What is an IP clause and what must it secure for the future?

An IP clause does not only capture “who owns what today.” Its primary function is to define who should own what in the future and who should have what rights to use IP and related know-how going forward.

In practice, IP allocation tracks the typical lifecycle of a collaboration:

• Background IP: patents, patent applications, software, data, methods, formulas, databases, processes, documentation and other know-how that a party brings into the relationship.

• Foreground IP (sometimes “Project IP”): anything created or developed in the course of the project, whether or not it is later patented.

• Improvements: enhancements and derivative developments to Background IP or Project IP, often the actual long-term value driver.

A key point for life sciences deals is that an IP clause is not limited to registered rights (patents, trademarks). Commercial substance often sits in data, formulation know-how, manufacturing parameters, assays, models, regulatory documentation or plain trade secrets/know-how. Even if no patent filing is pursued, the parties still need a clear allocation of who may use that know-how and to what extent.

When do you need an IP clause, including in “smaller” agreements?

You need an IP clause whenever, absent clear rules, a legitimate interest of a party would be exposed, typically downstream commercialization, exclusivity, financing, publication or follow-on transactions.

That includes both large and small arrangements:

• Partnering and licensing (biotech ↔ pharma): IP provisions are frequently the economic core because they structure commercialization rights and exclusivity.

• Spin-outs, joint ventures, platform access: what moves into the new entity and what remains with the originator often drives investability and governance.

• R&D collaborations and clinically adjacent projects: beyond inventions, data rights, publications and Improvements are recurring friction points.

• “Small” agreements with outsized leverage: consultant agreements, MTAs (Material Transfer Agreements), data access agreements and service agreements.

What legal tools exist to allocate IP between parties?

IP allocation can be structured using different mechanisms. The label matters less than fit with the relationship and the IP type.

• Assignment transfers ownership of a right or result. It is often used where an asset needs to sit fully “in one hand,” for example in a spin-out, an asset deal or where the counterparty needs exclusive, unconditional control.

• License keeps ownership with the licensor while granting rights to use. Licensing is often preferred where exclusivity is carved by field of use, territory or time, or where the owner needs to preserve platform rights for other programs.

Hybrid structures are common: Background IP stays with the originator, Project IP is assigned or exclusively licensed, Improvements are allocated under an agreed mechanism.

Why do statutory rules often not solve the issue, even though IP is “governed by law”?

Statutory law helps, but in practice it does not replace a clear contractual allocation of IP, because legal systems differ and default rules often do not match the parties’ commercial intent.

First, in international collaborations parties frequently operate across jurisdictions whose detailed rules they do not know with confidence. It is commercially rational to allocate key rights and permitted uses in the contract rather than litigate local default rules later.

Second, even where the governing law is clear, statutory fallback rules often do not reflect the deal mechanics. One example from Germany is joint invention ownership that can result, absent tailored contractual solutions, in a fractional co-ownership construct that is difficult to manage. In life sciences, where fast decisions on filing, enforcement, licensing and later transactions are critical, that type of default setup is often not fit for purpose.

Why is the risk of missing an express IP clause especially high in life sciences?

If an agreement does not address IP expressly, the debate shifts to whether the contract implies an allocation, for example through implied license doctrines, purpose-based interpretations or other interpretive tools. The outcome is uncertain, the evidentiary burden is heavy and the result is rarely deal-friendly. This risk is amplified in life sciences because (i) programs typically run through multiple stages and parties, so chain of title must be defensible, (ii) data and know-how are core value drivers even without registered rights, and (iii) partnering, financing and exits are driven by diligence efforts that scrutinize IP and penalize ambiguity here.

How is an IP clause different from a confidentiality clause?

A confidentiality clause (and also fully fledged NDAs/CDAs) governs protection against disclosure and permitted use of confidential information. An IP clause governs ownership and use rights: who may exploit results, who gets which rights and what happens with new developments.

A strong confidentiality clause does not substitute for an IP clause. It does not automatically grant the rights needed to use or commercialize results, and it does not resolve allocation of Project IP or Improvements. Conversely, an IP clause without appropriate confidentiality terms often leaves know-how and data insufficiently protected.

For more details on confidentiality drafting and pitfalls see our article about CDAs.