Third-party IP: Overview, definition, and example
What is third-party IP?
Third-party IP (intellectual property) refers to copyrights, patents, trademarks, or trade secrets owned by someone other than the contracting parties. When a company uses third-party IP—such as licensed software, patented technology, or copyrighted content—it must have proper authorization to avoid legal issues.
For example, if a business uses a stock photo in its marketing materials, that image is third-party IP. The business must obtain the correct license or permission to use it legally.
Why is third-party IP important?
Understanding third-party IP is crucial for businesses to avoid intellectual property infringement, which can lead to lawsuits, fines, and reputational damage. Many contracts include clauses about third-party IP to clarify who is responsible for securing permissions and handling legal risks.
For companies using software, creative works, or patented technology from external sources, properly managing third-party IP ensures compliance with licensing agreements and intellectual property laws.
Understanding third-party IP through an example
Imagine a tech startup develops an app that includes a third-party mapping service. Since the mapping software is owned by another company, the startup must obtain a license and comply with its terms. If they use the software without permission, they could face legal action for IP infringement.
In another scenario, a marketing agency creates an advertisement using a popular song. If the agency does not obtain a proper license from the song’s copyright owner, the company running the ad could be sued for unauthorized use of third-party IP.
An example of a third-party IP clause
Here’s how a third-party IP clause might appear in a contract:
“The Parties acknowledge that certain intellectual property rights used in connection with this Agreement may be owned by third parties. Each Party agrees to obtain all necessary rights, licenses, and permissions for the use of any third-party IP and shall indemnify the other Party against any claims arising from unauthorized use.”
Conclusion
Third-party IP refers to intellectual property owned by someone outside of the contract. Businesses must secure the right licenses and permissions when using third-party IP to avoid legal and financial risks.
Including a third-party IP clause in contracts helps clarify responsibilities and prevent disputes, ensuring that both parties comply with intellectual property laws.
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.