Are Your IP and Termination Clauses Clear? The Importance of Well Drafted Agreements in Collaborations
Thursday 10th November 2022
The separation between Adidas and Mascotte Holdings Inc. (the company owned by Ye, formerly known as Kanye West) raises the question of what happens with the intellectual property rights the two parties own when a collaboration is terminated.
While the separation has not yet reached litigation in this case, it is clearly one to keep an eye on given how well-known the parties involved are and the potential value of the contract between them.
Much of what happens next in this case is speculation, because the details of the contract are not known yet, it is an important reminder of why it is essential to draft agreements taking into consideration anything that might occur in the future.
What to consider when starting a collaboration which involves the transfer of IP
The following are essential points to think about – however, please note that they are not an exhaustive list:
Who owns the IP
First and foremost, ensuring it is clear who owns which rights is essential. Intellectual property is an asset like any other, so clarifying what rights belong to your business from the outset will help you protect them and ensure they stay with you upon termination.
Licences and assignments
Secondly, you need to establish what rights are granted to each other under the contract. If your business grants a licence to the other side, the type of licence granted is also important and must be in line with other agreements you might have with other third parties. For example, if you have already granted an exclusive licence to someone, you would not be able to grant another licence over the same IP right without being in breach of your earlier agreement.
Last but not least, your agreement must be clear on what happens to your pre-existing IP and any IP created during the agreement upon termination. You will want to ensure that any pre-existing IP stays with your business when the agreement ends, as some of your business might depend on those rights. For IP developed during the collaboration, it is vital to have clauses explaining who has the right to keep and use them after the collaboration comes to an end.
The Adidas – Ye separation is also relevant in the context of “influencer agreements”. While you might be running an in depth due diligence exercise when entering into agreements with influencers or brand ambassadors, you need to also consider what happens if they become a threat to your reputation in the future. This is why having appropriate termination clauses in place is crucial. Good termination clauses not only deal with ways to terminate a contract, but also cover consequences of termination. You will want to reserve the right to terminate if they no longer align with your business values or your clients’ values, and want to ensure that the termination is as trouble-free as possible.