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IP Licensing in Outsourcing and Tech Agreements

William A. TanenbaumCo-Head, Technology Transactions

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Conflating IP and Subject Matter

Definition of Intellectual Property: “Intellectual Property means copyrights, patents, trademarks, domain names, software (in object code and source code form), confidential information” Definition of Confidential Information: “includes . . . all IP . . .”

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Intellectual Property Regimes

CopyrightPatent Trade Secret Trademark and Service MarkMoral Rights

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IP Protection for Data

CompilationRealities of multi-party transactionsData sharing > data ownership

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Work Made for Hire

“The Parties agree that all Custom Work Product created for the Customer shall constitute works made for hire.” Effect of clause on ownership and paymentRipple effects:

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IP Law Different from Businessperson’s Reflexive Positions

“I pay, I own” – Work Made for Hire

Joint ownershipProblems – Right of joint owner

– Free R&D? – Is it joint? Authorship vs. inventorship– Control patent prosecution

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Ownership if Not a Work Made for Hire….Assignment – Not just copyright, all IP

Continuing obligationUpstream assignments – Otherwise a license right

Record – Pre-agree to PTO/Copyright Office form

Register copyright – Handling data

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Moral Rights

Arise in international agreements – … or in inherited forms

“Provider hereby licenses and agrees to license to Licensee Provider’s moral rights and droit morale in the Work Product.”

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Moral Rights (continued)

“Provider will cause each individual providing work product to waive his or her moral rights.”

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Dynamic Online EULAsProblem: future unilateral amendment by provider/vendor/licenseeAddressing the problem: – Amendments in standalone document – Delete and replace entire provision– State that licensee-specific amendments

survive future unilateral licensor amendments – Make reference to section title as well as

number

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Cloud Product Under EULA and Software Vendor’s Custom Work for Customer

Need to coordinate two agreements Issue: EULA gives provider ownership of suggestions– Does this cover actual coded improvements?

Addressing Licensee’s risks– Indemnity – Vendor and EULA platform try to resolve but

customer has no liability to Vendor

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Ownership and License Rightsin Custom Work Product

Box A Box B Box C Box D Box E

 Provider

Base Software

 Provider

Derivative Work  

 Provider Custom

Derivative Work

 Final

Custom Work

Product

DerivativeWorks ofCustomWork

Product

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Joint Development Agreement Combined Enhanced by Hardware Company

Combined Enhanced by Software Company

Combined Hardware and Software

Hardware Company DR/New Work

Software Company DR/New Work

Hardware Company Preexisting

Software Company Preexisting 

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Jointly Owned IP Inventorship vs. authorship – may not be jointPotential Problems Dispute over what is “primarily related” for technology– Especially for IP that can be used outside the joint

venture – When developed primarily by one party based on

confidential information of the other

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Software IP Licenses “Use” is a patent not copyright time

Section 106: reproduce, prepare derivative works, distribute, display publicly, and for sound recordings, perform publiclyMay omit common software operations: – install, operate, deploy, make available or

accessible on servers, etc., integrate and make interoperable

Will “worldwide” be sufficient?– But territoriality of IP rights

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IP Reps and Warranties Owns or has license to IP – Qualification: as between the parties

No pending litigation or claim of IP alleging IP– To knowledge after diligent inquiry (officer)– Which if adjudicated against Licensor would

interfere with: rights granted or intended to be; provide Services; interfere with use of Licensor’s technology

– Infringement claims for licensed IP – Except as scheduled

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IP Reps and Warranties (continued)

No invitation to license; no patent claim chartExcept as scheduled (Licensee: not interfere)Not aware of a claim and not received notice – Limit to senior employee or relevant department

Technology not contain third party IP unless identified – Need connection to indemnification

No other IP license needed Pass-through (including for COTS)

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IP Reps and Warranties (continued) Licensor can make assignments (custom) Breach of contract vs. infringement – Double recovery

Cover IP used in supply chainCovenants re IP infringement Not challenge Licensee’s IP rights – Exclude incorporated Licensor rights

Licensor will comply trademark requirementsWarranty pass-through (COTS)

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Settlements under Indemnification Obligations

Subject to licensee approval in full discretion; or Subject to approval which cannot be unreasonably withheld, conditioned or delayed, but only if:– Unconditional litigation release – Does not require admission of liability – Does not require payment or action

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License from Licensee

Limitations: – For purposes of engagement – During Term– What about Licensee reps and warranties?

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Indemnity Exclusions and Exclusions to Exclusions

Combinations – Not authorized (including by subcontractors)

Exclusion from exclusion: – *solely to extent combination caused the

infringement Not used as designed or intended to be usedModifications– Unauthorized (including by subcontractors)

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Indemnity Exclusions (continued)Derivative Works– But upgrades

Failure to discontinue alleging infringing software after direction from LicensorWhere Licensor met specific requirements of Licensee Key: exclusion to exclusion -- “solely to the extent [exception to the exception] caused the infringement” – May divide liability in infringement action

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Impact on Arbitration Clause

Requires arbitrator with IP knowledgeBut parties may exclude IP from arbitration

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Data at C-SuiteWho does what? CDO vs. CIO CIO vs. CTO CAO vs. CDO Privacy is contextualLitigation retention vs. revenueCybersecurity vs. revenue

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Customer-Facing Outsourcing“Traditional” focus on internal cost savings Next generation outsourcing will be front-office revenue generation Goal: faster, more targeted product development B2B and B2All data enabled

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Who is the “Reader” of the IP and License Agreement?

Need litigator skillOpposing in-house counsel Arbitrator– What will be disputed?

Aim towards summary judgment Lesson: technical schedules need to be legal documents One-sided evidence

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Questions and Answers

William A. TanenbaumCo-Head, Technology TransactionsArent Fox LLPWilliam.Tanenbaum@arentfox.com

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William A. Tanenbaum, Arent Fox LLPWilliam A. Tanenbaum was named as one of the Top Five IT lawyers in the country by Who’s Who Legal in 2016, and  was previously named as “Lawyer of the Year” in IT in New York by US News & World Report/Best Lawyers.  Chambers named Bill as one of only five lawyers in Band One in Outsourcing & Technology in New York, in Band Two nationally, and as a Leading Outsourcing Lawyer in its global edition. Legal500 found that he is a “Leading Authority” on Technology & Outsourcing.  He was selection for inclusion in the inaugural edition of Who’s Who Legal: Thought Leaders 2017.  Bill is a Past President of the International Technology Law Association.  He is currently a Vice President of the Society for Information Management (SIM) (New York Chapter), and industry CIO organization, and the only lawyer on the Board of Directors.

Clients endorse Bill as “a brilliant lawyer. I cannot imagine working with anyone else;” “brings extremely high integrity, a deep intellect, fearlessness and a practical, real-world mindset to every problem;” “efficient, solution-driven and makes excellent judgment calls” (Chambers); "one of the best IP lawyers I have worked with" and "knows exactly how to get a deal done” (Clean Tech and Who's Who Legal).