership of the IP and only provides temporary rights for its use. This arrangement allows the owner to maintain control over how their technology or brand is used.
A license agreement provides a flexible way to generate ongoing revenue through fees or royalties while controlling the use of the IP. The agreement specifies the terms of use, which typically include:
- The duration of the license (term)
- The geographical area where the IP can be used (territory)
- Whether the license is exclusive or non-exclusive
- The specific ways the licensee is permitted to use the IP
- Details of any payments, such as fees or royalties
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Crafting a Strong IP Assignment Agreement
Defining the Intellectual Property Being Assigned
When creating an IP assignment agreement, it is crucial to clearly and precisely define the specific IP being transferred. This clause should leave no room for ambiguity, ensuring both parties have a mutual understanding of the assets involved.
A vague description can lead to future disputes over the scope of the transfer, potentially requiring commercial litigation. For example, the agreement should specify:
- The exact copyright in a particular training manual
- The trademark associated with a specific campaign
- The patent for a new technology developed by the NFP
Including registration numbers for patents, designs, or trademarks can provide an additional layer of clarity and legal certainty.
Key Terms for Your NFP’s Assignment Agreement
Beyond defining the IP, a strong assignment agreement must include several other key clauses to protect your NFP’s interests and ensure the transfer is legally sound. These terms document the fundamental aspects of the transaction and outline the responsibilities of each party.
Essential terms to include in your NFP’s IP assignment agreement are:
| Key Term | Description |
|---|---|
| The Payment Amount | Also known as “consideration,” this clause specifies the sum paid for the permanent transfer of IP rights, documenting the financial exchange. |
| Warranties of Ownership | A formal assurance that the NFP is the legitimate owner of the IP, has the legal right to transfer it, and that it is free from third-party claims. |
| Indemnities | A clause protecting the buyer, stipulating that the NFP will cover any losses the buyer incurs if the warranties of ownership prove to be false. |
Key Components of an NFT’s Technology & IP License Agreement
Granting an Exclusive vs a Non-Exclusive License
When structuring a technology or IP license agreement, a critical decision for an NFP is whether to grant an exclusive or non-exclusive license. This choice significantly impacts the level of control your organisation retains over its assets and its ability to engage in other collaborations.
The two main licensing approaches offer distinct advantages:
| License Type | Description |
|---|---|
| Exclusive License | Grants sole rights to the licensee, preventing the NFP from using the IP or licensing it to any other parties during the agreement’s term. |
| Non-Exclusive License | Allows the NFP to license the IP to multiple parties simultaneously while also retaining the right to use the technology itself, offering greater flexibility. |
A middle ground option is a sole license, where your NFP agrees not to license the IP to anyone else but retains the right to use it alongside the licensee.
Essential Conditions & Limitations in an IP License Agreement
A comprehensive IP license agreement must clearly outline the specific conditions and limitations governing the use of the technology or IP. These terms protect your NFP’s interests by defining the precise scope of the permission being granted, which helps prevent future misunderstandings and disputes.
Essential stipulations to include in any technology and IP license agreement are:
| Condition / Limitation | Description |
|---|---|
| The Term | Specifies the duration of the agreement, clarifying how long the licensee has permission to use the IP. |
| The Territory | Defines the geographical region (e.g., a specific state, country, or global) where the licensee is permitted to use the IP. |
| Permitted Uses | Details exactly how the licensee can use the IP, such as for internal research only, while prohibiting commercial distribution. |
| Payment Details | Clearly states the payment structure, which could be an upfront fee, ongoing royalties, or another financial arrangement. |
| Rights to Sublicense | Specifies whether the licensee can grant a sublicense to a third party and outlines the conditions for doing so. |
| Termination | Outlines the grounds and procedures under which either party can terminate the license agreement, such as for a breach of terms. |
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Determining IP Ownership in NFP Projects & Agreements
IP Created by Your NFP’s Employees & Volunteers
For an NFP organisation, understanding who owns the IP created by its team is fundamental to protecting its assets. The ownership rules differ significantly between employees or volunteers, making clear agreements essential.
| Creator Type | Default IP Ownership | How the NFP Secures Ownership |
|---|---|---|
| Employees | The NFP (employer) generally owns the IP created by employees during their employment, a default position that employment lawyers can help formalise in contracts. | Ownership is typically automatic for work created in the course of the employee’s duties. |
| Volunteers | The volunteer who creates the material owns the copyright in that material. | The NFP must have a written agreement in place that explicitly assigns the volunteer’s IP rights to the organisation. |
Managing IP Created by Contractors & External Partners
When an NFP engages contractors, consultants, or other external partners, the default ownership of any resulting IP typically rests with the creator, not the NFP. This means that unless a formal agreement states otherwise, the contractor will own the copyright, patents, or designs they produce, even if your organisation paid for the work.
To ensure your NFP owns the IP it commissions, you must have:
- A clear, written agreement with the contractor
- An assignment clause that transfers all rights, title, and interest in the created IP to your organisation
For the assignment of copyright to be legally effective, the agreement must be in writing and signed by the contractor.
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Conclusion
For NFP organisations, understanding the distinction between permanently assigning IP and temporarily granting a license is crucial for protecting valuable assets created in technology collaborations. This guide has outlined how to craft strong legal agreements and clarify ownership, ensuring your NFP can effectively manage its IP.
To ensure your NFP’s collaborations are built on a solid legal foundation, contact LawBridge for specialised legal guidance. Our experienced not-for-profit lawyers provide trusted expertise to help you navigate complex IP agreements and protect your organisation’s valuable assets.
