A party’s right to use design and materials created under a contract is a legally complex issue and can give rise to disputes if not appropriately managed. NEC4 contracts approach intellectual property in a relatively straightforward way, particularly compared to other standard construction forms. This article offers an overview of intellectual property rights and how the NEC4 Engineering and Construction Subcontract (ECS) addresses design ownership and usage.

Intellectual property rights

Intellectual property rights refer to rights that protect creations of the mind, which are safeguarded by laws relating to copyright, patents, trademarks and designs.  In construction and engineering projects, intellectual property may include drawings, specifications, reports, software, methodologies, products or processes.

Intellectual property created prior to the contract is often referred to as ‘background intellectual property’ and work created during performance of the contract is termed ‘foreground intellectual property’.

Intellectual property generally belongs to the party that created the work unless the contract states otherwise. Parties involved may include clients, consultants, contractors or subcontractors. However, in most cases, clients will require a licence to use others’ intellectual property for project delivery, maintenance or later modifications. 

NEC4 defined terms

NEC4 contracts do not use the term ‘intellectual property’; instead, they refer to ‘material’ and ‘design’, neither of which is defined. The term ‘materials’ used in clause 73.2 refers to demolition and excavation and is unrelated to intellectual property. Because of this, users needing clarity around intellectual property rights may consider introducing a Z clause to define relevant terms and licensing requirements. 

Subcontractor’s use of material provided by client and contractor

Clause 74.1 restricts the subcontractor’s use of any material supplied by the contractor or the client solely to purposes necessary for providing the subcontract works. The contractor may, however, extend this right to its subsubcontractors. The limitation on use means the subcontractor cannot use the client’s or contractor’s designs or data provided in the subcontract scope for unrelated work or other contracts. This restriction includes drawings or information provided in the site information.

Client’s and contractor’s use and ownership of subcontractor’s design

Clause 22.1 gives the client and the contractor the right to ‘use and copy’ the subcontractor’s design ‘for any purpose connected with the construction, use, alteration or demolition of the subcontract works or works in the main contract unless otherwise stated in the subcontract scope.’  This restricts the client and contractor from using the subcontractor’s design for another project in a different location and precludes its use to construct an extension to the works. The phrase ‘unless otherwise stated in the subcontract scope’ implies the scope can restrict usage rights, and the NEC4 user guides support this interpretation.

Clause 22.1 also allows the client or contractor to use the subcontractor’s design for ‘other purposes as stated in the subcontract’. This means the ‘other purposes’ could be included in any of the documents forming part of the contract, not just the subcontract scope.

Clause 22.1 also requires the subcontractor to obtain and pass on to the contractor and client equivalent usage rights from any subsubcontractors. The term ‘subsubcontractor’ includes a person or organisation who has a contract with the subcontractor to design a part of the works, such as a structural engineer designer or architect.

In England, under The Copyright, Designs and Patents Act 1988 section 11(1), initial copyright of material is owned by its author. However, if ECS option X9 on transfer or rights is included, ownership of material prepared for design is automatically transferred to the contractor. The contractor may in turn transfer the rights to the client. Option X9 also mandates that the subcontractor obtain and transfer any related rights from subsubcontractors. In practice subcontractors, especially specialists, may resist such transfers, particularly if it affects their ability to sell similar products or systems elsewhere. In such cases, the parties might exclude ‘background intellectual property’ from the transfer by using carefully worded provisions in the scope or by drafting a specific Z clause. The NEC4 ECS is silent on the matter of payment as a condition allowing the client to use the subcontractor’s design or benefit from the transfer of ownership. There is also no provision stating that royalties will apply, although the cost of royalties incurred by a subcontractor is recoverable as a defined cost.

Subcontractor’s use of its own material

ECS clause X15.3 of option X15 on the subcontractor’s design allows the subcontractor to use the material it provides under the subcontract for other work, unless ownership has been given to the contractor or it is stated to the contrary in the subcontract scope.  The effect of this provision allows the contractor to restrict the subcontractor from using its design on other projects or selling its design to other clients and do so without the need to transfer rights of ownership (option X9) or amend the conditions of subcontract.

Option X10 on information modelling

Clause X10.6 of option X10 on information modelling states that the client owns the information model. This ownership includes the project information prepared by the subcontractor unless the information model requirements state otherwise. The subcontractor must therefore ensure that any rights it holds over its contributions are effectively transferred to the contractor. This includes obtaining equivalent rights from any subsubcontractor and providing the relevant transfer documents to the client. Option X10 is silent on which party hosts the common data environment for the model and any rules governing access to it.

Confidentiality

Confidentiality clauses are essential to protect proprietary methods, inventions and commercial data. Publicly disclosing an invention before filing for patent protection can void patent rights in many jurisdictions. For example, see the UK Patents Act 1977 S 2(1).

Clause 29.1 of the ECC prohibits parties from disclosing information unless necessary to fulfil contract obligations including resolving disputes. If the contract includes option X10 on information modelling, the parties should consider whether any restrictions on the use of shared information are necessary. For example, non-disclosure agreements may be required, stipulating that confidential information, including data and algorithms derived from the model, cannot be used to assert intellectual property rights or reverse engineered.

When a dispute resolver is appointed using the NEC4 Dispute Resolution Service Contract (DRSC), the dispute resolver must keep information and their decision confidential, and share them only with parties having a proper interest. This protects sensitive information while enabling the contract to be enforced.

Conclusion

The NEC4 ECS provides a clear but simple framework for managing intellectual property. It provides structured provisions for the use, ownership and transfer of design rights between clients, contractors and subcontractors. Confidentiality provisions further support the protection of sensitive material and intellectual assets.

Although certain terms are undefined and not every eventuality is catered for, the contract allows users to tailor rights and obligations through the scope or additional clauses. Careful drafting is required where broader or more restrictive rights are needed.

David Hunter (Daniel Contract Management Services) and Chris Turner (Turner CS)

October 2025

This article was first published in the NEC User Group newsletter Issue No. 139 September 2025