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Guest Opinion: Til Death... Do Your Part

1 Feb, 2011 By: John Abdo Response

John Abdo Head Shot

 I’d wager my entire paycheck from last month that most of you are working extra hard to support your families. However, dissimilar to millions of other working people, inventors often reside in a deeper level of commitment as they assume double-duty by exerting energy to sustain their day jobs combined with a higher degree of their passion focused on seeing their inventions successfully enter the marketplace.

Manifesting the seen from the unseen. Turning an intangible into a tangible. Growing a brainchild into a fully matured, revenue-generating entity. Inventors and their families are motivated by plenty of creative, goal-motivated emotions as they strive to realize their dreams. But nothing compares to the upsurge in apprehension during the process of negotiating an inventor’s contractual agreement, especially if it’s the inventors’ first agreement.

There are numerous standard terms and clauses that must be included in an inventor’s agreement — the payment section is one of them. In addition to the standard verbiage, inserting specific "protection" clauses is also important. Amongst a long list of other inclusions, it’s often prudent to include atypical clauses that don’t protect the inventor as much as they protect their family, or the beneficiaries of the inventors’ income.

As impersonal as this will sound, the phrase I’m referring to can be labeled a "death clause". You or your attorney can call it whatever you decide. This is the clause that automatically, and legally, justifies the transfer of an inventor’s royalties to self-assigned beneficiaries upon the inventor’s passing. God forbid that ever happen, but without this clause, the inventor’s family (or assigned recipient) can only moan and gripe as they won’t have a legal leg to stand on. But unless there is specific language in the agreement that outlines explicit instructions to transfer payments, it (probably) won’t happen.

The beneficiary of the inventor’s royalties can be their own will, trust or estate, a bank account in which the royalties can be deposited directly into, or a spouse, child or favorite relative to whom royalty checks are assigned.

If this is your first time hearing about this, then don’t get confused with the standard "force majeure" clause that typically brings up the "act-of-God" subject. The force majeure clause protects both parties — inventor and company — from any breach or non-performance should something out of everyone’s control occur, like a hurricane, earthquake or an attack from alien invaders.

Here’s an example of a standard force majeure clause:

  • Force Majeure. Neither party shall be in breach of this agreement to the extent it is unable to perform its agreed-upon duties due to any event of "force majeure," including, without limitation, any fire, earthquake, epidemic, explosion, casualty, strike, war, riot, civil disturbance, act of God, any state of national law, decree or ordinance, or any executive or judicial order.

In addition to the force majeure section, the so-called death clause can be inserted separately into the inventors’ agreement. Here’s an example of a death clause, listed below as "Transfer of Payments," a more suitable heading.

  • Transfer of Payments. In the event that inventor becomes deceased and/or incapacitated, any/all payments due to inventor, along with any/all other entitlements listed in this agreement, will automatically be issued to the inventors’ beneficiary as listed in the attached exhibit.

On a separate page that’s usually located at the end of the agreement titled "Exhibit", list the beneficiary by name and title along with their mailing address and other contact information, bank account and routing numbers, etc.

Remember, if a death clause is not designated in an agreement, the decision to handle forthcoming royalties is left completely in the hands of the company, licensee or partner whom the inventor has the arrangement with. In such cases, most likely, the company, licensee or partner will select their legal position, and what’s considered "legal" is what’s specifically written in the (authorized) agreement.

Disclaimer: Although skilled with intellectual property and contract construction and negotiations, the author of this article is not an attorney. Please use your best judgment while conferring with licensed legal counsel before making any contractual commitments.

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