IP Assignment and Background Asset Carveouts in a Master Services Agreement: A Guide for an AR/VR Studio

Introduction

In the fast-evolving world of AR and VR, ensuring clear ownership of intellectual property (IP) and carving out background assets in your Master Services Agreement is crucial. Failure to address these elements can lead to conflicts and confusion, potentially jeopardizing your studio's creative work and financial integrity. When clients pay for services, they often expect ownership of the final product, making it critical for creatives to establish clear boundaries regarding what is owned outright and what remains proprietary. If you're unsure about how to navigate these waters, don’t hesitate to reach out for help.

What Is IP Assignment?

IP assignment refers to the transfer of ownership rights in intellectual property from one party to another. In the context of AR/VR projects, clients typically expect that once they pay for services, they own the resulting work. This expectation can become a point of contention if not clearly outlined in the agreement. For creatives, understanding IP assignment is equally important. Clear definitions help prevent misunderstandings and ensure both parties agree on ownership.

What Are Background Assets?

Background assets are the foundational tools, methodologies, frameworks, and proprietary technology that a consultant uses to produce the deliverables outlined in the agreement. These might include software algorithms, technical designs, or any pre-existing materials that have been developed by the consultant prior to the project. By implementing a carveout for background assets, studios can safeguard these proprietary components while allowing clients to utilize the final work product. This balance is essential to protect both sides, ensuring clients get what they pay for while the creative retains ownership over their original tools and methods.

Suggested Clause Language

When drafting your Master Services Agreement, it’s essential to include clear language regarding both work product and background assets. Here’s an example of suggested clause language:

Work Product. Upon full payment of the Fees provided in the SOW, Consultant agrees that the deliverables, work product, content and other materials created, developed or conceived by Consultant for Client for purposes of this Agreement as provided in the SOW (the “Work Product”) shall be the sole and exclusive property of the Client. Consultant hereby irrevocably assigns to Client all right, title and interest worldwide in and to the Work Product, including all copyrights, patents, trademarks, trade secrets, and other intellectual property rights therein. Consultant acknowledges that to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 or any similar or analogous law or statute of any other jurisdiction and such copyrights are therefore owned by Client. To the extent that the Work Product and/or the results and proceeds of the Services may ever be determined under the laws of any country not to be a “work made for hire,” Consultant hereby confirms that effective on the date of creation of the Work Product, it assigns (or has assigned) to Client all right, title and interest thereto (including all copyright and associated rights, extensions and renewals, and all causes of action appurtenant thereto) throughout the world. If Consultant has any rights in any jurisdiction, including without limitation “artist’s rights” or “moral rights,” in the Work Product that cannot be assigned, Consultant hereby unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against Client or Client’s customers.

Background Assets. “Background Assets” are the materials, tools, utilities, techniques, technical frameworks, data models, object models, methodologies, know-how and information (both in object code and source code) made available to Client by Consultant under this Agreement that are proprietary to Consultant. This Agreement grants Client a non-exclusive limited right to use the Background Assets and does not constitute a sale or convey title or ownership of the Background Assets or any intellectual property rights therein to Client. Consultant is and shall remain the sole and exclusive owner of all right, title and interest in and to the Background Assets, including all improvements or modifications made thereto, and all intellectual property rights embodied in or related to the Background Assets.

Incorporating these clauses helps to clearly delineate the ownership of work product created during the agreement while allowing consultants to retain rights over their background assets. This way, both the AR/VR studio and the consultant can focus on producing outstanding work without worrying about future ownership disputes.

Example Scenario

Imagine an AR/VR studio engaged in a project to create an immersive training simulation for a corporate client. The studio utilizes a proprietary rendering framework that it has developed over years of work. By including a carveout for background assets in their agreement, the studio ensures that even as they deliver the unique simulation to the client, they retain ownership over the rendering framework. This protects their investment in developing this technology, while still allowing the client to benefit from the end product. Such foresight prevents potential conflicts in the future, where a client might expect to reuse the underlying technology without proper permissions.

How Counsel Club Helps

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FAQs

What’s the difference between work product and background assets?

Work product refers to the specific deliverables created for a client under the agreement, while background assets are the pre-existing proprietary tools and methodologies the consultant retains ownership of.

Will I get a license to use the background assets?

Yes, clients often receive a non-exclusive limited right to use background assets within the scope of the project, but they do not own these assets.

Do I get the source files for the work product?

This depends on the agreement. Make sure to clarify in the SOW whether source files will be provided along with deliverables.

What if I use third-party or open-source components?

It's important to document how these components are handled in the agreement. Ensure proper licenses are maintained to avoid any infringement issues.

How should I document the split in the SOW?

The split between work product and background assets should be clearly stated within the SOW, specifying what is owned by the client and what remains with the consultant.

Final Thoughts

Adding clear clauses regarding IP assignment and background asset carveouts to your Master Services Agreement is essential for protecting your creative work and maintaining a healthy relationship with clients. Don’t delay. Consider incorporating these clauses into your agreements now. For assistance with documenting these elements properly, reach out for help today.