Joint ownership of intellectual property
- Himanshu Dasare
- Updated: Fri, 25th Nov 2016
If you are working with others on the creation and or sale of intellectual property you should set down ownership rights. The risk is, intellectual property will be considered as held jointly unless you agree otherwise meaning the revenues and liabilities will be split. Problems are solved with an agreement.
Our services for dealing with joint ownership of intellectual property include:
The issue of intellectual property joint ownership arises in a range of settings including joint ventures, collaborations, mobile application (app) development, software development and shared research and development projects. We work with all parties to solve and avoid problems.
Establishing ownership of jointly owned IP
Questions of ownership arise in a variety of situations in practice such as:
- Where more than one person is engaged in development of IP;
- Where IP property has been acquired from a third party upon assignment of rights;
- Where consent for use of IP is needed; and importantly
- Where claims arise in respect of the intellectual property.
Ownership concerns apply to all forms of IP
Often problems arise where a company has made a significant contribution to a joint project. For example, it is common for a development to work on existing intellectual property created by one company and enhance it with new parties working in collaboration. Generally the enhanced intellectual property (being a combination of initial intellectual property and new intellectual property) can only be exploited with the benefit of rights to the initial IP. If the initial rights owner does not give consent there is a potential infringement which creates vulnerability.
Position if there is no agreement
If a written agreement is not in place, then owners will have to rely on statutory provisions, which might not necessarily reflect the true interests of the parties. In the UK the following statutory provisions will apply:
Each co-owner is entitled to an equal and undivided share in the IP right.
Each co-owner may use the IP right without consent of, and without accounting to the other co-owners.
For example if two or more people are registered owners of a trade mark, each owner can individually use the trademark for their own purpose. One might choose to use it on merchandising another might decide to use it on a mobile app, whilst another might decide to use it on a store front. The problem with this is that the mark may become vulnerable to cancellation for improper use.
Licensing and assignment
One co-owner shall not without the consent of all the co-owners:
- Grant a licence.
- Assign his share in the intellectual property.
- Mortgage their share of the rights
- Patents: all co-owners must be party to enforcement action.
- Copyright: Each co-owner may independently enforce the jointly owned copyright
- Trade mark: Infringement proceedings can be brought by any co-owner
Without a written agreement, joint owners could face problems in deciding:
- Who pays for any IP filings?
- Who directs prosecutions of any IP filings?
- Who decided in which jurisdiction such IP filings are made?
- Who can enforce the IP?
- Who gets royalties earned as a result of licensing the IP and in what proportion?
Without clarifying these issues prior to creating the IP can lead to:
- Costly disputes
- Breakdown in business relationship
- Reliance on statutory provision
- IP slipping in value
Top 8 important points to consider
We use our experience in dealing with joint venture agreements and licence agreements to keep the collaboration and joint ownership agreements to the core basic points. We know that time and money is precious. Long documents with unnecessary clauses do not help anyone.
A joint ownership agreement typically should consider:
1) Ownership of IP
In a variety of transactions, companies might use and merge IP they own to create a new product and therefore new IP rights. The parties in the collaboration might want to retain ownership of the IP that they own as of the effective date of the agreement (background IP). Therefore the agreement will have to:
- Identify the background IP that a party intends to use or share in connection with the collaboration or service.
- Include an acknowledgement that the ownership of the background IP remains with the current owner.
- Expressly carve out background IP from any assignment of IP rights.
2) Allocation of shares between joint owners
For IP that is developed under the agreement, parties will have to decide how the IP will be owned. It will deal with the amount of shares each collaborative partner will own in the intellectual property. For example will they all have an equal share in the intellectual property, or will the shares be divided to reflect the level of work that each partner put into developing the IP.
3) Sale or transfer of share
What will happen if one co-owner decides that they want to sell their share of the intellectual property? Will their share of the IP rights be sold to the other co-owners? Or will the other co-owners have the final say as to who the shares can be sold to.
In addition it will deal with what will happen if one of the co-owner dies. The default provision states that on death, shares in the rights will devolve to his/her personal representatives and not to the other co-owners. If the collaborative partners are not happy with this, they will need to have an express provision in place that states otherwise.
