Contractual Considerations to Bear in Mind While Moving Your Inventive Ideas Forward Tawanna D. Wright Presented by: Tawanna D. Wright, Esq. Grand Rapids Inventors 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 …DONT 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 didnt 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 Inventors 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-Contd 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-Contd 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- Contd 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- Contd 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 Customers 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 partys 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 states 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- Contd 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 Manufacturers 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