IP Contract clause help for Freelance project

Question

We are about to take a job developing an app for a client, and are concerned with the wording in their work contract.

To us, it seems that by signing this, we grant the client all the rights to our previous works, and any kind of unique feature that we come up with (example if we had come up with the hamburger menu on iPhone apps), then the company would own the rights and we would have never been able to use it in another app.

Are we wrong? Is this pretty standard?

(B) Background Technology. Contractor will disclose any Background Technology that Contractor proposes to use or incorporate in connection with performance of its Services to Company. If Contractor discloses no Background Technology, Contractor warrants that it will not use Background Technology or incorporate it into Work Product provided pursuant thereto.

(C) License to Background Technology. Contractor hereby automatically grants to Company a non-exclusive, perpetual, fully-paid and royalty-free, irrevocable and world-wide right, with rights to sublicense through multiple levels of sublicensees, to reproduce, make derivative works of, distribute, publicly perform, and publicly display in any form or medium, whether now known or later developed, make, have made, use, sell, import, offer for sale, and exercise any and all present or future rights in the Background Technology incorporated or used in Work Product.

(D) Ownership of Work Product and Intellectual Property. Contractor agrees that the Work Product is work made for hire. If any Work Product does not qualify as work made for hire, Contractor agrees that, the Work Product, including without limitation all Intellectual Property Rights in the Work Product, will be and is assigned to Company. Except as set forth below, Contractor retains no rights to use, and agrees not to challenge the validity of Company’s ownership in, such Intellectual Property Rights. Contractor hereby waives any moral rights, rights of paternity, integrity, disclosure and withdrawal or inalienable rights under applicable law in and to the Work Product.

(E) License to or Waiver of Other Rights. If Contractor has any right to the Work Product, including without limitation any Intellectual Property Right, that cannot be assigned to Company by Contractor, Contractor hereby automatically unconditionally and irrevocably grants to Company during the term of such rights, an exclusive, even as to Contractor, irrevocable, perpetual, worldwide, fully paid and royalty-free license to such rights, with rights to sublicense through multiple levels of sublicensees, to reproduce, make derivative works of, distribute, publicly perform and publicly display in any form or medium, whether now known or later developed, make, use, sell, import, offer for sale and exercise any and all such rights. If Contractor has any rights to such Work Product that cannot be assigned or licensed, Contractor hereby automatically unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against Company or related to Company’s customers, with respect to such rights, and agrees, at Company’s request and expense, to consent to and join in any action to enforce such rights.

Answer 1

I break it down into more lay language below,

B) Disclose any Background IP that you need to use to make us our product. If you don't disclose any background IP, we assume what you do for us is clean-roomed and that we will own it all (so if you don't disclose it, but use it in whatever you build them, they own it). This doesn't mean they own everything you ever worked on, just whatever you make for them.

C) All your background IP rights are belong to us...any background IP in the product you make us, you give us all licenses to use, forever, to copy, to modify, to use as we wish. This does NOT appear to include ownership (i.e. you can still use your background IP as you wish, sell it, give it to other customers, etc.)

D) Work for hire, we own all IP on the work that you do for us, literally you assign us all IP ownership (very standard, but many Software/Design/Web services companies fight back on this clause, see below), except for any Background IP which you declared per B).

E) If, for D) above, there is an non-assignable right (e.g. some law precluding the author/maker/creator to assign the IP ownership), you will give us an all inclusive license as in C) to use the IP, forever. In the case where you cannot assign a license, you promise not to sue us.

This is all fairly standard and agreeable, provided that you are charging high enough rates.

To answer your questions, no, it does not assign them the rights to all of your previous works, it assigns them a perpetual right to use whatever previous IP you have included in any work that you do for them.

Yes, they will own any unique feature that you come up with, if it is included in the work that you do for them, and you wouldn't be able to use it in another app.

The major issue for most Engineering/Software/Design/Web freelancers with part D) is that

• Often value for the customer is achieved through reuse of existing or previously developed IP. If every customer retains all the IP, then how can reuse occur for a new customer?

• Given the above, additional cost must be born by the client who wants all the IP, and all the IP will be done in a clean-room fashion.

I would speak to your lawyer about changing that D) clause into something more balanced, or raise your rates accordingly.

Furthermore, tell your clients that since they will not allow any reuse of IP generated for their work, that you cannot give them any benefits of Background IP (unless of course you charge them accordingly).