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IP Strategy Valuation of IP Assets New Invention Investigation and Enforcement IP Contracts

IP Contracts

Ananda IP has built a reputation as one of the best contract drafting practice of Thailand.

We are able to assist our clients with a wide range of contract drafting and contract negotiation services ranging for example from commercial/business agreements, employment agreements, confidentiality/non-disclosure agreements, technology transfer/IP agreements (including assignment. coexistence agreements, licensing etc.) to software and end-user licence agreements.

The section below contains general information on the various types of agreements available to IP owners to strengthen their protection. A sound IP strategy involves indeed a combination of IP rights registrations and contracts. Please do not hesitate to contact us for more information about our services.

Why building contractual protection is essential?

For the majority of businesses, the protection of IP rights begins in the private domain, within the business itself. Business owners can protect IP assets, mitigate potential losses, and avoid legal problems by adequately and properly protecting IP rights through a wide range of agreements and contractual provisions.

Prior or in parallel to any IP registration strategy, it is recommended to ensure that IP assets are well secured within the business itself. Employment agreements, confidentiality or non-disclosure agreements, and technology transfer agreements are particularly relevant to any type of business.

Employment agreements

All businesses have employees and all employment agreements should include appropriate IP protection clauses. Including IP protection clauses at this stage costs nothing and ensures that creations made by employees are duly assigned to the employer and/or that even if employees learn of information they shouldn't, they are contractually bound to maintain confidentiality and to protect the business's IP interests.

IP protection clauses in employment agreements can be drafted to protect practically all types of IP rights. The right IP protection clause can help protect IP rights in various kinds of industries ranging from high tech companies developing at great cost new products or processes, to service companies simply wanting to protect their service brand and goodwill.

For IP-intensive fields such as the pharmaceutical industry, IT or biotechnology, the need for IP protection clauses in employment agreements is even more pronounced. For example, a pharmaceutical company developing new drugs and employing researchers would need strong IP provisions clauses with these researchers to ensure that confidential research information, information related to new products (such as new drugs or active pharmaceutical ingredients) or processes (such as manufacturing processes) is kept confidential and assigned to the employer. IP protection clauses for IP-intensive employment agreements may further include grant-back provisions to ensure that if an employee resigns from the firm and files shortly after a patent application on a new drug developed during the time of his or her employment, such inventions belong to the previous employer.

Non-compete provisions can also complete employment agreements, to the extent permitted by law. These non-compete provisions however should be carefully drafted in order to be enforceable in Thailand. In particular the non-compete provisions after an employee resigns from a company should be reasonable so as to allow the employee to find new employment.

Confidentiality and non-disclosure agreements

Confidentiality agreements are legally binding agreements between a discloser, and a (or several) recipient(s) of confidential information. Confidentiality agreements deal with the terms upon which “confidential” information is disclosed namely, the use for a permitted purpose and the duration of obligations of confidentiality.

Confidentiality agreements may be known by other names, such as non-disclosure agreements, confidentiality deeds, mutual disclosure agreements, secrecy agreement etc. and are particularly useful when exploring new business opportunities, prospecting, and developing relationships with new partners.

Confidential information is information that is not in the public domain.

It usually includes but is not restricted to:

  • intellectual property assets (copyright, software, trademarks, product designs, inventions, trade secrets, patents) not in the public domain;
  • information that relates to technology (for example regarding the composition of a product, a new invention or a process) and know-how;
  • business, marketing and financial information and strategies (including for example customer data, reports, analysis, compilations, estimates, projections, forecasts, interpretations, records, charts, diagrams, studies, results, specifications, assets, operations, financial condition, marketing, planning and pricing policy, sponsors, employees, contracts, strategic relationships, and other proprietary information).

Companies are usually well aware of the value of their confidential information and restrict access to such information through various physical protection means (restricted areas, guards, digital protection, encryption of data etc.). However they sometimes underestimate the risks of disclosing information to third parties in particular prospective business partners. Foreign companies investing in Thailand or looking for business partners in Thailand are especially exposed to such risk.

There are several reasons why confidential information needs to be protected:

  • it has a special and unique value;
  • it is critical to preserve the patentability of new intellectual property. For example, confidential information may relate to patentable subject matter and may be intended to be the subject of a patent application. As a patent can only be granted over patentable subject matter that is novel, this means that it must not be in the public domain. If confidential information was disclosed without a confidentiality agreement, the disclosure would put it into the public domain, and as a result, adversely affect its novelty, and put at risk the success of the patent application. However if confidential information was disclosed with a confidentiality agreement, its owner may under certain conditions, apply for a patent and of course seek compensation for breach of confidentiality.
  • some confidential information may be intended not to be included in a patent application but kept as a trade secret, for example.

Businesses will usually enter into confidentiality agreements with:

  • their employees, to ensure that confidential information exchanged within the company remains strictly confidential and that employees cannot take such confidential information into the public domain. Confidentiality provisions may be included in employment agreements or specific confidentiality agreements can be used. It is important to note that employees can be individually responsible and accountable for breaching confidentiality, whether intentionally if they disclose such confidential information to a competitor, or accidentally if they disclose information that is proprietary to their employer and considered confidential by mistake or negligence;
  • their contractors, business partners -whether prospective or not -, in particular when an outside party is required to prototype, manufacture, install or even sell products or services incorporating confidential information. In such cases, a confidentiality agreement will state that the recipient can only use the confidential information for a specific purpose and for a limited duration.
  • their clients, in particular when clients are  bound by specific licenses or terms of use for a process, product or service.

