Contract Law Drafting Exercise

Intellectual Property Clause

General Principles

The Company X holds intellectual property rights to all types of products created by its employees according to the contractual agreements between the Company X and its employees. The employees agree not to initiate any intellectual property applications without notifying the Company X.

Interactions with Third Parties

The Company X is obliged to represent the interests of all employees during business relationships with other companies or business units. The Company X is prohibited from entering any business or contractual relationships that may have the direct or indirect negative impact on intellectual property rights regarding the products created by its employees.

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Copyright Laws

All agreements between parties are based on the applications of the US copyright laws. The Company X does not hold intellectual property rights to any employees’ work performed beyond the contractual agreements between parties.


In case of any controversy or dispute over the structure and protection of intellectual property rights, the parties agree to arbitrate them according to the existing rules developed by the American Arbitration Association. Its judgment will be considered non-appealable and should be enforced by the court of the corresponding jurisdiction.

Legal Issues Addressed by the Contract Clause

There are several major legal issues addressed by the above-mentioned contract clause. Firstly, it specifies the general distribution of intellectual property rights between the company and its employees (Cheeseman, 2014). The contract clause states that the company holds intellectual property rights to all products created by its employees according to their professional obligations. Thus, employees do not have the right to claim any additional financial compensation from the company for utilizing the products of their intellectual property. If employees initiate any legal measures related to intellectual property rights, they should notify the company in advance.

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Secondly, the contract clause specifies the company’s interactions with third parties to the degree that it involves the decisions related to intellectual property rights. The company has a responsibility to protect intellectual property rights of its employees and avoid such business relationships that may negatively affect them. In general, it extends the applications of intellectual property issues to the broader business context. Thirdly, the contract clause explicitly specifies that the existing copyright laws will be respected, and no agreements should presuppose any violations of copyright laws. Finally, the American Arbitration Association is considered the ultimate agency responsible for resolving any potential disputes between parties. Both the company and its employees are obliged to respect the judgment made by the Association. It may be enforced through the corresponding courts.

The contract clause can be successfully applied within a business managerial setting. It addresses the needs of all parties involved, and its elements do not include any contradictions in relation to the existing copyright or other legal requirements. The company possesses the necessary resources to distribute the existing scope of responsibilities among its managers and employees. The correct specification of their mutual rights and obligations as well as the distribution of intellectual property rights allow arriving at the most consistent form of enforcing and protecting the rights of all people involved. The most important thing is ensuring the voluntary agreement on contractual aspects by all managers and employees.

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Potential Legal Defenses

It is necessary to specify the potential legal defenses available to contract formation in order to make its application consistent with the interests of all parties and existing national legal regulations. The first important aspect is that the designed contract respects the rights and interests of both the company and employees. Although the company holds all intellectual property rights to the products created by its employees, it does not discriminate against them (Cheeseman, 2014). The reason is that such agreements do not contradict the legal requirements, and employees receive the adequate financial remuneration for their efforts and results in terms of creating intellectual property products.

The second aspect refers to the legal defenses of the company’s intellectual property rights in the broader context of business relationships with other business partners. As the modern commercial environment is highly complex, it is necessary to ensure the respect for intellectual property rights by third parties. Although the contract clause cannot cover the whole variety of potential business relationships, it specifies the responsibility of the company to protect intellectual property rights to products developed by its employees (Bukspan, 2013). Therefore, it should not initiate any agreements that may have a negative impact on such rights.

The third relevant aspect of legal defenses refers to the complete compliance with the existing copyright laws. The contract clause demonstrates that national copyright laws should be respected, and no part of contractual agreements should violate such requirements. It provides the proper integration of the company’s contract into the broad national legal system.

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Remedies for Breach of the Contract

The developed contract clause contains the possibilities of the effective enforcement of obligations of all parties in case of the potential breach of the contract. As the agreement is made between the company and its employees, the potential breach of the contract may come either from the company’s side or that of employees. In relation to the company’s potential violation of intellectual property agreements, it mostly refers to its interactions with third parties. If the company enters business relationships that have a negative impact on the intellectual property of products created by its employees, the latter may initiate the legal process to protect their rights and obtain financial compensation. Another case of the potential violation of intellectual property rights from the company’s side may refer to the desire to formulate such claims for intellectual products created by employees that are not covered by the company’s contract (Bukspan, 2013). In this case, employees should utilize the copyright laws to protect their interests.

However, employees may also be responsible for violating the above-mentioned agreements. It mostly refers to their refusal to transfer intellectual property rights to the company. In this case, the company should refer to the contract clause and request the precise fulfillment of all contractual obligations by employees. In case of major disputes that emerge between parties and the absence of the specified resolution in the contract clause, they should address their concerns to the American Arbitration Association (Perry, 2016). The Association’s judgment may be enforced directly without any further appeals.


In conclusion, intellectual property rights constitute the central part of numerous business relationships between parties. The process and implications of transferring such rights between employees and the company should be strictly specified with the help of contract clauses. It is possible to determine the parties’ rights, responsibilities, and mutual obligations in the most precise and mutually beneficial form. The developed contract clause addresses the major potential legal challenges and specifies the process of arbitration of any potential disputes between the company and its employees. It can be successfully implemented in the business managerial setting as it respects the interests of both managers and employees. The developed contract clause does not contradict the major legal requirements established by copyright laws and other regulations. The American Arbitration Association enables addressing potential disputes in this sphere. Thus, the contract clause is effective in fulfilling its key functions.

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