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Avoiding Technology Contract Disasters

Outline of PowerPoint Presentation
September 2003

Stephen Rubin, Esquire


  1. Shareholder/Member Agreement
  2. Nondisclosure Agreement
  3. Trade Secret Agreement
  4. Noncompete Agreement
  5. Employment Agreement
  6. Independent Contractor Agreement
  7. Software Development Agreement
  8. Software License Agreement
  9. Trademark/Franchising Agreement
  10. Website Design/Hosting Agreement
  11. Joint Venture or Partnership Agreement
  12. Insurance Policy
  13. Legal Representation Agreement


  1. Failure to Secure the IP Rights of Other Party
  2. Failure to Protect Your Own IP Rights
  3. The Contract Is Unenforceable
    a. No consideration
    b. Oral agreements
    c. Ambiguity, omission or invalidity
    d. Limitations on enforcement
    e. Bankruptcy of party
  4. Exposure to Third-Party Liability
    a. Vicarious (employer/ employee and principal/agent)
    b. Indemnification and hold harmless clause
    c. Statutory—e.g., contributory infringement
  5. Unequal Bargaining Positions (Contracts of Adhesion)


  1. Purpose—NDA enables disclosure of commercially valuable secret information for evaluation by recipient with whom a relationship involving the information has not been formed under protection against use or disclosure by the recipient
  2. Key Provisions
    a. Definition of secret information to be disclosed
    b. Establish permitted use (e.g., no reverse engineering
    c. Establish safeguards for maintaining secrecy
    d. Provide for return of information
  3. Potential Disaster Areas
    a. Not in writing
    b. Inadequate definition of protected information (secrets vs. trade secrets)
    c. Inadequate duration of protection
    d. Lack of secrecy safeguards
    e. Ineffective enforcement remedies


  1. Purpose—Employment Agreement defines the respective rights and obligations of the employer and employee to avoid later dispute over such matters as compensation, termination, and rights to IP
  2. Key Provisions
    a. Employment at will
    b. Payment terms
    c. Confidentiality of employer’s trade secrets
    d. Disclosure and ownership of IP created by employee
    (1) work for hire copyright
    (2) patent shop rights
    e. Noncompete
    f. Representations and warranties of employee
    g. Indemnification
    h. Arbitrate or litigate
  3. Potential Disaster Areas
    a. Not in writing
    b. Implied employment term
    (1) course of dealing
    (2) employee policy manual
    c. No assignment of IP rights
    d. No representations and warranties
    e. No indemnity
    f. Unclear scope of employment
    g. No at-will employment clause
    h. No power of attorney to secure IP registration


  1. Purpose—Provide for the functionality (deliverables) and schedule (milestones) of programming to be performed by developer, transfer IP from developer to purchaser, and compensation to developer
  2. Key Provisions
    a. Description of software deliverables and milestones
    b. Acceptance standards
    c. Payment terms (commission/ royalty)
    d. Representations, warranties and limitation of liability
    e. Transfer of IP rights (license or assignment) to patents,
    copyrights, trademarks or trade secrets
    f. Confidentiality
  3. Potential Disaster Areas
    a. Not in writing (work-for-hire rule)
    b. Unanticipated delay
    c. Defining and correcting bugs
    d. Developer goes out of business
    e. Developer use of undisclosed software
    f. Developer infringement – purchaser liability


  1. Purpose—Transfer specified rights in existing software from owner to licensee for a defined term, provide for support services and warranties, if any, and specify owner’s compensation
  2. Key Provisions
    a. Scope of license—use, duration, transferability, exclusivity, territory
    b. Scope of Services
    (1) training
    (2) conversion of data
    c. Payment terms
    d. Warranties and limitation of liability
    e. Software escrow agreement
  3. Potential Disaster Areas
    a. Not in writing
    b. Customization and conversion of data
    c. Ownership of licensee- created IP based on software
    d. Monitoring use
    e. Theft by former employee
    f. Licensor goes out of business
    g. Licensor infringement – licensee liability


  1. Purpose—Designer agrees to perform specified services to design, develop artwork and graphics, recommend and/or create software, and provide features for client’s website in exchange for defined compensation. Designer also may provide facilities to host website for client.
  2. Key Provisions
    a. Specification of design services
    b. Description of deliverables and milestones
    c. Ownership of IP
    (1) work for hire
    (2) site (domain name)
    (3) graphics and programming
    (4) licenses to imbedded software of third parties
    d. Payment terms
    e. Confidentiality
    f. Warranties and limitation of liability
  3. Potential Disaster Areas
    a. Not in writing (work-for-hire rule)
    b. Designer retention of IP ownership rights
    c. Unanticipated delay
    d. Defining and correcting bugs
    e. Interruption of hosting service
    f. Control of website changes
    g. Designer/host goes out of business
    h. Designer infringement – client liability


  1. Mediate, Arbitrate or Sue
  2. Damages
    a. Compensatory
    (1) lost profit
    (2) illegal gain
    (3) fair value
    b. Statutory
    c. Liquidated
    d. Punitive
  3. Injunctive Relief (preliminary and Permanent)
  4. Attorney Fees
  5. Settlements


  1. (general contract and IP information)
  2. (Patent and Trademark Office)
  3. (Copyright Office)