How Can Consultants Protect Their IP Rights?
Businesses rely on their employees to function. However, there may be certain functions or campaigns a business may prefer professional consultants to undertake. They may decide to engage you as a consultant to provide professional advice or services for their business needs, either on a one-off or ongoing basis.
When a business engages you to provide services or produce work products, you should be aware that intellectual property rights (IP rights) may be generated in the following manner:
- Copyright, for example in literary and artistic works. Of particular mention would be a graphic designer engaged as a consultant to generate graphics for the business. Copyright may be generated in these artistic works. However, you do not and cannot own trade mark rights in this graphic even if it is eventually used as a logo for the business because trade mark rights must be associated with a business. Trade mark law protects the reputation that a business has acquired and that is associated with its trade mark.
- Patents, for example in inventions. You may be a software developer engaged as a consultant for the business to develop software. You would own IP rights in the software if it qualifies as a registered patent.
For a more detailed guide, please refer to this overview of the different types of IP rights.
As a consultant, therefore, how should you ensure that the IP rights over works that you produce in the course of your consultancy are adequately protected?
As you may know, IP rights assist in protecting your interests in your work by preventing people from copying your inventions, creative works or business identity. If you have secured ownership of these IP rights, then you would be able to monetise your efforts in generating IP rights through your works.
By way of an example, say you are a software developer and have been engaged by a client to develop software for its business. If for some reason you did not ensure ownership of the patent rights generated by this new software, then the client is free to make, use or just copy your software without paying you.
This article will assist you in identifying your IP rights, and provide recommendations on how best to protect these rights. It will cover:
Ownership of Consultancy Intellectual Property Rights
The general rule is that the creator of the intellectual property owns the rights. This means that you, as the independent consultant, own the IP rights in whatever work or product you produce for the client. However, this only applies if there is no other agreement stating otherwise.
In reality, most consultancy agreements would likely provide that these IP rights would be assigned or at least licensed to the client for royalties. This is hardly surprising as the client would have engaged you to provide or produce services or works for its business, and would be reluctant to leave these rights in your possession or care for other uses or purposes after. These IP rights could also very well become one of their most important assets.
There is also a very important distinction between you, the consultant, as an independent contractor and as an employee. If you are an employee, then your employer would own the IP rights in your work.
You can refer to our article on the differences between the two types of contracts, consultancy agreement (contract for service) and employment agreement (contract of service) for more information.
Can I Assign or Licence My Consultancy Intellectual Property Rights?
Your consultancy agreement should indicate or clarify the ownership of these consultancy IP rights. As mentioned, the client is likely to want to own or at least have the freedom to use these IP rights, and you can commercialise your IP rights by way of an assignment or licence.
Assigning your consultancy intellectual property rights
An assignment is essentially a sale of your IP rights. An example would be if you created software which qualifies as a patent, then you may consider assigning this patent to the client instead. If you are assigning your IP rights, do ensure that a fee reflecting the value of these rights is included in your consultancy fee(s), as the fee is likely to be a one-off instance.
Licensing your consultancy intellectual property rights
If you are only licensing your consultancy IP rights, then you are only granting a permit to the other party to use these rights but more often than not for a fee (royalty). The ownership of these IP rights still vests in you. The terms of such royalty payments will largely depend on your bargaining power, i.e. if your rights are of greater value to the client, then naturally the amount of royalties would be larger.
To assist in determining the value of these royalties, you may consider engaging accounting professionals to conduct a valuation of these rights. In general, royalties are indicated as a percentage, for example, 5% of the sale price of a product you may have created for the business.
Practical Steps to Protect Your Consultancy Intellectual Property Rights
As a consultant, do remember that whilst the general rule provides that you have IP rights over works that you produce in the course of your consultancy, in reality, the consultancy agreements may provide otherwise. Here are some practical steps you may take in ensuring your rights are adequately protected:
- Depending on your bargaining power with the client, decide if an assignment or licence is more suitable in your case.
- If it is an assignment, ensure that the value of the rights is included in your consultancy fee, as this would usually be a one-off payment. You can consider obtaining a valuation.
- If it is a licence, payment in the form of royalties would usually be indicated as a percentage. Ensure that the clause also provides for varying percentages, especially if this is reliant on the revenue generated from sales of the product.
For further advice or guidance on how best to protect your interests, it would be best to consider consulting an intellectual property lawyer.
We would also recommend that you seek legal guidance, specifically from contract drafting lawyers, to draft or review these agreements or clauses. You may also refer to this guide on consultancy agreements in Singapore.
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