A Place for My Stuff: Taking Care of Intellectual Property in Contracts National Contract Management Association, Thunderbird Chapter 50 th Anniversary Celebration Kimberly A. Warshawsky Partner, Ballard Spahr LLP

2 Licensing Indemnification and Limits on Liability Confidentiality Agreements Consultant Agreements Discussion Points

3 License Agreements

4 Licensing A License conveys rights to use, not rights to own the product and/or intellectual property Defined by the purpose and perspective and the “why” and the “who”

5 Licensing Why: -Business critical versus ancillary products Length of license Term and use Fees (and for what) -Limited license versus perpetual rights -Integrated versus “stand alone” products Ownership Termination Contract damages

6 Licensing Who: -Licensor versus Licensee Rights and responsibilities -Sublicensee or Affiliates How far does the license extend, and what can the licensee do Indemnification -Joint Venturer Ownership issues Indemnification

7 Licensing: Key Drafting Considerations Scope -Definitions, Geography, and Field of Use Term Protection of Underlying Rights -Enforcement, Policing, and Restricting Access and Use Ownership -What if the Licensee has or obtains rights in the intellectual property?

8 Licensing: Key Drafting Considerations Fee Provisions -Royalty vs. One-Time Fee vs. Service and Upgrade Fee Audit Rights -Who, Where, How Often, and Who Pays? Termination -For Cause vs. Without Cause -Notice Provisions vs. Immediate Termination Choice of Law, Jurisdiction, Venue, Attorneys’ Fees

9 Licensing: Protection of Underlying Rights Licensee agrees to notify Licensor promptly of any known use of the Marks by others not duly authorized by Licensor. Notification of such infringement shall include all details known by Licensee that would enable or aid Licensor to investigate such infringement. Licensor will have the right, in its discretion, to bring or cause to be brought, any such action. Licensee agrees that it will cooperate with Licensor in any such action, and will, in Licensor’s discretion, consent to be named as a plaintiff in any action against an alleged infringer of the Marks. Licensor will reimburse Licensee for the reasonable documented expenses it incurs at Licensor’s written request or which Licensee is required to incur in any such action.

10 Licensing: Protection of Underlying Rights “If any of the Marks are or become registered, upon prior written notice by Licensor, Licensee will include an appropriate trademark indicator (“™” or “®”) with the first prominent use of a Mark on the Site or in Advertising and will include the following legend on the home page of the Site(s) on which one or all of the Marks appear and on the last page of print Advertising in which one or all of the Mark appears: ‘_____________ is the registered trademark of [Licensor], and is being used by permission.’” “Licensee will cause each Licensed Product, all packaging, and any other materials on which Licensor’s trademark or other brand element, including slogans, taglines, symbols or images, appear to bear the trademark, patent and/or copyright notice as Licensor may reasonably specify.”

11 Licensing: Ownership Identification: -“With respect to each Licensed Product, Licensee will identify itself as the source of the product.” -“Licensee may use Licensor’s Software in Licensee’s service by referencing that Licensor’s service is ‘powered by Licensor.’ Such reference must be made whenever Licensee’s service is named. The base of each web-based page will reference Licensor’s Marks and their ownership by Licensor.” Assignment: -“Licensee acknowledges that, as between Licensee and Licensor, all rights in and to the Marks are exclusively owned by and reserved to Licensor. Licensee will neither acquire nor assert ownership or any other proprietary rights in the Marks or in any derivation, adaptation or variation thereof.”

12 Indemnification

13 Indemnification and Limits on Liability Indemnification shifts the risks between the parties Like most other contract provisions, the scope of the indemnification provision is a matter of contract negotiation Typically used with respect to: -Product claims -Breaches of representations and warranties -Intellectual property -Negligent acts and omissions

14 Indemnification and Limits on Liability “Seller will defend, indemnify and hold Buyer harmless against a third-party action, suit or proceeding (“Claim”) against Buyer to the extent such Claim is based upon an allegation that a Product, as of its delivery date under this Agreement, infringes a valid United States patent or copyright or misappropriates a third party’s trade secret.” “Seller will defend, at its expense, a third-party action, suit or proceeding against Buyer (“Claim”) to the extent such Claim is based upon an allegation that a Product, as of its delivery date under this Agreement, infringes a valid United States patent or copyright or misappropriates a third party's trade secret. Seller will indemnify Buyer for any judgments, settlements and reasonable attorney’s fees resulting from a Claim as provided in this Section.”

