How-to guide: Protecting intellectual property when drafting sales or marketing agreements (USA)

Introduction

This guide will assist in-house counsel, private practice lawyers and sales and marketing departments on protecting intellectual property in sales or marketing agreements. It provides guidance as to what intellectual property rights are, alongside practical advice to consider when drafting and negotiating sales or marketing agreements.

This guide covers:

What are intellectual property rights?
How are intellectual property rights protected by law?
Protection of intellectual property rights in sales and marketing agreements – key considerations

This checklist can be used in conjunction with the following How-to guides: Reviewing an online sales or marketing agreement and How to protect trade secrets in the employment relationship.

Section 1 – What are intellectual property rights?

Intellectual property (IP) rights are the rights given by law to the owners and inventors of intangible (yet valuable) assets that result from intellectual activity, innovation or creativity (eg, a brand, invention or other kind of creation). IP rights protect genuine business assets and give their owners the right to use or license their creations for specific purposes. These protections grant the creator exclusive control over how their work or creation is used and distributed for a certain period of time (that may vary depending on the type of property). For example, works created after 1 January 1978 would be copyrighted for the life of the author, plus 70 years after the author’s death, with limited exceptions. A trademark could hold protection in perpetuity if the proper steps to protect the mark (eg, use of the trademark, litigation against all infringers) are taken.

IP rights protect an individual or company from having their ideas and creations copied, used inappropriately or stolen. The most common types of IP rights are:

trademarks;
patents;
copyrights;
inventions;
processes/formulas;
literary and artistic works;
unique images/designs/symbols/names used in the marketplace;
trade secrets; and
confidential information (eg, customer lists).

While IP possesses value to the owners, the precise value of it may not be easily quantifiable. Consider, for example, the challenges that the owner of an exclusive customer list might have in determining the value of the list.

An important consideration in IP is that the owner must take affirmative steps to be granted the protection of their rights under the law. When conducting business that involves IP, it is best practice to use written contracts, and ensure that the use of IP is expressly covered in the agreement.

Section 2 – How are intellectual property rights protected by law?

All the types of IP listed at Section 1 above are protected by laws in the United States. The extent of protection, and the actions the IP owner must take to protect it, are governed by both federal and state laws, as described below at Sections 2.1 to 2.2.

2.1 Federal laws

One of the most important federal laws regarding the protection of IP is the Defend Trade Secrets Act of 2016 (DTSA). The DTSA provides American persons the opportunity to protect against and remedy infringement of important protected information. Other federal statutes pertaining to IP protection include the Lanham [Trademark] Act, the Patent Act and the Copyright Act.

Significantly, the DTSA allows a federal cause of action, where previously the only alternative was an action in state court. This was problematic for many reasons as trade secret laws tend to differ from state-to-state, both in the text of the laws and in their application. The DTSA alleviates this issue and provides consistency in IP law.

With respect to consistency, the DTSA provides uniform definitions for many terms. Two of those terms the Act defines are especially important – ‘trade secret’ and ‘misappropriation’.

Trade secret is defined relatively broadly, and allows for a wide range of proprietary information trade secrets to be protected under the statute. Specifically, trade secret is defined as:

‘all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.’ (18 USC section 1839(3))

‘Misappropriation’ is defined as:

acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
disclosure or use of a trade secret of another without express or implied consent by a person who
- used improper means to acquire knowledge of the trade secret;
- at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was
  - derived from or through a person who had used improper means to acquire the trade secret;
  - acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or
  - derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or
- before a material change of the position of the person, knew or had reason to know that-
  - the trade secret was a trade secret; and
  - knowledge of the trade secret had been acquired by accident or mistake;’ (18 USC section 1839(5))

Several other provisions of the DTSA are of interest in the enforcement of IP rights, which include:

civil seizure as a remedy – the court may order a civil seizure prior to a formal finding of misappropriation when the court deems it necessary to prevent further infringement of the IP holder’s rights;
claims under state law – taking action under the DTSA does not pre-empt any claims that may be available under state law; and
sufficient nexus – claims for misappropriation of trade secrets need to allege sufficient nexus between the trade secret at issue and interstate or foreign commerce. Otherwise, the DTSA claims may be dismissed for ‘fail[ing] to allege any nexus between interstate or foreign commerce and the alleged trade secrets’. See Gov’t Emps Ins Co v Nealy, 262 F Supp 3d 153, 173 (ED Pa 2017).

A violation of the DTSA can lead to several remedies, including:

injunctive relief;
required re-affirmative actions to protect the trade secret;
payment of a reasonable royalty (under exceptional circumstances); and
damages (actual loss and unjust enrichment).

