Legal Updates

Each party to a business agreement must make sure that its goals and intentions are expressed explicitly in the written contract

March 8, 2023

Two companies entered into confidentiality agreements and production agreements for the purpose of producing a product to eliminate algae. After the relations between the companies came to a halt, one of the companies contended that all the intellectual property and knowledge related to the product was transferred to it within the framework of oral agreements between the parties and as can be deduced by the intention of the parties at the time of the conclusion of the agreements and that the other company is therefore prohibited from making use of the said intellectual property and knowledge.

The Supreme Court held that there was no transfer of intellectual property and knowledge underlying the product and that the other company is therefore free to use it. When it comes to commercial contracts that are not characterized by lack of clarity or ambiguity, which were concluded between experienced business parties who were represented by lawyers, the rights and obligations of the parties will be determined in accordance with the precise language of the agreements and there is no room to trace back the intention of the parties or the purpose of the agreements. Here, the production agreements specifically stated that the rights of each party in the intellectual property will be preserved and there is nothing in the agreement to transfer rights in the intellectual property from one company to another. This presents a full and exhaustive mechanism with regards to the intellectual property and if any of the parties signed such an agreement while explicitly contradicting its own intentions – it has no-one but herself to blame. Therefore, the intellectual property related to the product is owned by the other company which should not be prevented from using it based on the production agreements.