15 Indemnification and Limits on Liability Key considerations include: -What is and is not covered? Products – changes may affect indemnification Basket provisions – certain claims or dollar amounts excluded Conduct – willful versus negligent conduct Contract provisions, including representations and warranties -Who owes what obligations? -How is the obligation triggered?

16 Indemnification and Limits on Liability “Seller and Shareholders shall have no liability (for indemnification or otherwise) with respect to claims under Section [Indemnification and Reimbursement by Seller and Shareholders] until the total of all Damages with respect to such matters exceeds $____ and then only for the amount by which Damages exceed $_____. However, this Section will not apply to claims under Section [title, labor, environmental matters] or to matters arising in respect of Sections [Representations and Warranties of Seller] or to any Breach of any of Seller’s and Shareholder’s representations and warranties of which the Seller had Knowledge at any time prior to the date on which such representation and warranty is made or any intentional Breach by Seller or either Shareholder of any covenant or obligation, and Seller and the Shareholders will be jointly and severally liable for all Damages with respect to such Breaches.”

17 Indemnification and Limits on Liability Key considerations (continued): -Limitations on liability: Geographic scope Limited to payments under the contract -Who can demand indemnification? Parents/subsidiaries Successors Customers Sublicensees, subcontractors, vendors

18 Indemnification and Limits on Liability Key considerations (continued) : -Is the obligation reciprocal? Breaches of representations and warranties Product liability claims Misconduct -Cooperation and control the event of litigation Who can pick the defense? Who negotiates and pays for the defense? -How is a claim for indemnification made? Don’t be vague, but avoid absolutes

19 Indemnification and Limits on Liability “The party seeking indemnification (the “Indemnified Party”) will give prompt written notice of any claim to the other party (the “Indemnifying Party”) provided, however, that the failure by an Indemnified Party to give such notice will not relieve the Indemnifying Party of its obligations under this section, except to the extent that the Indemnifying Party either did not receive actual notice of the claim or suffers actual damage from the failure.”

20 Confidentiality Agreements

21 The form of the Agreement flows from the who, the why, the what, and the when: -Who: Licensor/owner versus licensee/recipient. -Why: What is the business purpose? -What: What is to be exchanged? -When: Is there a schedule to the release of the information, or is disclosure based upon a condition precedent? Confidentiality Agreements

22 Define the Business Purpose: -Compare: “WHEREAS, [licensor] intends to disclose verbally, visually, electronically and/or in tangible form, certain confidential and proprietary information to the Receiving Party for business purposes.” -“WHEREAS, [licensor] intends to disclose verbally, visually, electronically and/or in tangible form, certain confidential and proprietary information to the Receiving Party for the sole purpose of evaluating whether to engage in Project Tell Them My Secrets.” Confidentiality Agreements

23 What information is confidential and how may it be used? -What happens upon termination? Transmission, storage, and technology -Access to the information during the Term? Term Dispute resolution mechanism Remedies Confidentiality Agreements

24 Confidentiality Agreements Flesh out what is confidential Finances, customer information, supplier information, organizational structure and internal practices, marketing and other strategies, inventions and other IP, third party confidential material Notes, drawings, source code, manufacturing details, etc. Is the disclosing party under an obligation to disclose everything? What can be withheld? Return/destruction of confidential information -Destruction does not ensure an “empty head” Termination

25 Confidentiality Agreements Recipient obligations -Can the information be used in any form following termination? Full hearts, full minds -What if the recipient is already in possession of certain information? The recipient should be specific about what he or she knows -Which of recipient’s employees and principals can see the information? -What are recipient’s obligations to keep and maintain the confidentiality? “Best efforts” or something more?

26 Consultant Agreements

27 The devil is in the details -Deliverables, timelines, and confidentiality -Can the contractor hire his own contractor, and under what terms? What obligations does the subcontractor have? Ownership of deliverables and other intellectual property -Assignment – get it up front! -Work for Hire – full time employees and express agreements Consultant Agreements

28 Representations and warranties: -Covenants not to compete With you and with others -Prior confidentiality provisions -Indemnification against wrongdoing Remedies Consultant Agreements

Questions? Kimberly A. Warshawsky Partner, Ballard Spahr LLP