It should be noted that the DTSA does not provide for retroactive application. For example, in one case the court found that employees alleged to have shared trade secrets with their new employer began working for the defendants between January 2015 and February 2016. In dismissing the plaintiff’s claims, the court stated that the employee’s period of employment was anywhere from more than a year to, at a minimum, several months before the DTSA’s 11 May 2016, enactment. See Becton, Dickinson & Co v Cytek Biosciences Inc, No. 18-cv-00933-MMC (ND Cal 16 August 2018), Court Opinion (08/16/2018).

Another issue that has arisen with claims made under the DTSA is ensuring that the claims are made with sufficient particularity as to the trade secrets being misappropriated. This creates an issue where a plaintiff has reason to avoid disclosing too much detail of their trade secret, since it may be construed as a de facto forfeiture of the trade secret, in circumstances where the court may not grant a motion to seal. See AlterG, Inc v Boost Treadmills LLC, 388 F Supp 3d 1133, 2019 USPQ 2d 182881 (ND Cal 2019) (dismissing claims of breach of contract and trade secret misappropriation due to lack of particularity).

In the case of Quintara Biosciences, Inc v Ruifeng Biztech, Inc, No 23-16093 (9th Cir Aug 12, 2025), the Ninth Circuit ruled that under the DTSA, plaintiffs are not required to identify alleged trade secrets with ‘reasonable particularity’ before discovery, contrary to the requirements of the California Uniform Trade Secret Act (CUTSA). The court reversed a District Court’s decision striking nine of eleven trade secrets under Fed R Civ P 12(f), holding such a move was an abuse of discretion. Instead, whether trade secrets under DTSA have been identified with ‘sufficient particularity’ is typically a fact issue inappropriate for resolution by a motion for judgment on the pleadings.

Pending legislation

The rise in the use of artificial intelligence (AI) in all types of business has added a new and unexplored dimension to IP protection. Legislation has been introduced at the federal level that attempts to address the challenges posed by AI.

HR 2794/S 1367, named the ‘Nurture Originals, Foster Art, and Keep Entertainment Safe Act of 2025’ (the ‘NO FAKES Act of 2025’), is intended to stop the dissemination of AI-generated likenesses of individuals. The bill would grant each individual or right holder (a person who has a license or right to use another’s image or likeness) the right to authorize the use of their voice or visual likeness in a digital replica, or in connection with a product or service. A license to use another’s likeness would be valid for no more than ten years, and would have to be in writing and signed by the individual or an authorized representative of the individual. A license would also have to include a ‘reasonably specific description of the intended uses of the applicable digital replica.’

Identical versions of the NO FAKES Act were introduced in the House and Senate in April of 2025, and were referred to the Judiciary Committees of the respective houses. The bills were introduced with support from both Republican and Democratic lawmakers.

The ‘AI Accountability and Personal Data Protection Act’ (S 2367) would ‘establish a Federal tort relating to the appropriation, use, collection, processing, sale, or other exploitation of individuals' data without express, prior consent.’ The uses of data specifically prohibited without consent include ‘the training of a generative artificial intelligence system that is sold, rented, licensed, or otherwise used by the provider of the generative artificial intelligence system [and] the generation, by a generative artificial intelligence system, of any covered data that pertains to an individual, including content that imitates, replicates, or is substantially derived from the covered data of the individual.’ The bill was introduced on July 21, 2025, and referred to the Senate Judiciary Committee. The bill has support from both Republicans and Democrats.

The ‘Content Origin Protection and Integrity from Edited and Deepfaked Media Act of 2025’ (S 1396) would call on the Under Secretary of Commerce for Standards and Technology to establish a public-private partnership to facilitate the development of standards regarding content provenance information technologies and the detection of synthetic content (defined in the bill as ‘information, including works of human authorship such as images, videos, audio clips, and text, that has been wholly generated by algorithms, including by artificial intelligence) and synthetically-modified content. The bill was introduced in the Senate on April 9, 2025. This bill also has support from both Democrats and a Republican.

As noted, all three bills have support from lawmakers from both parties, making it likely that some form of legislation on this subject will be passed in Congress.

2.2 State laws

2.2.1 Uniform Trade Secrets Act

As noted above, one of the primary concerns with state IP laws is that they may vary from jurisdiction to jurisdiction. To some extent this was addressed by the Uniform Trade Secrets Act of 1979 (UTSA). The UTSA is not federal legislation, but instead is a model Act promulgated by the Uniform Law Commission for adoption by states in the United States, with the goal of making state laws governing trade secrets uniform. To date, 47 states and the District of Columbia have adopted the UTSA. The UTSA was designed to codify the basic principles of common law trade secret protection.

