Software development intellectual property joint ventures

IP Joint Ventures

Intellectual property (IP) joint ventures can combine technical expertise with marketing and financial resources, particularly in software development. However, without clear agreements, disputes can arise over ownership, income and how the resulting IP can be used.

We regularly see smaller specialist software businesses collaborate with larger corporates. Clear contractual protections are important to ensure that each party’s contributions and rights are recognised.

Intellectual property joint ventures – 3 areas to consider

When structuring an IP joint venture, focus on:

• Disclosure of existing IP;
• Each party’s contributions; and
• Ownership of newly developed IP.

Intellectual property joint ventures – disclosure

Existing IP should be identified before development begins. This helps distinguish each party’s existing rights from the IP created during the collaboration.

Identification of the IP disclosed

The joint venture agreement should clearly record the IP each party brings to the project. Software may be identified through source code, designs, technical documents and flowcharts, while patents can be identified by application or patent numbers. The parties should agree and approve the relevant schedule.

IP Joint Venture risk areas

Without clear disclosure and ownership provisions, disputes may arise over whether new software incorporates existing IP and whether further consent is required to use or commercialise it. Unclear ownership can also create infringement risks and reduce the commercial value of the resulting product.

Commercial risk areas

Common issues include:

• Income sharing: The parties may disagree over how revenue should be divided, particularly where their contributions differ. The agreement should specify how income is allocated.
• Joint ownership: Where IP is jointly owned, decisions about licensing, assignment and exploitation may require the parties’ agreement. The applicable rules depend on the type of IP and jurisdiction.
• Commercialisation: Disagreements over how and by whom the software can be marketed or licensed may delay growth and prevent opportunities from being pursued.
• Future development: Without agreed ownership and exploitation rights, disputes can arise as the software evolves or new products are developed.

Solutions to potential risks

The agreement should establish ownership of existing and future IP, including how rights in software created during the project will be allocated. It should also address licensing, assignment, enforcement and infringement, with clear procedures for making commercial decisions.

Bigger picture

An IP joint venture agreement should also address wider commercial risks.

Project timings

Set out milestones, deadlines and procedures for dealing with delays. Where appropriate, allow a reasonable period to remedy a failure before damages or other consequences apply.

Civil liability

Consider who is responsible for accidents, property damage or other liabilities arising during development and testing, particularly in areas such as drone technology.

Trouble shooting

Where technical failures may have several causes, the agreement should address responsibility, investigation and the allocation of liability.

Insolvency

Consider what happens to a party’s IP rights if it becomes insolvent, dies or is otherwise unable to participate. Appropriate transfer or buy-out provisions can help protect the project and the remaining collaborators.

New markets

The agreement should allow for new products, applications and markets that emerge during the collaboration, including how the parties will agree on their development and exploitation.

Sale of IP

Consider how the IP could be sold if an opportunity arises. One option is to establish a special purpose vehicle (SPV) to hold the IP, allowing a buyer to acquire the company rather than negotiate separate assignments or licences. The structure should be assessed against the parties’ commercial, tax and legal requirements.