Lawyers are known for being obsessed with getting things in writing.
Business people often do not see the point, are in too much of a hurry, or have other priorities for their cash than spending it on drafting contracts.
There are a number of precedents available on the internet which provide a starting point for contract drafting. However, the significance of the clauses which you are using – or not using (either because they are not in the particular precedent you are looking at, or just because you do not realise how important they are) – is not always clear.
While I do not always advocate that instructing a lawyer to draft your basic contracts is critical – indeed many successful business people operate without written agreements – it is much easier to manage your business if you are aware of the various issues involved when working with third parties. The exercise of contract drafting does not just give you legal certainty with your business partners, it also alerts you to issues which you may not yet be aware of.
My area of legal expertise is intellectual property. I therefore draft a lot of licence agreements.
Many clients come to me who do not have written licence agreements in place even though they do have licensees. A licensee is someone who is using your intellectual property (whether a trade mark, copyright, patent, design right, know how or confidential information) with your knowledge and usually your approval. (A franchise arrangement for example will therefore always have a licence element.)
Where there is no written contract reflecting the terms of your relationship with your licensee the law will infer a number of implied terms.
Implied licences
In some cases there will not be any understanding between parties regarding an implied licence to use intellectual property rights. A common example of this is software agreements.
If you have commissioned a third party to create some bespoke software for your business you may believe that you own the copyright in that software. You do not, unless you have a written document, signed by the software programmer, transferring the copyright in that software to you, with an indication of how much has been paid for the work – the “consideration”. A failure to get such a written assignment means that you cannot allow any other party to work on your software programme to finish it, improve it, or update it without the authority of the original software programmer.
If you are already in this position it can be remedied by getting a retrospective assignment. However, negotiating payment with the software programmer after the event may prove more costly than getting the assignment up front.
It is also possible to get an assignment of copyright for future works. So if you work regularly with third-party contractors who create copyright works for you, then get them to sign a document transferring the copyright in all the work they do for you – now and in the future – to you for the consideration price already agreed.
The reverse of this situation also arises of course. I have clients who do not realise that by creating a copyright work for a customer, that customer has certain rights to use it, even if there is no written agreement regarding the control of the copyright work. In such a situation, my advice to clients who want to regain complete control of the copyright work is that they need to terminate the implied licence with their customer.
Termination of verbal contracts
You cannot just terminate an agreement which is verbal with immediate effect. You will usually be required to give your licensee reasonable notice.
It may be that you can not terminate certain types of licence at all. If your customer has paid to use a copyright work (or any other intellectual property right) for a particular purpose, then it may be impossible to stop such a use. It may however be that there is a time limit on the right to use the intellectual property right, and what constitutes ‘reasonable’ notice will be related to the overall time that the right has been used and is expected to continue.
