When a company wants to transfer some of its assets or intellectual property to another entity, it often enters into what is called a fencing agreement. This type of agreement helps to protect the interests of both parties involved in the transfer.

At its core, a fencing agreement is a legally binding contract that outlines the terms and conditions of the transfer. It sets up various „fences“ or restrictions that dictate how the assets can be used or copied, both during and after the transfer. Fencing agreements are commonly used in industries such as technology and pharmaceuticals, where intellectual property is a key asset.

One of the primary functions of a fencing agreement is to establish what is known as a non-compete clause. This clause prevents the receiving party from using the transferred assets to directly compete with the transferring party. For example, if a company sells a patented software program to another entity, the non-compete clause would prohibit that entity from using the program to develop a competing product.

Another important aspect of a fencing agreement is the establishment of confidentiality provisions. These provisions dictate how the transferred assets can be used and who can access them. This is especially important if the transferred assets contain sensitive information, such as trade secrets or customer data.

In addition to these core provisions, fencing agreements may also include restrictions on sublicensing, transferability, and termination. Sublicensing restrictions prevent the receiving party from allowing others to use the transferred assets without the transferring party`s permission. Transferability restrictions ensure that the receiving party cannot sell or transfer the assets to a third party without consent. Finally, termination provisions outline the conditions under which the fencing agreement can be terminated, such as if one party breaches the terms of the agreement.

Overall, fencing agreements are an important tool for protecting the interests of both parties in a transfer. They establish clear boundaries around how the transferred assets can be used and help to prevent disputes down the line. If you are involved in a transfer of assets or intellectual property, be sure to consult with an experienced legal professional to ensure that a fencing agreement is put in place to protect your interests.