The Confusing World of Joint Ownership of Intellectual Property

July 26th, 2011 by Matt Storms

A confusing topic for many entrepreneurs is joint ownership of intellectual property.  It often comes up in connection with joint development arrangements, subcontracting portions of work, joint ventures, and other collaborative projects involving intellectual property development, whether it be in connection with software, cleantech, medical device, drug development, or other technology-based initiatives.

Joint ownership of intellectual property can result when two (or more) people co-invent a patentable invention or co-author a joint work of authorship.  Joint ownership can also come up as a matter of a compromise in a contract.

While it may seem fair and a reasonable compromise to declare that all intellectual property developed as part of a collaborative project should be jointly owned, many of the implications of jointly owned intellectual property are counterintuitive.  For instance, joint ownership related to patents is very different than joint ownership of copyright.

So, let us go through the basic implications of joint ownership by the default rules in the United States for patents, copyright, trade secrets, and trademarks.

Joint Ownership of a Patent

In the absence of an agreement to the contrary, each joint owner of a patent may make, use, offer to sell, sell and import the patented invention without the consent of the other joint owners, provided that the joint owner does not infringe the patent rights under a separate patent.  Notably with patents, there is no duty of accounting among the owners of the patent.  In other words, one owner can profit from the patent and does not have to share  the proceeds of the profits with the other owner(s).

To exclusively license a patent to another, however, generally requires the consent of all the owners of the patent.  Also, the consents of all owners of a patent are generally needed for patent enforcement.  This means that in many cases, any single owner can limit enforcement of the rights under the patent.

Joint Ownership of Copyright

Analogous to patents, each owner of a copyright is free to copy, distribute, prepare derivative works based on the joint work, and exercise the other exclusive rights of copyright.  Unlike patents, however, joint owners of copyright do have to account to one another for profits they receive in connection with the jointly owned copyright.  In other words, each owner has to share the profits with the other owners.

To exclusively license copyright requires the consent of all the owners of the copyright.  Also, unlike joint owners of a patent, one owner of a copyright cannot block another owner of that copyright from suing for infringement by simply refusing to join in the suit.  While each individual owner has the right to enforce the copyright in preventing others from using the copyrighted material, another owner can circumvent that enforcement by simply licensing to the “infringer” the right to use the copyrighted material.

Joint Ownership of a Trade Secret

The law surrounding joint ownership of trade secrets is not as well established as it is for patents and copyright.  As with copyright, joint owners of a trade secret likely have to account to one another for profits related to the trade secret.  Although, that conclusion is not entirely clear by case law or statute.  To exclusively license a trade secret likely requires the consent of all the owners of the trade secret.  Sometimes joint ownership can make maintaining secrecy difficult, however, which if compromised could jeopardize the trade secret status.  Although in some contexts, joint owners may have an obligation to one another to keep a trade secret confidential.

Joint Ownership of a Trademark

While joint ownership of trademarks is possible, it is somewhat unusual in that joint ownership is counter to the fundamental purpose of a trademark, which is to serve as a designation of origin from a single entity or person.  A more common strategy is a jointly owned single entity owning the mark.  When there is joint ownership of a trademark, however, as with copyright and trade secrets, joint owners of a trademark likely have to account to one another for profits related to the mark.  To exclusively license a trademark requires the consent of all the owners of the trademark.

Other Issues of Joint Ownership of Intellectual Property

There are a few other general things to keep in mind with regard to joint ownership of intellectual property.  As with the status of joint ownership itself, the parties can modify many of the default rules by addressing the particular issues in a contract, subject to certain legal restrictions such as those related to antitrust.  For example, the parties can decide that only one party is in charge of registration, maintenance, and prosecution of the intellectual property and that the parties must share all royalties in a certain manner (e.g., 70/30).

In addition, the default rules outlined above are quite different in many foreign countries.  For example, in Canada and the U.K., in the absence of an agreement to the contrary, a joint owner of a patent, while having the right to exploit the patented invention, has no right to license it to a third party without the consent of the other owners.

While joint ownership makes sense in certain contexts, many times it does not.  Often joint ownership sounds good in concept at a very high level, but when emerging companies understand the implications of joint ownership of intellectual property they frequently try to avoid it or they contract out of many of the default rules.

July 26th, 2011 by Matt Storms |

 
 

5 Responses to “The Confusing World of Joint Ownership of Intellectual Property”

  1. Jon St. Pierre Says:

    I wondered what the outcome would be if a co-owner of a copyright attempted to assign a co-owned copyright to a third party absent permission from their co-owner? Would the assignment simply fail?

    Thanks,
    Jon

  2. ron golbus Says:

    i own a company and hired a graphic artist over an 8 year period of time to co create a brand for my firm. I was involved as an owner of my firm with every design concept and was personally involved in every design from concept to completion. My graphic artist who is a sub contractor says he owns the designs that we co created but my understanding is if designs are co created that there is equal ownership…I also understand that work for hire which is how I characterize the relationship as there was no contract regarding same takes precedent over the issue and the designs are my firms’ and not the property of the designer. any thoughts. sincerely, ron golbus rong@graphicencounter.com

  3. Jonathan Fritz Says:

    @Ron, generally speaking a person who creates a copywritten work is the author and therefore owns the rights associated with that work. However, in the case of “works made for hire” the entity for which the work was created is the author. It can be a complex analysis in determining whether a work is made for hire. Generally works created by employees are works made for hire, as well as works with others where there is an explicit written agreement stating that it is a work made for hire. The following U.S. Copyright Office circular may be helpful: http://www.copyright.gov/circs/circ09.pdf Additionally, copyright law allows for more than one person to create a joint work and be co-owners of the joint work. Depending upon the particular facts there may be a question as to whether the designs are works made for hire, and whether there is co-ownership of the copyrights. Therefore, it is important to consult with an attorney that specializes in copyright law to advise you.

  4. layaway Says:

    I am a partner in a venture. My partners were supposed to go and get investors. So I could lead a team to help me build the software. As part of the sweat equity I provided working protoype. The potoype fullfilled my sweat equity. My partners kept asking me for a more work claiming that needed to show more to get funding. I did this with the intent to help them get funding not to build the software for free. I eventually stopped because I realized they were not trying to get funding. I built a solid framework and would change it and leave this partnership. My partners say they own what I wrote. The initial concept was theirs but the software design and development is mine. I built the system with my own computer using software licensed to me. do they have a claim to the software? I was never compensated.

  5. Matt Storms Says:

    @layaway, the answer is likely found in the agreement(s) that you have with the company. Often, companies enter into invention assignment agreements with founders and employees that address the issue. Sometimes, a subscription agreement for the stock a founder receives in the company (that’s a form of compensation) will address the initial contribution of intellectual property such as code, designs, ideas, etc. It may be prudent for you to consult a local attorney to address your individual situation. Good luck.

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