32 INTELLECTUAL PROPERTY
a single recipe)? Or is the scope of the service to develop a broader formulation for that particular purpose that would encompass not only the single recipe but potentially many other like recipes? It is natural to expect that the formulator will want to sell (and will be asked to sell) the same or similar formulation to other customers if at all possible, particularly if the formulation is ground-breaking or has wide public appeal.
Who will own the recipe, formulation and process of manufacture that is developed? At the very outset it should be agreed upon who will own any ‘developed IP’ (eg. recipe, general formulation, process of manufacture etc). Will it be the entrepreneur, manufacturer, or both the entrepreneur and manufacturer? Presumably the entrepreneur will want or expect to own the developed IP, but often it is the case that the manufacturer will only surrender ownership of the developed IP for a higher price. The entrepreneur should not assume that he or she will own the developed IP even if he or she has paid good money for it. The entrepreneur may simply be paying for supply of the formulated product, not for the secret sauce – ie. neither the actual recipe nor process of manufacture. In the absence of an agreement to the
contrary, the actual innovator or innovators of the developed IP will own that IP. It could be that both the entrepreneur and manufacturer own the developed IP, having both contributed to its development. To avoid all doubt, the agreement could list all developed IP to be owned by the entrepreneur or manufacturer. The agreement could also list any pre-existing background IP that is contributed by the entrepreneur, so as to clearly distinguish it from any developed IP or any pre-existing background IP owned by the manufacturer.
Is the developed IP or some aspect thereof to be kept confidential by either the entrepreneur or manufacturer? If at all possible, you do not want competitors to obtain a helpful leg-up from all of your hard work and investment. Therefore, it is in your interest to keep aspects of the developed IP, such as the formulation process or secret sauce etc, secret for as long as possible. If some aspects are to be kept confidential, then what aspects? For what period of time? Even after termination of the agreement between the entrepreneur and the formulator? These can be documented in the agreement. To avoid all doubt the agreement could
list all entrepreneur IP and developed IP considered to be confidential. Note that the requirement for
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confidentiality will usually cease when made publicly known through no breach of confidence. Note that some aspects could remain trade secrets, even though used commercially.
Does the manufacturer warrant, to its best knowledge and belief, that it is not using the confidential information of a previous customer to provide service to the entrepreneur? You do not want to be in the situation where the manufacturer has used the secret sauce of an earlier customer, which could cause problems down the track when manufacturing and selling the formulation. The agreement could include a statement that the formulator believes that he or she is not using the confidential information of a previous customer to provide service to the entrepreneur.
Does the manufacturer warrant that any confidential information of the entrepreneur or in connection with the developed IP will not be used by the manufacturer in the provision of services to other customers? You do not want to be in the situation where the manufacturer has used your secret sauce for another customer. To avoid all doubt the agreement could
list all entrepreneur IP and developed IP considered to be confidential, and not for use with other customers.
Does the manufacturer warrant that the developed IP will not be used commercially by the manufacturer nor provided to another customer?
This follows on from the previous point. The agreement could include an assurance that the formulator will not use the developed IP to compete with the entrepreneur nor enable others to do so. But does this assurance cease after a certain period of time? After confidentiality no longer applies? After the relationship has ended? Whether or not the developed IP can be used by the manufacturer in the development of similar products and processes for other customer will usually depend on the broad or narrow scope of the service initially agreed upon, and whether the developed IP is to remain the confidential information of the customer. To avoid all doubt, the agreement should clearly specify the scope of the service, including the scope of the developed IP, and anything that is to remain confidential.
Does the manufacturer warrant to the entrepreneur that, to its best knowledge and belief, there is no obstacle to using the IP commercially in any region? Although clearly it is in the manufacturer’s interest to manufacture large quantities of a successful formulation, there nevertheless may be potential obstacles to commercialisation, including the issues touched on above. Potential obstacles to commercialisation include third party patent rights and potentially other types of third party intellectual property rights. The manufacturer may not be willing to warrant that the developed IP is available for commercial use by the entrepreneur, in which case the entrepreneur would be well advised to carry out its own freedom to
April 2018
©Maksym Dykha/Fotolia
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