34 INTELLECTUAL PROPERTY
same or near identical branding and/or packaging to others. It turns out that there is nothing barring the consultant from engaging in this kind of activity because there was no agreement on that point. The branding and packaging has become very important to your business but now there are others using it.
You pay a consultant to come up with unique branding and/or packaging for you and subsequently discover that the branding and/or packaging infringes the IP rights of a third party and so can’t be used in the marketplace. This might take place several years after product launch, result in the recall of all infringing product, incur high legal fees and so cripple your business.
Again, I am not suggesting that consultants engage in unscrupulous activities, but ultimately it comes down to the nature of the deal initially struck between the entrepreneur and consultant. Based on my experience, not all consultants utilise written agreements, nor is there such a thing as a sort of standard universal written agreement that everyone signs. Each agreement will probably have some good points and bad points. So what types of IP-related issues should be discussed and potentially appear in an agreement, or should at least be agreed upon if relying on a verbal agreement (which I do not recommend)? Suggestions follow:
Who will own the branding and/or packaging that is developed? At the very outset it should be agreed upon who will own any ‘developed IP’ (eg. branding or packaging). Presumably the entrepreneur will want or expect to own the developed IP, but often it is the case that the consultant will only offer 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, although this is normally the case with regard to branding/trade marks. Often branding is merely licenced to the entrepreneur, which can cause problems for the entrepreneur if registering a trade mark. Regarding packaging, the consultant may own the developed IP but simply sell the entrepreneur packaging/packaged products.
In the absence of an agreement to the
contrary, the actual author, designer or innovator of the developed IP will own that IP. To avoid all doubt, the agreement could list all developed IP to be owned by the entrepreneur or consultant. The agreement could also state that the consultant will formally assign rights in the developed IP to the entrepreneur (including copyright in any artistic work/graphic/logo).
PERSONAL CARE EUROPE
Does the consultant warrant that the developed IP will not be used commercially by the consultant nor provided to another customer? The agreement could include an assurance that the consultant 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 the relationship has ended?
Does the consultant warrant to the entrepreneur that, to its best knowledge and belief, there is no obstacle to using the IP commercially either in the country of origin (or elsewhere)? Potential obstacles to commercialisation include third party patent, design and registered trade mark rights as well as potentially other types of intellectual property rights, including copyright and trade mark rights under common law. Another potential obstacle to
commercialisation includes if the consultant has used the confidential information of another customer to arrive at the developed IP.
The consultant 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 his or her own freedom to operate searches (ideally using a patent and trade marks attorney.) It is rarely the case that a consultant will carry out a comprehensive freedom to operate search, even for branding/trade marks.
Is the developed IP to be protected by way of a trade mark registration, design registration or patent? A granted patent can provide protection for packaging for up to 20 years. A registered design can provide protection for packaging for up to 10 years (in Australia). If so, who is to own the patent or registered design? Again, in the absence of an agreement to the contrary, the actual innovator or innovators of the developed IP will own that IP and will be entitled to protect it. Regarding branding/trade marks, this may be a word, phrase, slogan, graphic, logo, colour or colour combination, aspect of packaging or shape of a product itself, or any combination of these. Registered trade mark rights can last indefinitely. The entrepreneur may wish to protect the developed IP as a safeguard so as to exclude the consultant and its future customers from doing what falls within the scope of the registered IP (as well as everybody else).
The consultant may insist on the
entrepreneur obtaining protection of the developed IP (if possible) so as it also can
enjoy a measure of exclusivity – ie. ensure that competing products can be kept out of the marketplace.
Also, following on from this, who is to
enforce rights in the patent, design or trade mark if infringed by a third party? Who is to pay the legal costs? Presumably the owner of the IP.
Does the consultant agree to assist the entrepreneur in obtaining protection for any developed IP, should it choose to (or vice versa)? The agreement may include a co-operation clause whereby the consultant agrees to assist the entrepreneur in obtaining protection for any developed IP of the entrepreneur’s choosing (usually at the entrepreneur’s expense), including formally assigning rights in the developed IP to the entrepreneur and assisting with the filing and prosecution of patent and/or design applications.
If the consultant or entrepreneur is sued for infringement of third party IP rights, who is to take defensive action and pay legal costs? Regarding packaging, from time to time a consultant and/or entrepreneur may be sued for infringing a granted patent or registered design that is owned by a third party. In view of this, the agreement could include a statement regarding what would happen in such a situation. Regarding trade marks, the entrepreneur would be wise to carry out freedom to operate/clearance searches to check to see that the trade mark/branding does not conflict with the rights of owners of registered trade marks or unregistered trade marks.
Conclusion: branding and packaging Entrepreneurs, again, it is self-evident that there may be little point in developing branding and/or packaging that you (1) will not own, (2) cannot use commercially, and (3) cannot use exclusively without others copying it. Consultants, again, attempt to avoid disputes with customers by including in your agreements comprehensive and clear IP clauses, particularly with regard to trade mark ownership and freedom to operate in the marketplace.
This article, written from an Australian standpoint, is intended to provide general information only. The contents should not be relied upon as detailed legal advice for any specific case. While every effort has been made to ensure that the contents are correct at the time of publication, please note, the relevant laws and practice are subject to change. Specific advice should be sought from your legal advisor, particularly a lawyer specialising in contracts.
PC April 2018
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