The clause is much more common in licence agreements. Even then, it is often the subject of considerable debate. It is easier for me to explain a grant back clause in the context of a licence agreement. So that s what I ll do. When a licensor licenses his intellectual property to a licensee, it is almost inevitable that the licensee will discover enhancements and improvements to that intellectual property.
Products improve over time.
Inevitably, the issue will arise as to who owns the enhancements and improvements, the licensor or the licensee. If you think that the licensor is over reaching by claiming the licensee s enhancements and improvements, consider this. Chances are that the licensor made the major breakthrough. The licensee s enhancements and improvements would not have been discovered but for the licensor s breakthrough. Therefore, by all rights, such enhancements and improvements should accrue to the licensor.