METS Practical Advice: Managing Intellectual Property in Contracts

The mining industry is in the middle of a transformation. METS companies are investing large amounts of money and know-how into new solutions that are helping mining companies to become more efficient and target more elusive deposits.The solutions and technology being commercialized are more complex than they were in the past. Digital technologies, data analytics, automation, robotics, process re-engineering, modular/mobile equipment/infrastructure, and sensors are all examples. 

We often find that when mining technology companies are reviewing a mining services contract, the focus is mainly on the goods or services being provided, price, and the commercial schedules. It is common to find that IP is merely a secondary consideration even though it should be an essential part of the contract. It is is critcal for METS companies who are doing business in Latin America to understand how to protect their intellectual property. 

What can we understand to be within the realm of Intellectual Property?

Intellectual property, in general, is often defined in a contract to include a broad range of rights, whether registered or not, such as designs, patents, innovation patents, copyright, and trademarks. This definition commonly expands to include matters such as confidential information, trade secrets, know-how, business names, and domain names.

In relation to mining services and contracts, this should include data, software, inventions, reports, guidelines, procedures, business methods, know-how and designs that have been developed for or are part of computer software, business, and operational methods, specialized know-how, geological information, proprietary tools.

How to protect your Intellectual Property?

In Latin America, it is very important to protect your intellectual property and to do it correctly since common-law rights do not apply. Consequently, it is of great importance to understand the methods that can be used to protect IP rights when entering into agreements.

In order to do so, it is highly recommendable that companies put in place systems and procedures to protect their IP. This includes registrations (trademarks, patents, etc), contractual mechanisms, and legal action (when needed). No system is impervious and therefore different methods of protecting IP should be used.

In addition, many companies will not have specific patents over their technology. In these cases, IP will need to be protected by specifically dealing with the issue in contracts that are being signed with customers. Insufficient protection of IP in a contract can leave companies exposed to future disputes and leave the door open to IP infringement.

What is the impact if an IP clause is not well-drafted?

The civil remedies available through legal action can compensate for some or all of the losses suffered as a result of IP infringements. With that being said,  it is time-consuming and definitely not cost effective. This is why it is best to spend time and effort on well-drafted IP clauses that will:

• Make compliance simpler and interpretation easier.
• Reduce the likelihood of misunderstandings arising between the parties.
• Make any future legal action to protect IP more likely to succeed as the IP clauses clearly define the IP and the limits of how the parties may use and handle it.
• Deter those trying to misuse IP.
• Clarify and determine which rights pertain to who.

In addition, IP clauses should be drafted in a way that protects IP when the contract ends. These clauses should include restrictions on use, and destruction or return of IP to the provider. 

For the supplier, an IP clause that is not robust in a legal sense may result in a considerable financial loss if the IP is a key part of their business. The supplier may also be exposed to litigation if IP belonging to a third party is inadvertently or deliberately allowed to be used without the permission of the owner of the IP. The client may be exposed if the client’s background or project IP is taken by a supplier and used or given to a competitor.

What are the types of IP that should be identified in a mining services contract?

There are three main types of Intellectual Property:

Background IP: is IP that is owned by one of the parties to the contract and that already exists prior to the contract, or comes into existence during or after the contract’s term, but is developed independently of the contract. The key issues with protecting background IP are:

• identifying the IP before the start of the contract.
• proving who the IP belongs to.
• agreeing on the scope of any license of the IP.
• agreeing on how the background IP will be protected and maintained.

Third party IP: is IP that may be provided by one of the parties to a contract and/or is owned by another person/company who is not a party to the contract. All third-party IP should be clearly identified, appropriately licensed or sub-licensed, and conditions for use clearly stated in the contract.

Project IP: is IP that is developed during the contract by one or more parties to the contract. For example, data generated during a project is an important consideration since it will often be used by the supplier to make improvements to algrorithms which will then be used with future clients. The mining company whose data is being used will want to ensure that specfic information about their operations is not identifable and cannot be used by competitors. 

At a minimum, a supplier will need to obtain a license for the Project IP for the purposes of performing its obligations under the contract. It may also want to obtain rights to use the Project IP in the future so that it can use the information to improve its products or solutions, improve work methods and documentation, and/or conduct training and interval review in the future. 

There are many other ways in which these rights can and should be defined, such as by geographical area, time, exclusivity, and any rights to transfer or encumber. The terms of any license will depend on the interests and bargaining power of the parties.

IP Ownership – The Complexity of Project IP

In today’s world, many solutions are constantly being improved by data that is being generated from exisiting contracts. In other cases, new solutions are often created when helping a mining company solve a specfic problem that they may have at one of their operatiobs. It is of vital importance that the Intellectual property clauses determine and regulate the project intellectual property. Who ‘created’ and who owns the IP can be complex. When one or more persons create the Project IP, then the Project IP will sometimes be jointly owned, though, the terms of the contract can alter this or regulate who finally ends up as the owner of the project IP. 

How to include your IP clauses in the mining services contract?

Some mining companies will not have intellectual property clauses in their standard contracts so it will be important that they are added, In other cases, the mining companies will already have their standard clauses. It will be important to review those clauses to ensure they are not abusive, to ensure the suppliers IP is respected, and to deal with intellectual property that may be generated from the project.  Regardless of the situation, a contract’s IP clauses should be carefully considered. A contract should not be signed until these issues are discussed and agreed on. 

Conclusion:

Mining technology and service providers are bringing valuable IP to Latin America. This IP is often the reason why they were successful in their home countries and the reason why they have opportunities in Latin America.

While the immediate focus for a business seeking to enter into a mining services contract may be securing or being awarded the work, IP-related issues can be business-critical in both the short and long term. Well-drafted IP clauses are an essential part of the contract and should be carefully considered. As is often the case, a little front end work will go a long way to ensure that your most valuable asset is protected.

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects are clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal