Assigning intellectual property (IP)

Intellectual property (IP) is often the most valuable asset in a modern business, more valuable than the physical assets. Yet the assignment of IP rights is treated superficially in many agreements, which can lead to serious conflicts and the loss of valuable rights.

This guide explains what intellectual property is, how it is assigned correctly, and what an IP assignment agreement should contain.

What is intellectual property?

Intellectual property (IP) is rights over non-physical values: ideas, creative content, marks and technologies.

The most important types:

Copyright

Copyright protects original creative works: text, images, software, music, design and film. In Denmark, copyright arises automatically; you do not need to register it.

Duration: as a rule 70 years after the author's death.

Important on software: computer programs are protected by copyright. If a freelancer writes code for your business, the freelancer as a rule owns the code, unless otherwise agreed in writing.

Trademarks

Trademarks protect signs that distinguish a business's goods and services from others': logo, name, colour and slogan.

Registration: trademarks are registered with the Danish Patent and Trademark Office (nationally) or EUIPO (EU-wide). Unregistered trademarks can be protected through use.

Duration: valid for 10 years at a time, renewable indefinitely.

Patents

Patents protect inventions, that is technical solutions to a technical problem.

Registration: patents must be applied for and granted by the Danish Patent and Trademark Office or the European Patent Office (EPO).

Duration: a maximum of 20 years from the application date.

Design

Design rights protect the appearance of a product.

Registration: can be registered with the Danish Patent and Trademark Office or EUIPO.

Duration: a registered design can be maintained for up to 25 years (five periods of 5 years).

Trade secrets and know-how

Trade secrets protect confidential information with commercial value, for example production formulas, customer lists and business methods.

Protection: requires reasonable steps to be actively taken to keep the information secret. No registration.

Legal basis: the Trade Secrets Act (implementing EU Directive 2016/943).

Assignment vs. licence: the decisive difference

Before you consider an IP agreement, it is important to understand the basic difference:

Assignment: you sell or give the IP rights to the other party, who becomes the new owner. You lose ownership.

Licence: you give the other party permission to use your IP rights, typically for payment. You keep ownership.

	Assignment	Licence
Ownership	Transferred to the buyer	Remains with the licensor
Payment	Typically a lump sum	Typically ongoing royalties
Revocation	Normally not possible	Possible on the licence ending
Risk	The seller loses future control	The seller keeps control

For many business situations, a licence is more flexible than an assignment. An assignment is relevant in a business transfer, an exit from a collaboration or the sale of a technology.

What should the IP assignment agreement contain?

1. The parties' identity

Full names or company names, addresses and CVR or civil registration numbers.

2. A precise description of the rights assigned

This is the most important element. IP rights are non-physical and can be hard to delimit. Describe precisely:

• For copyright: the title, a description of the work and any registration number
• For trademarks: the trademark's precise form, class, registration number and country of registration
• For patents: the patent number, title and country
• For software: the version, whether the source code is included, and documentation

Too vague a wording (avoid):

"The Seller assigns all rights to the software."

A precise wording:

"The Seller assigns to the Buyer all economic copyright including source code, documentation and any derived versions of the software 'ProductName' version 2.3 to 2.7 as described in appendix 1."

3. The geographic scope of the assignment

• Global
• The EU and EEA
• Specific countries

For registered rights (trademarks, patents), the countries of registration are decisive.

4. Exclusivity

Are the rights assigned fully, or does the assignor keep rights for other use? In a full assignment everything passes to the buyer. In a partial assignment the rights are split, and the parties should carefully specify who can do what.

5. Price and payment

• A lump sum
• Instalments over time
• Royalties on future sales
• A combination

State the currency and payment terms.

6. The assignor's warranties

The assignor should warrant:

• That the assignor is the rightful owner of the IP rights
• That the rights are not encumbered by charges, licences to third parties or other burdens
• That the rights do not infringe third-party rights
• That there are no pending disputes about the rights

These warranties are decisive for the buyer and should always be included.

7. Pending and future applications

Is a patent that is not yet granted, or a trademark under registration, being assigned? State who takes over responsibility for and the costs of completing the registration process.

8. Derived rights

What happens to future versions, updates and derived works? This is especially important for software, music and technological inventions.

9. The assignor's future use

Does the assignor need to continue using what is assigned, for example for internal use? The agreement should state this clearly and possibly include a licence back to the assignor.

