Cloud [on Title]

Legal jargon for an issue which raises questions over whether someone in fact owns an asset, including real property and/or intellectual property – such as copyrights and patents, or other assets.  In intellectual property it can often arises because of a failure to properly understand the legal principles involved in assignmentsshop right, work-for-hire, contractor IP and body-shopping.

A cloud on title can be a major factor in due diligence and can cause transactions, particularly IP related transactions to fail. Usually a purchaser will require a seller to resolve any cloud on title at their cost before completing a transaction, in part because if proper title is not delivered in the transaction the purchaser may become an infringer of another owner’s rights. Clouds on title can be particularly problematic if they predate the current owner in the chain of title, since earlier vendors will often have no incentive or reason to resolve the issue.

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