G.R.I.N. Business Contract Issues February 9, 2010

Report
Contractual Considerations
to Bear in Mind While
“Moving Your Inventive
Ideas Forward”
Presented by: Tawanna D. Wright, Esq.
Grand Rapids
Inventors
Tawanna
D. Wright 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
Thank You!
Tawanna D. Wright, Esq.
[email protected]
616.389.9394

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