There are typically three essential elements to a trade secret claim under the UTSA:

the subject matter involved must qualify for trade secret protection (see below for more on this);
the holder of the subject matter must establish that reasonable precautions were taken to prevent disclosure of the subject matter; and
the trade secret holder must prove that the information was misappropriated or wrongfully taken.

The UTSA defines ‘trade secrets’ as:

‘information’, including a formula, pattern, compilation, program, device, method, technique, or process that:

derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Remedies that may be sought under the UTSA include injunctive relief, damages and attorney fees, but not civil seizure as provided for under the DTSA.

2.2.2 State trademark law

Trademarks offer the owner protection against the unauthorized use of any symbol, words, phrases, or identifying elements of a business that are unique and specific to their commercial or brand identity. There are two ways to file for trademark protection in the United States. A state trademark filing allows a business to register its mark at the state level only, so long as the trademark will only be used within one state. It does not provide the same level of protection as a federal trademark. While not mandatory, state trademark registration offers several advantages: it is quicker and cheaper than federal registration, grants exclusive in-state use, allows for state-level infringement lawsuits, permits the use of ™ or SM symbols, and can help establish priority in potential conflicts with other trademarks during federal registration.

Alternatively, registering a trademark under the federal Lanham Act would provide protection over a mark throughout the United States and across all its possessions and territories.

2.2.3 State law examples

Alabama

The law of Alabama states that once you adopt and use a trademark and are documented as the first to use such mark, you are entitled to exclusive rights to that mark. Any conflict of ownership is handled outside the Secretary of State’s Office and is an issue for the courts. See Ala. Code section 8-12-1.

California

California has adopted the California Uniform Trade Secrets Act (CUTSA) that provides owners of trade secrets a legal right to file a lawsuit in state court when their trade secrets have been stolen or misappropriated. California’s version of the UTSA is codified in Cal Civil Code sections 3426.1–3426.11. California’s law gives employers broader protection against theft or misappropriation of trade secrets by an employee because the California law provides that an employer owns all trade secrets created by an employee within the scope of their employment. The CUTSA also gives businesses a legal right to sue a rival company that uses a trade secret without authorization even if the infringing company was not aware that it. Importantly, the standard of proof in these cases only requires a showing that the defendant knew or should have known that they might be using a trade secret.

The CUTSA defines a ‘trade secret’ broadly to include just about any information utilized by a business, including ‘formulas, patterns, compilations, programs, devices, methods, techniques, and processes’. See Cal Civil Code section 3426.1(d).

Florida

One interesting twist in the Florida law is that it bars any claim or cause of action for ‘the use of an idea, procedure, process, system, method of operation, concept, principle, discovery, thought, or other creation that is not a work of authorship protected under federal copyright law’ other than a cause of action based in copyright, trademark, patent, or trade secret, unless it is the subject of a written contract governing the terms of use. See FL Stat section 501.972.

District of Columbia (DC)

While DC has no specific trademark law, businesses using a mark exclusively within DC can still seek federal trademark registration. This is because federal trademark protection extends to all US states and territories, including DC. A trade name defined in DC law as a word or name used to identify a person’s business which is not, or does not include, the true and real name of all persons conducting the business; or which Includes words which suggest additional parties of interest (eg ‘company,’ ‘and sons,’ or ‘and associates’) must be registered if a person will conduct business under that name. Protection for a trade name does on texted beyond the District. If your business operates beyond DC, you will need to consider federal registration for broader protection. For businesses operating only in DC and looking to register a trade name, the DC trade name registry is available here.

Section 3 – Protection of intellectual property rights in sales and marketing agreements – key considerations

3.1 Understand applicable federal and state laws

Protecting IP in the United States requires a thorough understanding of all the laws that may apply. While the primary law is the federal DTSA, it is also imperative to understand the UTSA as well as state-specific statutes governing the use of this type of property. Care should be taken to ensure that IP rights are properly identified and secured to meet the goals of the parties to the agreement and address the particular circumstances of the parties. When preparing or reviewing the agreement the parties need to understand who owns the IP and how the IP can be used by the parties.

3.2 Ensuring protective language is included

Trade secret protection generally requires that the sales or marketing agreement makes provision to cover the following three matters:

the trade secrets at issue;
reasonable care to protect; and
that violation of the agreement constitutes misappropriation.

In addition to the provisions mentioned above, other important drafting considerations may need to be considered. The following details can be included to ensure comprehensive coverage.

3.2.1 Ownership and assignment

specify the ownership of IP developed or used during the agreement;
clarify whether the IP remains with the original owner or is assigned to the other party; and
if IP is being purchased or assigned, outline the terms and conditions governing the transfer of ownership rights.

