Proprietary Interest: Definition, Example and Related Terms
What is a Proprietary Interest ?
Proprietary interest is a term used in business to refer to the ownership rights that a company or individual has in an asset or a set of assets. This can include anything from physical goods, to intellectual property like patents, trademarks, or copyrights. When someone has a proprietary interest in something, it means they have the exclusive right to use, sell, or profit from it. They can also choose to license these rights to other people or companies.
For example, if a software company creates a new program, they would have a proprietary interest in that program. They could choose to sell it, license it to others, or keep it for their own use. Similarly, if a company invents a new product, they would have a proprietary interest in that product. They could patent it, which would give them the exclusive right to manufacture and sell it.
Proprietary interest can also apply to financial assets. For example, if a company owns stocks or bonds, they have a proprietary interest in those securities. They have the right to sell them, hold onto them, or trade them as they see fit.
In commercial contracts, proprietary interest often comes into play in licensing agreements. For example, a company that owns a proprietary interest in a piece of software could license it to another company. The licensing agreement would specify how the second company can use the software, and it might also require them to pay royalties to the first company.
Understanding proprietary interest is important for contracts managers because it can affect a company's ability to use, sell, or license its assets. If a company doesn't properly protect its proprietary interests, it could lose valuable assets or miss out on potential revenue.
In addition, proprietary interest can also affect a company's liability. For example, if a company has a proprietary interest in a product that causes harm to someone, the company could be held liable for damages. Therefore, it's important for contracts managers to understand proprietary interest and to make sure that it's properly addressed in their contracts.
Example(s)
Scenario Description A technology company, TechCo, develops a revolutionary new software. They hold a proprietary interest in this software. In this case, TechCo has the exclusive rights to the software they developed. They can choose to sell it, license it to other companies, or use it exclusively within their own operations. If they choose to license it, they can set the terms of the license, which might include royalties or other forms of compensation. A pharmaceutical company, PharmaCo, invents a new medication. They file for and are granted a patent, giving them a proprietary interest in the medication. PharmaCo has the exclusive right to manufacture and sell the medication they invented. They can also license the rights to other companies, possibly in exchange for royalties or other compensation. If they don't protect their proprietary interest, other companies could produce and sell generic versions of the medication.