Retained rights: Overview, definition, and example
What are retained rights?
Retained rights refer to the rights or privileges that one party maintains after transferring or granting certain other rights or ownership to another party. These rights are intentionally reserved or kept by the original owner or holder, despite the transfer of other assets, responsibilities, or intellectual property. In a contract, retained rights ensure that the party maintaining the rights continues to have control or authority over specific aspects, even after an agreement is made.
For example, in a licensing agreement, the creator of a product or intellectual property may retain the right to make improvements or modifications to the product, even after licensing it to another company.
Why are retained rights important?
Retained rights are important because they allow the original holder to maintain control over certain aspects of an agreement or transaction while still benefiting from transferring other rights or assets. These rights are often crucial for businesses and individuals to ensure they retain some level of influence or authority over the use, development, or distribution of their property, assets, or intellectual property. For example, a company may want to retain the right to use its branding or trademarks even after it has licensed its product to another company.
For individuals and businesses, understanding and clearly defining retained rights helps ensure that essential aspects of ownership or control are preserved while entering into contracts or agreements. This can prevent misunderstandings and protect long-term interests.
Understanding retained rights through an example
Imagine a software company that licenses its software to a third-party vendor. The agreement includes a clause stating that the software company retains the right to modify and update the software at any time, even though the vendor has exclusive distribution rights for the current version of the software. This allows the software company to continue innovating and improving the software, ensuring they retain control over future versions.
In another example, a musician who sells the rights to their music may retain the right to use the songs for live performances or in personal projects. Even though they have sold the commercial distribution rights to a record label, the musician keeps the right to use the music in certain contexts.
An example of a retained rights clause
Here’s how a retained rights clause might appear in a contract:
“The Licensor retains the right to modify, update, and improve the licensed product as it sees fit, and such modifications shall remain the property of the Licensor. The Licensee shall not alter, modify, or sublicense the product without the prior written consent of the Licensor.”
Conclusion
Retained rights allow individuals or businesses to maintain control over certain aspects of their property or agreements while still transferring or granting other rights to a third party. Whether related to intellectual property, licensing agreements, or contractual obligations, clearly defining and understanding retained rights ensures that the original holder maintains necessary control and authority over key elements. This helps protect long-term interests and provides flexibility in future endeavors.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.