3.2.2 Use and exploitation of IP

clearly outline the rights and limitations regarding the use and exploitation of the IP involved in the agreement; and
define the permitted purpose for which the IP can be utilized and any restrictions or conditions associated with its use.

3.2.3 Protection and enforcement

detail the parties’ obligations and responsibilities concerning the protection of the IP;
specify the measures to be taken to safeguard trade secrets, confidential information and other valuable IP; and
establish procedures for reporting and addressing any suspected or actual misappropriation or infringement, including the remedies and enforcement mechanisms available.

3.2.4 Disposition of rights

address the disposition of IP rights when the sales or marketing agreement terminates or expires; and
specify whether the rights revert to the original owner or remain with the party who utilized or developed the IP during the agreement.

3.2.5 Non-disclosure and confidentiality

include comprehensive non-disclosure and confidentiality provisions to protect sensitive information shared between the parties; and
clearly define the scope of confidentiality, obligations of non-disclosure, and the duration of such obligations.

3.2.6 IP Created during the agreement

if there is a possibility of new IP being created during the sales or marketing agreement, outline the ownership and rights associated with such IP; and
determine whether the new IP will be jointly owned, assigned to a specific party, or subject to a separate agreement.

By incorporating these additional details into the sales or marketing agreement, you can address ownership, assignment, protection, enforcement, confidentiality, and the potential creation of new IP. These provisions ensure a clear understanding of the parties’ rights, obligations and responsibilities, enhancing the effectiveness and legal certainty of the agreement.

In addition, the following considerations provide further detail on specific aspects related to IP in the sales or marketing agreement:

3.2.7 Provide a clear description of the IP

specify the exact type of IP that is the subject of the agreement, whether it is trade secrets, patents, copyrights, trademarks, or a combination thereof; and
provide a clear and detailed description of the IP involved to ensure mutual understanding.

3.3 Consider other boilerplate provisions

3.3.1 Representations and warranties

Include representations and warranties regarding the ownership, validity and non-infringement of the IP. Both parties should make certain representations about their rights to use and transfer the IP and warrant that it does not infringe upon any third-party rights. This helps establish confidence and protection for the parties involved.

3.3.2 Rights on termination

determine the rights and obligations of each party regarding the use of IP when the agreement terminates;
specify whether any rights to use the IP will continue after termination, and if so, under what conditions or limitations; and
address the duration of post-termination rights, any associated fees or royalties, and any necessary sub-licensing arrangements.

3.3.3 License grants and restrictions

if the agreement involves licensing of IP, define the scope and limitations of the license granted;
specify any restrictions or conditions on the use, modification, sub-licensing or transferability of the licensed IP; and
clearly outline the permitted territories, duration, and any exclusivity provisions, if applicable.

3.3.4 Indemnification

include provisions related to indemnification for IP-related claims or disputes; and
clarify the responsibility for legal costs, damages or liabilities arising from third-party claims alleging infringement or misappropriation of IP rights.

3.3.5 Governing law and dispute resolution

specify the governing law that will apply to the agreement and the resolution of any IP-related disputes; and
determine the jurisdiction and venue for resolving such disputes and consider alternative dispute resolution methods such as arbitration or mediation.

By considering these additional points, you can provide further clarity and protection related to the type of IP involved, representations and warranties, and the rights and obligations of the parties concerning IP upon termination. This helps ensure a comprehensive and well-defined sales or marketing agreement regarding IP.

In addition, some preliminary analysis should be undertaken to evaluate whether breach of the contract would precipitate a federal or a state-level cause of action. For example, the UTSA and state laws would govern where:

the property is not used in interstate commerce; and
the subject property was registered in the state only, and not under the federal Lanham Act.

Further, as illustrated by the uniqueness of the Florida statute described above (at Section 2.2.3), understanding any state laws that may apply are critical to ensuring that the appropriate protective language is incorporated into the sales or marketing agreement.

3.3.6 Quality control

If a federal-registered trademark is being licensed, it is important to include quality control measures to allow the holder of the mark to evaluate and supervise how the mark is being used. This type of quality control will vary according to the type of product or service to which the licensed mark is attached. For example, a license may provide that a licensee of the trademark for a restaurant chain may be used only if certain menu items, made to a certain recipe, are offered. Licensure of a trademark without quality control measures may result in cancellation of the mark.

Additional resources

US Copyright Office
Copyright Law of the United States
International Copyright Relations of the United States
Intellectual Property Rights Information & Assistance
US Patent and Trademark Office
Industrial design policy
Patent policy
Trademark policy
Trade secrets/regulatory data protection

Filed under

Topics

Commercial contracts