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.
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 |