Confidentiality agreements or confidential provisions in any kind of agreement should be precise enough to be enforceable. Often the definition of what constitutes confidential information is not precise enough to determine what is confidential and what is not, which potentially is a cause for the agreement to be considered void. Whenever there is a precise type of confidential information to be protected (for example the source code of a computer program, the composition of a pharmaceutical compound or a confidential list of clients), it is recommended that the agreement specifically mentions that such type of information is “confidential”.

It is also recommended to stamp as “confidential” (in English and Thai language) any information made available to avoid such information being treated as non-confidential. It is also advisable to provide a translation in Thai of the agreement when dealing with companies in Thailand, as it is important that both parties clearly understand the scope of the agreement.

Technology transfer/ IP agreements

Technology transfer agreements/IP Agreements include a wide range of agreements including material transfer agreements, IP license or assignment agreements, IP strategic or joint-venture agreements such as co-development agreements or co-marketing agreements.

The main purposes of technology transfer/IP agreements is to clearly establish who should own the intellectual property and, where applicable, put a price on intangible assets (purchase price in case of assignment, license fees or royalties for license or franchise agreement) or evaluate the contribution of each party in terms of IP (for strategic alliances, joint ventures, co-research and co-development agreements).

These agreements of course presuppose that IP assets have been clearly identified and evaluated.

Below is a short overview of the role and main purpose of technology transfer/IP agreements provided to remind the reader that IP protection and IP strategy is not just a matter of registering and enforcing IP rights but also and very importantly getting the right agreement(s) in place.

There are many types of agreements that deal specifically with IP assets:

TYPE OF AGREEMENTMAIN PURPOSEPRACTICAL TIPS
IP Assignment AgreementTo transfer IP ownership from one person to another (whether these assets include registered intellectual property rights or unregistered IP assets such as trade secrets or patentable subject matters)

As this is a permanent divestment of ownership, both parties shall agree on a selling/purchase price.

In case of registered rights, an assignment agreement (or Deed of Assignment) shall be filed at the Department of Intellectual Property to record assignment of IP ownership.
IP License AgreementTo allow one or several person(s) to use, exploit the intellectual property (trademarks, copyright, patents, design etc.) of the licensor.As this is a temporary right granted to use IP assets/rights of a licensor, a license agreement shall very precisely indicate the scope of the license (use, territory, terms, license fees, duration, ownership of new intellectual property, warranty, termination clauses, confidentiality etc.). It is recommended to record such agreement at the Department of Intellectual Property and if necessary inform Customs about the identity of authorised licensees.
IP Franchise AgreementTo allow one or several person(s) to use the intellectual property of the franchisor.A franchise agreement will usually detail with more specifications the terms under which the contracting party may use the intellectual property, know-how etc. of the franchisor. Recommendations are similar to those of an IP license agreement.
Material/Technology TransferTo allow one or several recipients to use for a permitted purpose a material or specific technology.Such agreements will deal with permitted use of material/technology and of course ownership. Clauses regarding ownership of new intellectual property resulting from the creation of intellectual property by the recipient using the material/technology shall be carefully examined.

Strategic alliances

A strategic alliance is a relationship where two (or more) parties contribute their different but complementary resources and capabilities to achieve a common objective. This includes joint research and development, joint manufacturing, joint venture, joint promotion and marketing agreements etc.A strategic alliance is an active and sophisticated relationship, which may involve licenses, cross-licenses, co-ownership, specific rights (manufacturing rights, marketing rights) and where payments or contributions of the parties are clearly identified and usually occur as per milestone developments. Clauses regarding ownership of new intellectual property resulting from the alliance are usually required. It is essential for owners of such agreements to consult with specialised IP attorneys. Indeed, Thailand’s legal framework does not allow all types of contractual provisions in particular if these provisions restrict fair competition or fair business practices.

Business agreements

In addition to IP specific agreements such as license, franchise and technology agreements, IP provisions are strongly recommended in almost any types of commercial or business agreements.

Whether you intend to enter into a manufacturing, distribution or sale agreements it is recommended to make sure that these agreements contain IP clauses which establish IP ownership, terms of use of intellectual property, confidentiality regarding IP assets, possibility to subcontract/license IP assets, indemnity for IP violations and if applicable liability for use of licensed technology etc.

Difficulties often arise when for example two companies have done business together without any formal agreement or without any IP provisions in their commercial agreement.

The following situations are practical examples of frequent cases occurring in Thailand where IP ownership is sometimes difficult to establish.

  • manufacturing/ distributing products through a local company without any agreement;

A mistake of foreign companies doing business in Thailand is to forget to register their brands or to let their local manufacturer/distributor register these brands (or create new brands suitable for the local market such as a brand in Thai language) without any agreement indicating which party will own the trademark rights. There is a risk that after many years of a local manufacturer/distributor using and promoting such brands (and sometimes even registering such brands under its own name), it claims ownership of such brands in Thailand.  Because there is no agreement this sometimes creates diverging interpretations about who should own the right. The same type of situation occurs when trade secrets have been communicated without proper confidentiality agreements. It becomes extremely hard to claim ownership of these trade secrets and prevent the other party from continuing to use them.

  • hiring services of a company to develop a product or service which contains IP rights;

In another well-known situation, company A will ask company B to develop new software. Company B will provide a version of the software to company A but then decide to either use the software for its own purposes or to sell/license it to other companies (including possibly competitors of company A). Unless clearly established between the parties it may be possible for company B to claim some copyright on the product (in this case the software).

Practical tips

  • Start by identifying your IP assets;
  • Prioritise your protection needs;
  • Establish a clear IP protection strategy and budget to match your business objectives;
  • Check the environment to ensure you can freely use your intellectual property;
  • Ensure that you control the disclosure and ownership of your IP assets through contractual protection.