4) Development of IP
How the intellectual property will be developed. If consultants are going to be used to develop the intellectual property, it is necessary to have agreements in place to ensure that the rights have been assigned to the owners. If a prior agreement is not in place disputes could arise on ownership of IP.
5) Right of exploitation of IP
How the intellectual property will be exploited. Will each owner have to get the others consent before exploiting the intellectual property rights? This can be the desired approach for most companies so that they have control on which companies are granted licenses and the contents of the license agreement.
6) Rights of each owner
Whether it will be appropriate for each joint owner, with or without the consent of the other joint owners, to:
- Exploit the intellectual property rights themselves;
- Grant licences of the intellectual property rights to others (on an exclusive or non-exclusive basis); and
- Assign the intellectual property rights.
7) Infringement and enforcement issues
Who will be responsible for monitoring and policing the joint IP and pay the expenses for any infringement in connection with it. This is important because for many IP rights swift action is needed to stop infringement. For example if a trade mark has been infringed and no action has been taken, the trade mark can be revoked for becoming generalised.
It is important to have a confidentiality clause within the agreement. Disclosures of confidential information can be an obstruction to future IP rights registration especially patent, and design.
If two or more people collaborate to produce a product, it is possible to have divided or distinct ownership in the same work.
Example of a mobile application (app)
If two or more people collaborate to produce a mobile application, one person might write and own the source code. Another might have written the contents of the app displayed on screen and therefore own that. Whilst another might have designed the images and logo displayed on the app. Each could then, possibly, pursue their own strategies for monetising their intellectual property. This could lead to disputes and claims of ownership. This is not always the strategy preferred by many companies as they want to exploit the app as a whole. Therefore a collaboration agreement is needed to ensure that all parties agree on ownership and exploitation methods.
Example of software development
A number of times two people are responsible for developing software and work on the source code together. In this instance it is not easy to distinguish between the work that was done. Therefore both parties jointly own the copyright that protects the source code. It is advisable to have a collaboration agreement in place to establish ownership. If an agreement is not in place, it is advisable to keep drafts or any paperwork that can establish that you wrote the source code. This is necessary if a dispute arises in which the other party claims that you are not the owner of the software.
Our joint ownership of intellectual property track record
We work with a variety of businesses entering all types of joint ownership projects. Most of our work involves review of joint ownership rights and analysis of what they can do with those rights. We advise on both contentious and non-contentious cases.
- Negotiation of a software agreement between a software house and end user. The parties used us to carve out rights for the software house to re-sell some of the ideas to other customers whilst providing the end user with a functional agreement it could use to diversify its operations.
- Working with a chief technology officer joining a start up with intellectual property created outside of the employment which was to be used in the employment. The director wanted to reserve the right to take his technology with him if the employment did not work out.
- Design of a joint venture for a small company entering into a joint venture with a very large firm of brokers. The agreement provided for development and use of shared platforms from which our client could perform its trade which was ancillary to the brokering business. The brokers were investing in the joint venture and taking equity and our role included setting out the obligations of both parties to the joint venture.
- Negotiation for the early exit from a joint venture involving the use of intellectual property which was proving to be a burden for our client.
- Obtaining an injunction preventing a global company launching a new product that was jointly developed with our client. In the Intellectual Property Enterprise Court (IPEC), we showed that there was enough evidence to support our client’s ownership claims and no consent was given by our client for the product launch.
- Protecting a TV production company from potential ownership claims from an animation artist. We proved with documentary evidence of stored images and scripts that our client had commissioned the artist and an agreement of transfer of ownership existed in the works. Thus we ensured our client’s intellectual property rights were enforced. Our pre-action correspondence prevented a court action.
- Obtaining the remedy of specific performance against refusal of ownership in the intellectual property. The co-owner refused to accept liability arising from the use of the intellectual property. The absence of a written ownership agreement did not provide a strong defence against our client. The other side was ordered to share liability of claims arising from the use of the intellectual property brought against our client.
We have considerable IP, tax and commercial expertise. To create a joint ownership agreement, why not call or email me to arrange an informal discussion.