33.3.1 Foreground IP (i.e. IP in Project Data) and background IP (i.e. IP in Contractor Materials, Third Party Materials and Authority Data) can either be transferred (i.e. where ownership is assigned to someone else) or licensed by their owner.
33.3.2 In relation to foreground IP, there are three main options, each of which has pros and cons and which one is appropriate will depend upon the circumstances of the particular Project:
(i) Option A - The ownership of the IP in the Project Data can be transferred (by way of an assignment, which should be "with full title guarantee") from the Contractor to the Authority and licensed back to the Contractor for use in the Project (or other projects, for which the Authority may consider charging a royalty fee). The Authority has paid for the development of these specific IPRs and this option gives the Authority the greatest level of security because regardless of what happens to the Contractor, the Authority will own and therefore be able to use the Project Data and IP therein for any purposes it desires. This option is particularly appropriate where the IP in the Project Data is central to the Project and core to the continuity of the Service e.g. defence and waste projects. Under this scenario it is impossible for the Contractor to control the further use of the IP by the Authority (whereas if it were licensed to the Authority, its use may be controlled/restricted by the terms of the licence).
(ii) Option B - The Contractor can retain the ownership of the IP in the Project Data but grant a wide licence (which should be free, perpetual, irrevocable, sub-licensable and transferable) of the Project Data to the Authority to use it for the Project and other projects and to enjoy the Services. This option allows the Contractor to retain ownership of the IPR in the Project Data and therefore be able to use the Project Data for any purposes it desires, including for the Project. The Contractor will grant the Authority a wide, usually non-exclusive, licence to use the Project Data which gives the Authority the benefit of being able to use it for the Project and other projects or programmes. However, the risk with this option is that should the Contractor become insolvent, the licence may become ineffective (if the liquidator sets aside the Contract as an onerous obligation).
(iii) Option C - The Contractor can retain the ownership of the IP in the Project Data but grant a narrow licence (free, perpetual, irrevocable, sub-licensable and transferable) to the Authority to use it for the Project only. This option allows the Contractor to retain ownership of the IPRs in the Project Data and therefore be able to use the Project Data for any purposes it desires, including for the Project. The Contractor will grant the Authority a licence to use it only for the purpose of the Project. The downside for the Authority is that it cannot use the Project Data for any other project or broader programme. The other downside is that should the Contractor become insolvent, the licence may become ineffective.
33.3.3 Option A (ownership of IP), [followed by Option B (a broad licence)], clearly will give the Authority the broadest and most secure rights in IP provided by the Contractor, and one of these is likely to be the appropriate option for foreground IP for PF2 projects. Option B, a broad licence, may be suitable for background IP such as Contractor Materials and Third Party Materials (and consideration should be given as to whether or not the Authority's rights to use the IP should be limited to "Approved Purposes" (see further Clause 33.2.4 (Project Data)) to do with the Project or Programme, or, preferably, usable by the Authority without limitation). Option C, a narrow licence, is clearly less good for the Authority. It may, on the other hand, be suitable for background IP (such as Authority Data) which the Authority may license to the Contractor. Use of this may be restricted to "Approved Purposes."
33.3.4 The Authority will in any event need to decide which option it requires on a project by project basis, and this decision should be taken early on in the procurement process so as to avoid having to negotiate this later on. Where IP is only a minor consideration in the Project (for instance because it relies on readily available commercial IP) the Parties may agree a less detailed approach to the grant of IP rights either way between them.
33.3.5 Irrespective of who owns the IP, however, the Contract must ensure that the Authority is able to use any IP required to provide the Service, and enjoy the Service, if it takes over the Service or employs/procures a third party to perform the Service (e.g. on expiry or early termination of the Contract). The Contractor will in any event usually be required to provide appropriate warranties to the effect that the assignments / licences granted are sufficient to enable any third party (including the Authority) to provide the Services or Works after the termination or expiry of the Contract.
33.3.6 The Contract should also provide for physical delivery of the Project Data, Contractor Material and Third Party Materials and related software manuals and (where the Authority owns the IPR) source codes at the Authority's request (see further Clause 31.2.(d) (Provision of Information)). Where the Authority does not own the relevant IPRs it may be necessary for the source codes to be placed in escrow with an independent third party, so that access should not be interfered with by any insolvency of the IPR's owner. If the materials are maintained on a computer, the Authority may need a licence for software to read it (unless it is readable with ordinary commercially available software).
33.3.7 It is important that confidentiality provisions do not cut across, or prevent use of, all IP which the Authority may need to operate the Project.