IP Licensing Terminology for Freelancers

Freelancers typically have to provide a license for their work product IP to their clients. The licensing clause in contractor agreements can be a lengthy run-on sentence that contains information about the parameters of the IP license. While the language can read largely boilerplate, we will break down all the terminology this week so you can understand what they mean and negotiate in cases that are out of the norm. Let’s begin!

What is the gist of the clause?

Here’s a sample clause that’s from the publicly available contract Dell provided one of their contractors:

[Contractor] grants to Dell a perpetual, irrevocable, royalty-free, fully-paid, nonexclusive, worldwide license, with no duty to account, to the [Contractor] Intellectual Property for unrestricted use for any purpose, either individually or in combination and both separately and as integrated into other capabilities, including without limitation the right to sublicense or otherwise authorize, implicitly or explicitly, third parties to exercise any or all such rights.

In simple terms, when the Contractor provides work products for their client, they also provide ownership in the form of ‘a license’ for that work product to their client. If you’re a software developer, all the code you write gets licensed to the client. If you’re a graphic designer, all the graphics you generate get licensed to the client.

What do the specific terms in the clause mean?

Now, let’s break down the terms used in the Dell clause to explain what they mean to the individual. For applicable terms, we’ve also included the common alternatives.

1. Perpetual vs. Term-Based: Perpetual licenses never expire. Term-based licenses run for a set time that may or may not renew at the end of the term.

2. Irrevocable vs. Revocable: Irrevocable license can’t be taken back or removed. Revocable licenses have termination conditions such as event-based, at the contractor’s discretion, or due to a breach.

3. Royalty-Free vs. Royalty-Bearing: Royalty-free licenses have no reoccurring payments past the initial payment made for the work itself. Royalty-bearing licenses require ongoing payments based on a predetermined calculation of usage.

4. Fully-paid: The work has been paid in full and no further payments are required.

5. Nonexclusive vs. Exclusive: Non-exclusive licenses allow the contractor to grant this license to additional clients. Exclusive licenses mean this client is the sole holder of the license.

6. Worldwide vs. Limited Territory: Worldwide licenses are global. Limited Territory licenses are limited to a geographic region.

7. No Duty to Account vs. Duty to Account: The duty to account requires the client to provide records of usage to the contractor. No duty to account does not require the client to do so.

8. Sublicense vs. No Sublicense: Sublicensable licenses allow the client to provide this license to others. The lack of this right means they cannot share the license.
   
   

What are Moral Rights and why are freelancers asked to waive them?

Often in the same section as this clause, there will be a sentence asking contractors to waive their Moral Rights. While the terminology sounds scary, Moral Rights are the legal term for non-economic IP rights. Moral rights include the attribution right for the author to be credited and the integrity right for the work to not be distorted. While most European countries do not allow Moral Rights to be transferred or waived, the US does allow them to be waived in writing. As a result, most US clients will request contractors to waive their Moral Rights as it is more convenient for the clients.

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Freelancers have to handle two roles, providing their subject-matter expertise to clients and running a small business. Contracts are full of jargon, but we hope that chipping away at common causes one by one provides clarity to freelancers. Let us know other clauses that are top-of-mind for you and we’ll feature them in future posts!

For advocacy and beyond,
The Ask Ginkgo Team