10. Confidentiality

During the negotiation of an IP assignment, confidential information about the technology is typically exchanged. A confidentiality clause protects both parties.

IP created by employees and freelancers

One of the most frequent IP traps for businesses is thinking they own IP created by others.

Employees' IP

Copyright (not software): for most copyright-protected works created by an employee, under an unwritten main rule the rights necessary for the business's ordinary operation pass to the employer. There is therefore no automatic full assignment of all rights unless it is agreed.

Software: the copyright to a computer program created by an employee as part of the work passes in full to the employer under section 59 of the Copyright Act.

Patents: the employer can require an invention made by an employee within the business's field to be assigned against reasonable compensation under the Act on employees' inventions.

Freelancers' and consultants' IP

Starting point: a freelancer who creates a copyright-protected work (code, design, text, video) for your business as a rule owns the copyright themselves, unless otherwise agreed in writing.

It is one of the most costly mistakes for businesses. Many pay to have a logo, a website or an app made and think they own it. But without a written IP assignment clause in the contract, the freelancer owns it.

Solution: always include an IP assignment clause in your contract with freelancers and consultants.

IP in a business transfer

On the sale or transfer of a business, it is decisive to map all IP assets:

1. IP audit: identify all registered and unregistered rights
2. Ownership: who owns what? Are there rights owned by, for example, the founder personally?
3. Licences: which IP licences is the business dependent on? Are they assignable?
4. Registration renewals: are all registered rights valid and renewed?

Registering the assignment

For registered rights (trademarks, patents, designs), the assignment should be registered with the relevant authority to have full legal effect against third parties:

• Trademarks: notify the assignment to the Danish Patent and Trademark Office (nationally) or EUIPO (EU)
• Patents: notify the Danish Patent and Trademark Office or the EPO
• Domain names: update the registrant details with your registrar

A lack of registration can mean the new owner does not have full protection against third parties.

The most common mistakes in an IP assignment

1. Too vague a description: "all rights to the project" is not clear enough
2. Missing warranties: the assignor does not warrant ownership of the rights
3. The freelancer trap: paying for creative work without requiring an IP assignment
4. A forgotten licence back: the assignor needs continued use, but no licence back is agreed
5. The registration is forgotten: the assignment happens but is not formally registered

Pricing intellectual property

What is your IP actually worth? Pricing intellectual property is complex because there is no open market as for real property.

Methods of IP valuation

The cost-based method: what has it cost to develop the IP? This method typically undervalues the real market value.

The market-based method: what is paid for comparable IP assignments in the market? Requires access to comparison data.

The income-based method: what future cash flows will the IP generate, discounted to present value? This is the most used method in professional transactions.

The royalty relief method: what would it cost to license similar IP? Used among other things in tax transfer pricing.

For larger transactions, you should obtain a professional IP valuation from an accounting firm or a specialised IP adviser.

IP assignment and tax

Capital gains tax for companies

If your company sells IP rights, the gain (the sale price minus the acquisition or development costs) is taxed as taxable income.

Denmark does not have a special "IP box" regime with reduced taxation of IP income. There are, however, deduction and depreciation rules for the costs of acquiring and developing intangible assets, which an accountant can help apply.

Royalties and withholding tax

If ongoing royalties are paid to a foreign licensor, there may be withholding tax. The double-taxation treaties between the countries govern how much can be withheld.

Transfer pricing for IP within groups

If IP is transferred between group companies (for example from a parent to a subsidiary), the price must be set on arm's-length terms under the transfer-pricing rules (section 2 of the Assessment Act). A failure to comply can lead to an adjustment by the tax authorities.

Insuring intellectual property

Can IP rights be insured? Yes. IP insurance typically covers:

• The costs of pursuing IP infringers
• Defence against claims of IP infringement
• Loss in an IP dispute that threatens the business's core operations

IP insurance is still a niche product in Denmark, but can be relevant for technology businesses and brands with a high dependence on intellectual property.

Conclusion

A correct IP assignment rests on a precise description of the rights assigned, clear warranties from the assignor and a formal registration of registered rights. Be especially aware of the freelancer trap: without a written assignment clause, the freelancer still owns the copyright. For larger transactions, involve legal and tax advice.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer or accountant for advice on your specific situation.