contractual considerations to bear in mind while moving your inventive ideas forward tawanna d....
TRANSCRIPT
Contractual Considerations to
Bear in Mind While “Moving Your
Inventive Ideas Forward”
Tawanna D. Wright
Presented by: Tawanna D. Wright, Esq. Grand Rapids
Inventors Network
July 13, 2010
Purpose of the Presentation
To provide you with information on important contract provisions and concepts that you should be aware of.
To get you thinking prospectively about protecting your own interests before signing any agreement.
Major Take-Aways
Always make sure you KNOW your rights and obligations under a contract.
NEVER sign a contract if you do not understand what ALL of the terms mean.
Protect yourself first! When in doubt …DON’T SIGN!
Contract Basics –What is a K?
A contract is an enforceable promise or set of promises.
A valid contract requires an offer, acceptance, consideration and mutuality of obligation.
A contract can either be written or oral.
Presumptions of Contracting
Courts will presume two things when you sign an agreement: that you have read it, and and you that understand it.
“I didn’t know” is not a valid excuse. “Quite simply, ‘failure to read is not a
defense in an action to enforce the terms of a written agreement.’” Starbrite Distrib v Excelda Mfg Co, 211 Mich App 475; 481, 536 NW2d 558 (1995)
Contemplated Agreements
Manufacturing Agreements
Purchase Agreements
Invention Consulting Agreements
7 Key Contract Provisions/Considerations to
Remember American Inventor’s Protection Act
Disclosures Confidentiality Provisions Indemnification Provisions Alternative Dispute Resolution
Provisions Integration/ Merger Clauses Termination Provisions Choice of Law/Forum Selection Clauses
# 1 AIPA Disclosures
AIPA disclosures applies to Invention Consulting Contracts
The “Improper and Deceptive Invention Promotion” section of the AIPA, 35 U.S.C. 297, requires an "invention promoter" to make certain disclosures to a potential customer prior to entering into a “contract for invention promotion services."
AIPA Disclosures-Cont’d
“Invention promotion services”: ‘the procurement or attempted procurement for a customer of a firm, corporation, or other entity to develop and market products or services that include the invention of the customer.” 35 U.S.C. 297 (c)(4).
“Invention promoter”: any person, firm, partnership, corporation, or other entity who offers to perform or performs invention promotion services for, or on behalf of, a customer, and who holds itself out through advertising in any mass media as providing such services. 35 U.S.C. 297 (c)(3)
AIPA Disclosures-Cont’d
The 5 Required Disclosures under the Act: the total number of inventions evaluated in the
past 5 years;
the total number of customers who have contracted with the invention promoter in the past 5 years …or who have defaulted on their payment to the invention promoter;
the total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services;
AIPA Disclosures- Cont’d
the total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services; and
the names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years. See 35 U.S.C. 297 (a).
IF THE PROMOTER IS LEGITIMATE, IT SHOULD HAVE NO PROBLEM MAKING THESE DISCLOSURES, THE LAW REQUIRES THEM!
AIPA Disclosures- Cont’d
If a promoter provides false information in its disclosure to a customer, there are a couple of recourses:
Filing a formal complaint with the USPTO Office; and /or
Filing a civil action seeking: Damages sustained as a result of the false
statement Statutory damages up to $5,000, or up to $15,000
for egregious cases Customer’s attorney fees
#2 Confidentiality Provision
A must if you share your invention with anyone! Example:
Confidentiality: CONSULTANT agrees that all CONFIDENTIAL INFORMATION, and all other information relating to the INVENTION, shall be held in trust and in strict confidence, and shall not be disclosed directly or indirectly, to any third party, without the prior written consent of the INVENTOR. CONSULTANT further agrees that it shall not make the INVENTION nor have the INVENTION made for any type of commercial sale, nor use any CONFIDENTIAL INFORMATION, or any other information relating to the INVENTION for its own commercial gain. CONSULTANT understands and acknowledges that any unauthorized disclosure of the INVENTION and/or of the CONFIDENTIAL INFORMATION will result in irreparable damage to the INVENTOR.
#3 Indemnification Provision
An agreement to assume a specific liability in event of a loss This is your recourse if someone breaks the
confidentiality agreement! This is also another party’s security that you will
reimburse them for infringement.
EXAMPLE: Indemnification for Infringement. Purchaser represents and warrants that there are no patents, copyrights or other proprietary rights which will or may be infringed by the manufacture of the products. Purchaser agrees to indemnify, hold harmless, and defend Manufacturer from any and all claims, demands, or causes of action arising from, or in connection with, any claim of infringement of any patent, copyright, or other proprietary right arising from the manufacture of the products.
#4 Effect of ADR Provisions
Example: Alternative Dispute Resolution: Any and all
disputes arising out of or relating to this contract shall be resolved by arbitration before the American Arbitration Association.
Accepting a Contract with an arbitration provision has two important ramifications You have no right to a jury trial You may have just significantly increased your
upfront costs should the contract ever have to be litigated.
# 5 Integration/Merger Clauses
Example: Entire Agreement: This instrument contains
the entire agreement between the parties pertaining to the subject matter hereof. No agreements, representations, or understandings not specifically contained herein shall be binding upon any of the parties hereto unless reduced to writing and signed by the parties to be bound thereby.
If it is not in writing it does not matter!
#6 Termination Provision
Clearly state the effect of termination: Do you intend all obligations to end when
the contract is terminated? Are there any provisions of the contract
that you want to survive termination? Be specific!! Remember the Confidentiality Agreement
and the Indemnification Provisions, you may want these to survive termination of the underlying contract to protect your interests!!
#7 Choice of Law/Forum Selection
Choice of Law Provision: which state’s law will apply to the agreement.
Forum Selection Clause: Where the case will be litigated.
The applicable law governing the agreement can in some instances substantially affect the rights of the parties.
C.O.L/ Forum Selection- Cont’d
EXAMPLES: Jurisdiction and Venue (Forum Selection). Any
cause of action arising under or by virtue of this Agreement may only be filed in the federal or state Courts serving Kent County, Michigan, the venue and jurisdiction of which is agreed and submitted to by Purchaser and Manufacturer. Each party expressly waives all objections or defenses to the venue or jurisdiction of these courts.
Choice of Law. It is the express intent of Purchaser and Manufacturer that this agreement be deemed to be made at Manufacturer’s place of business. The laws of the State of Michigan shall govern this Agreement between Purchaser and Manufacturer.
Questions?
TawannaD. Wright
