October 16, 2023
Intellectual property (IP) disputes in supplier contracts often occur due to the complex nature of IP rights and the intricate details of contractual agreements. These disputes can arise for several reasons, underscoring the importance of clear communication, thorough contract drafting, and a mutual understanding of IP rights between parties.
To mitigate the risk of IP disputes in supplier contracts, businesses should:
Here are some of the main reasons why IP disputes happen in supplier contracts:
Disputes often stem from ambiguities regarding who owns the IP related to products or services supplied. A contract might not clearly specify whether the supplier retains ownership of their IP or if it transfers to the purchaser upon delivery. Similarly, there might be confusion over the scope of usage rights granted to the purchaser, such as whether they're allowed to modify the product, use it in specific markets, or resell it.
Supplier contracts often involve sharing proprietary information that may not be formally registered as IP (such as trade secrets, know-how, and confidential processes). If a contract lacks robust confidentiality clauses or fails to define what constitutes confidential information adequately, disputes may arise over the misuse or unauthorised disclosure of such information.
Disputes can occur over who owns the rights to improvements made to a product or process. This is particularly relevant when a supplier improves their product based on feedback or specifications from the purchaser. Contracts that don't address the ownership of improvements can lead to disagreements over who holds the IP rights to these enhancements.
When a supplier licenses IP to a purchaser, the contract must clearly define the license's scope. This includes geographical limitations, exclusivity, sublicensing rights, and the specific uses allowed. Vague licensing terms can lead to disputes over alleged overreach by the licensee or unauthorized use of the IP.
Disputes may also arise if a third party claims that the products or services supplied infringe on their IP rights. In such cases, the supplier contract should specify who is responsible for defending against these claims and who bears the costs associated with infringement disputes, including potential damages.
Conflicts can emerge when a supplier contract terminates, over what happens to the IP rights that were shared or licensed during the contractual relationship. Disputes may involve the use of IP post-termination, return or destruction of proprietary information, and the handling of ongoing projects that involve shared IP.
Ultimately, many IP disputes in supplier contracts boil down to a misalignment of expectations. Parties may enter into agreements with different understandings of the deal's IP aspects, leading to disputes when these expectations clash in practice.
Not all of these are supplier related, but they're certainly interesting!
Merseyside artist John Charles found himself in a tangle with fashion behemoth Hugo Boss after his "Be Boss, Be Kind" slogan, coined during popular online art classes amid the COVID-19 lockdowns, gained traction. The issue arose when Charles moved to trademark the slogan, with 'boss' being Liverpool slang for 'excellent', only to face opposition from Hugo Boss's legal team.
Outcome: A friendly settlement allowed Charles to continue his merchandise sales, supporting his daughter's trust fund.
Henry Martinez, a prominent tattoo artist operating Prick Tattoos in Shoreditch, was prickled by the opening of Prick Me Baby One More Time, a cactus shop in Dalston by Gynelle Leon. He claimed the shop's name infringed on his business's goodwill.
Outcome: The court found no likelihood of confusion between the tattoo parlour and the cactus shop, leaving Martinez's claims unmet.
Halewood International's attempt to capitalise on Cockney rhyming slang for gin by trademarking "Vera Lynn" met resistance from the celebrated centenarian herself.
Outcome: Halewood was instructed to cover Dame Vera Lynn's legal costs, marking a victory for the beloved British icon.
The Missionaries of Charity sought to trademark the distinctive blue-rimmed sari worn by Mother Teresa, arguing it was essential to protect her legacy from commercial exploitation.
Outcome: The trademark was successfully registered in 2016, with a strict warning against unauthorised use.
Hip-hop legend Dr Dre contested the trademark application of Dr Drai, a Pennsylvania gynaecologist, claiming it would confuse consumers.
Outcome: The US trademark office ruled in favour of Dr Drai, finding no evidence of potential customer confusion.
Basketball superstar Michael Jordan challenged the Chinese sportswear company Qiaodan Sports for using his name without permission.
Outcome: Jordan triumphed, preventing the company from using the Chinese transliteration of his name, though the Romanized "Qiaodan" remained permissible.
The craft beer company BrewDog faced legal pushback from Elvis Presley Enterprises (EPE) over its Elvis Juice IPA, leading to an inventive response from BrewDog's founders.
Outcome: While BrewDog initially lost, a later ruling allowed them to trademark "BrewDog Elvis Juice" in the UK, though their European trademark attempt was unsuccessful.
Authors Michael Baigent and Richard Leigh claimed Dan Brown's "The Da Vinci Code" infringed on their copyright by mirroring theories posited in their book, "The Holy Blood and the Holy Grail".
Outcome: The court ruled historical research and theories cannot be copyrighted, siding with Dan Brown.
The launch of Bratz dolls sparked a legal battle with Mattel, the creators of Barbie, over design similarities and intellectual property rights.
Outcome: Mattel emerged victorious, with MGA ordered to pay damages and halt Bratz sales temporarily.
One of our favourites, a dispute over the copyright of selfies taken by a macaque monkey named Naruto, using photographer David Slater's camera became a legal sensation, with PETA stepping in on the monkey Naruto's behalf.
Outcome: The court ruled Naruto lacked legal standing to sue, though Slater agreed to donate a portion of future proceeds from the selfies to wildlife charities.
Our subject expert: Fayola-Maria Jack
Fayola-Maria Jack is a multi-award winning deal shaping and dispute resolution expert. She has shaped successful resolutions and out of court settlements for governments, multinationals, military, banks, and venture backed startups.
