ABSTRACT

Intellectual Property (IP) clauses are essential in commercial contracts because they define
the parties' rights and obligations with relation to intellectual property assets. This study
examines the importance of intellectual property clauses in commercial contracts in depth.
It investigates the many forms of IP clauses, their roles, and their impact on intellectual
property rights and protection. The analysis is backed up by relevant examples and case law
to demonstrate the practical application of intellectual property clauses in commercial
agreements.

INTRODUCTION
IP IN CONTRACT:

Patents, trademarks, copyright, and trade secrets are commonly recognised to be examples
of intellectual property; however, a contract definition of IP may also include confidential or
proprietary information. It may encompass both registered and unregistered intellectual
property, as well as domestic and foreign IP; however, this is not always the case. As a
result, it is critical to begin with how IP should be defined in a specific contract so that all
parties are on the same page about what is included and what is excluded.

Commercial contracts are often written documents, although they can also be verbal
agreements under particular conditions. Commercial contracts specify what each party must
do in order for the contract to be valid, as well as the repercussions if any of the terms and
conditions are not met. Commercial contracts frequently involve the creation, development,
and use of intellectual property. The contract also specifies the agreement's terms, which
include all of the essential factors. A breach of contract happens when one party fails to
satisfy their contractual obligations. IP clauses serve as contractual procedures to protect
the intellectual property rights of the parties involved in such contracts.

IP clauses are important in commercial contracts because they establish a legal framework
for intellectual property ownership, use, and transfer. These clauses are especially
significant when the business involves the development or use of proprietary information,
such as trademarks, patents, or other forms of intellectual property. In a business
environment, including IP clauses helps organisations ensure that their intellectual property
assets are secured and conserved over the contract's entire existence.

ROLE OF IP CLAUSES IN COMMERCIAL AGREEMENT : a detailed analysis

Contracts serve a purpose in practically every business, and many contract provisions are
common in all. In fact, such contract clauses are nearly always included in any contract that
is written. Commercial contracts are more likely to incorporate a set of standard terms and
conditions.

The major clauses in commercial contracts:

CONFIDENTIALITY:

When two or more organisations engage into a contract, a significant amount of information

will almost probably be transmitted in order for all parties to meet their contractual duties.
Because each party's financial and business practises must be disclosed, the contract must
have a stringent confidentiality clause. This provision should forbid all parties from releasing
any and all transactional information. This is especially critical when valuable intellectual
property is at stake.

The importance of intellectual property (IP) in confidentiality agreements in commercial

contracts is crucial. Contracts contain confidentiality agreements to prevent sensitive
information from being leaked to unauthorised parties. These clauses can protect a wide
range of data, including trade secrets, financial information, and customer lists.

IP is important in confidentiality clauses since it often serves as the foundation for the
sensitive information being protected.  For example,  A company's patent or trademark may
be considered secret information that must be secured under the terms of a contract.

Case law:

Coca-Cola Co. v. Pepsico, Inc. (1992):

In this case, Coca-Cola Co. sued Pepsico, Inc. for allegedly misappropriating trade secrets.
The conflict began when a former Coca-Cola employee who had signed a confidentiality
agreement joined Pepsico and was involved in the development of a new beverage with a
recipe similar to Coca-Cola's. The court ruled that Pepsico broke the confidentiality
agreement by stealing Coca-Cola's trade secrets and utilising them to create a competitor
product. The case demonstrated the need of having intellectual property-related terms in
confidentiality treaties to safeguard trade secrets and prevent unauthorised usage by
competitors.

DISPUTE RESOLUTION CLAUSE:

Even the most precisely drafted contracts are prone to conflict. As a result, it's critical to
understand the parties' dispute resolution strategies in the event that one arises. Firms are
increasingly include an arbitration provision in their contracts, requiring the parties to agree
to arbitration before or in lieu of settling their disputes through litigation. While some
contracts do provide for traditional legal recourse, this is typically a faster and less
expensive way to handle contract-related disputes.

Potential IP-related problems that may emerge throughout the course of the commercial
contract should be specifically addressed in the dispute resolution clause. This involves
disagreements over the ownership, infringement, licencing, or misuse of intellectual
property assets. Parties can guarantee that the dispute resolution procedure effectively
addresses these special problems by recognising the distinctive nature of IP disputes.

