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Beware the Boilerplate Series: Always Define the Meaning of "Intellectual Property"

March 28, 2014

This is the first in Tarter Krinsky & Drogin LLP’s "Beware of the Boilerplate" Series to provide you with practice tips and pitfalls in the licensing of intellectual property rights.

In Energy Recovery, Inc. v. Hauge (Fed. Cir. March 20, 2014), Defendant was the former president of a company that specialized in pressure exchangers. Defendant left the company and entered a Settlement Agreement with the company that included a provision whereby Defendant assigned "all right, title and interest, along with any and all patent rights...in..." (i) the patents and patent applications...; (ii)...intellectual property rights, property rights...; and (iv) all other intellectual property and other rights relating to pressure exchanger technology..." that existed before a certain date.

After leaving the company, Defendant started a second company and obtained a new patent on pressure exchanger technology. The first company sued him for breach of the Settlement Agreement, essentially alleging that the "technology" was the same and fell within the definition of "intellectual property" that Defendant had been obligated to assign to the company in the Settlement Agreement.

Defendant argued, on the other hand, that "intellectual property" did not refer to the technology itself, but rather, over the legal rights to it. He argued that he’d already given the company all of the "intellectual property" existing before the agreed-upon date. The Court agreed with the Defendant.

Practice Point: Clearly define the grant provisions of all of your IP contracts. If you want to transfer or receive "intellectual property" or "technology," ensure that these terms are well defined and unambiguous. Definitions matter! By making the contract terms clear, you can potentially reduce (or eliminate entirely) future litigation costs.

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