Retention of rights: Overview, definition, and example
What is retention of rights?
Retention of rights means that a party in a contract keeps certain rights, even if they don’t actively use or enforce them at a given time. This ensures that just because a party doesn’t exercise a right immediately, they don’t lose it for the future.
For example, if a company licenses its software to a client but states that it retains all ownership rights, it means the client can use the software, but the company still owns it and can enforce those rights later.
Why is retention of rights important?
Retention of rights is important because it prevents unintentional loss of legal rights. In business contracts, companies often include retention of rights clauses to ensure they maintain control over their intellectual property, confidential information, or contractual remedies.
Without this protection, a party might unintentionally give up important rights by not enforcing them immediately. This is especially crucial in licensing, intellectual property, and commercial agreements.
Understanding retention of rights through an example
Imagine a publishing company grants a writer the right to use certain images in a book but retains the rights to those images. This means the writer can use them in the book, but they can’t sell or license them to others because the publishing company still holds ownership.
Another example: A business signs a contract with a supplier and doesn’t immediately enforce a late payment penalty when an invoice is overdue. A retention of rights clause allows the business to enforce that penalty later, even if they didn’t do so right away.
An example of a retention of rights clause
Here’s how a clause like this might appear in a contract:
“The failure of either Party to enforce any right or provision under this Agreement shall not be deemed a waiver of such right. Each Party retains all rights not expressly granted herein.”
Conclusion
Retention of rights ensures that a party keeps legal protections, even if they don’t immediately enforce them. This is especially useful in contracts involving intellectual property, licensing, and commercial agreements.By including a retention of rights clause, businesses can safeguard their ownership, legal claims, and contractual flexibility. Before signing a contract, it’s essential to understand which rights are retained and how they might impact future obligations.
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.