Case law:

Microsoft Corp. v. Motorola Inc. (2013):

In this case, Microsoft and Motorola were at odds over the licencing terms of standard-
essential patents (SEPs) for wireless communication technologies. The conflict revolved over
whether Motorola's offer to licence its SEPs to Microsoft was fair, reasonable, and non-
discriminatory (FRAND), as required by industry standards. The court's decision emphasised
the necessity of include IP-related elements in dispute resolution procedures, notably those
relating to FRAND licencing duties.

INDEMNITY CLAUSE:

This clause is included in the agreement to protect the assignee from any errors in the
assignment agreement. The Indemnification Clause shields the Assignee from any expense,
judgements, penalties, claims, or demands forced on him through no fault of his own, and
thus provides critical protection against fraud or breach.

The purpose of intellectual property (IP) in a business contract indemnification provision is

to allocate the risks and responsibilities associated with IP infringement or misuse. By
including IP provisions in the indemnity clause, the parties define the scope of
indemnification, specify the types of IP rights covered, establish an IP warranty to ensure
non-infringement, outline defence and settlement procedures for IP-related claims,
establish notice and cooperation requirements, and may include indemnity limitations or
exclusions. These provisions safeguard the parties by requiring one party to indemnify and
keep harmless the other party for claims, damages, or losses stemming from intellectual
property issues, ensuring that they are appropriately protected and creating a secure
business partnership.

Case law:

Micron Technology, Inc. v. Rambus Inc. (2009):

Micron Technology filed a lawsuit against Rambus in this matter, saying that Rambus used
fraudulent practises throughout the standard-setting process to win patents for various
DRAM (dynamic random-access memory) technologies. The disagreement centred on the
interpretation and implementation of the indemnity clause in the two parties' commercial
contract.

When addressing IP-related risks, the court's decision in this case highlighted the need of
incorporating precise and explicit language in the indemnity provision. It stressed that the
indemnity clause should explicitly apportion the risks and responsibilities associated with
intellectual property infringement or misuse. The court further emphasised the importance
of the indemnity clause addressing any limitations or exclusions on indemnification duties,
particularly with regard to patent-related matters.

TERMINATION CLAUSE:

All factors of when an agreement can be concluded should be addressed in the termination
clause. Termination does not have to be the outcome of a legal disagreement. The
termination can also be ended by mutual agreement. The termination clause may specify
conditions in which the agreement may be terminated, such as non-payment of the
agreement's fee or price, breach of agreement by any party to the agreement, or the quality
of the product or service is not as excellent as the vendor described. The termination clause
may also include force majeure and insolvency as reasons for termination.

The purpose of intellectual property (IP) in a commercial contract termination provision is to

outline how IP assets will be treated and what rights they will have following contract
termination. This clause defines the ownership and transfer of intellectual property rights,
addresses the termination of licences or permissions granted for IP use, specifies obligations
regarding the confidentiality and non-use of IP assets after termination, and may include
dispute resolution mechanisms for IP-related disagreements. Furthermore, the termination
clause may include non-compete and non-solicitation measures to prohibit the exploitation
of IP assets after termination.

Case law:

Teles AG Informationstechnologien v. Oberthur Card Systems Ltd. (2002):

In this situation, Teles AG and Oberthur Card Systems formed a business partnership to
develop and provide smart card technology. The contract included a termination provision
that addressed the handling of intellectual property rights in the event of termination. After
the contract was cancelled, disagreements emerged over the ownership and use of the IP
assets.

In this judgement, the court emphasised the need of having clear and specific provisions in
the termination clause addressing the protection of intellectual property rights. The court
recognised that contract termination can have major repercussions for the ownership and
use of intellectual property assets, and it emphasised the importance of particular language
in the termination clause to address these problems.

CONCLUSION:
People are becoming increasingly conscious of their intellectual property rights as
technology advances. Every day, thousands of applications for Trademarks, Copyrights,
Designs, and Patents are filed; some transfer their intellectual property rights for
commercial gain, and thus this requires suitable and adequate legal documentation in order
to successfully commercialise and provide any benefits to their owner; any innovation
without adequate safeguards is a treasure trove for infringers, disrupting the genuine claims
of the rightful owner of the IP and causing looting.

END NOTES:
1. INDIAN CONTRACT ACT, 1872
2. LECTURE ON INTELLECTUAL PROPERTY, Dr Rega Surya
3. www.legalserviceindia.com
4. Rk Bangia

5. https://www.lexology.com/library/detail.aspx?g=91f84111-8390-41d3-9bb9-
914b5b8aeffd
6. www.Indiankanoon.org