Whether you're running a business or working as an individual creator, it is important that you understand the complexities of joint ownership of intellectual property rights to make informed decisions.
To help, our intellectual property solicitors will explain the rules, benefits, risks, and ways to handle disagreements when it comes to shared ownership of intellectual property rights.
Contents:
- What are the rules on joint ownership of intellectual property rights?
- Confidential information
- Joint intellectual property ownership agreements
- What are the advantages of joint ownership of intellectual property?
- What are the risks of joint ownership of intellectual property?
- What happens if joint owners disagree on the use of their intellectual property?
- Enforcing jointly-owned IP
- Summary
What are the rules on joint ownership of intellectual property rights?
Copyright
The first owner of copyright is generally the person who creates a work. If two or more people collaborate in creating a single work—a computer program, for example—joint creators will become joint owners.
If the collaborators produce something in which their contributions are distinct, such as an encyclopedia or a song (which comprises music and words), there are multiple copyright works in which each individual creator will have independent nights. It's not joint ownership but it still calls for an agreement between the various participants, to determine how royalties will be shared as well as other matters. A licence of a joint copyright work requires the consent of all the joint owners, which might make it very difficult to exploit. Agreeing how to exploit the work in advance, and documenting the terms of that agreement, is helpful—but it is hard to predict just what you will need to cover, and if the work turns out to be a valuable property the likelihood of disputes about the agreement will increase.
Design right
Just like copyright work, a design may be created by more than one designer working together. It's important to ask whether they contributed to what the design right protects (original features of the appearance of an article) and not some other aspect of the article concerned—the way it works, for example. If a design is jointly owned, the same restrictions apply to the rights of the co-owners as they do for copyright.
Registered designs
When a design meets the requirements for registration (novelty and individual character) it may gain extra protection by being registered. Two or more people can be joint owners of the design. Joint owners of a registered design should have a written agreement about who can do what, in what shares the rights are held, and other matters.
Patents
It is common to find patents for inventions that have been devised collaboratively, and the law recognises that co-inventors may file patent applications together. Each is entitled to an equal, undivided share of the patent or application, and each co-owner may work the patent for their own benefit. However, they may not licence, assign, or mortgage their share in the patent without the other co-owners’ consent.
A joint ownership situation could also arise because a share in the patent is transferred to another party. Giving a share in your patent to someone who lends you money or invests in your business is a bad idea: they would be entitled to work the invention, but more importantly could also stop you from licensing the use of the patent. Instead of giving away a share, grant a mortgage instead.
Trade Marks
It is possible for two or more parties to apply to register a trade mark, or for a share to be assigned to another party. Generally, this is not something to do lightly, as it dilutes the ability of the trade mark to identify your business in the market place—but an assignment may be limited to a geographical area, or to only some of the goods or services, for which the trade mark is registered. In each case, the parties need a watertight agreement to maintain any boundaries they might have set.
Fragmented use of a trade mark by multiple owners could mean it becomes misleading and potentially vulnerable to revocation. Each co-owner has a vested interest in being able to control what other co-owners do with the trade mark.
Each co-owner of a trade mark may use it themselves, but may only assign or licence their rights with the consent of other co-owners.
Problems with jointly using a trade mark could be overcome by creating a joint venture company to own and use the trade mark.
Confidential information
Confidential information is not truly a form of property, but it is so closely related to IP that it must be considered here. If two parties have the same confidential information, there is a real danger that it is no longer confidential. A written agreement prohibiting the parties from disclosing the information to anyone else is essential to preserve its status.
Joint intellectual property ownership agreements
It is important to have an express agreement in place to regulate the use of any jointly-owned intellectual property. This must also cover not only IP that exists at the date of the agreement, but also any IP that is created subsequently. Our intellectual property solicitors can prepare a joint IP ownership agreement for your situation.
It is normal in many agreements, such as joint ventures, to divide IP into background IP (which the parties bring to the project from their own resources) and foreground IP (which is created by the joint venture). Identifying what IP falls into each of these categories is an important starting point.
A better arrangement might be to give parties licences to use IP rather than making them joint owners – one party could own the IP, avoiding joint ownership problems, and grant perpetual, irrevocable, and perhaps royalty-free licences to the others.
What are the advantages of joint ownership of intellectual property?
Joint ownership of intellectual property is rarely a conscious choice. It arises collaborators formalise their arrangements. If the alternative is for one party to own all the rights in the product of collaboration, joint ownership might be one way to recognise the contribution of the other party or parties: and offering a stake in the ownership of intellectual property could be an effective way to attract an investor. In each case, though, consider carefully what joint ownership will allow the other party to do with the intellectual property, and ensure that a comprehensive agreement is in place to prevent other co-owners from doing things with their intellectual property without your approval.
What are the risks of joint ownership of intellectual property?
If two people own a piece of tangible property together – a motor car, for example – they both have the right to use it: but they cannot exercise that right at the same time. This is not the case with an intangible asset like intellectual property, as multiple owners can work a patent, exploit a copyrighted work, or use a trade mark, at the same time. But that is not to say that they can do so without them creating problems.
A patent confers exclusive rights to the owner. Normally this means that the patentee has the market to themselves for a limited time, but if the patent is jointly owned it means there is potentially someone else in the market. That severely restricts the ability of both parties to make the sort of profit that is needed to justify their investment in research and development.
Where copyright works are subject to collective licensing arrangements, which is how composers earn a large part of their living, the system is well-adapted to dividing royalties between copyright owners – although there are still plenty of disputes about who owns the copyright, and in what shares. But if a work only has one author, sharing the copyright with others could create problems. If, instead of granting a licence to the publisher, a well-known author gave away a share of the copyright, you could have two editions of the same book in the shops at the same time.
Trade marks distinguish the goods or services of one trader from those of others – but what if they don’t? No-one gets confused between VW’s Polo car, Nestlé’s Polo mints, or Ralph Lauren’s Polo clothing line. But it’s a different matter when the goods or services are similar. If two or more businesses own one trade mark, consumer confusion becomes unavoidable.
Just like co-owners of a car, joint owners of intellectual property rights will need to make an agreement of some sort to regulate the use of the property.
What happens if joint owners disagree on the use of their intellectual property?
Given the problems surrounding jointly-owned IP, disagreements are hard to avoid. Because the rights of joint owners are enshrined in law, there is little mileage in relying on the relevant law to offer a solution, unless one of the joint owners is doing something that can only be done with the consent of the others such as granting licences to third parties.
Before you can think about trying to resolve a disagreement with another joint owner, there has to be an agreement between them. It would be possible to agree on how to deal with a dispute after it has arisen, but that is far from being the ideal time to try to sort the problem out – all parties will have entrenched positions. This is a scenario that has to be dealt with before it becomes reality.
An agreement between joint owners of IP should address which of the parties can do what with the IP, where (in what territory), and perhaps also when. The parties should also deal in their agreement with resolving disputes. They should agree on which jurisdiction’s law should govern the agreement, and which courts will hear disputes.
Enforcing jointly-owned IP
Not all the joint owners of a piece of intellectual property must agree before they may sue for infringement, they must generally join the others as parties to the litigation. That could be either as a claimant, if they are co-operative, or a defendant if they aren’t: and if they are joined as a defendant, they generally will not become liable for costs unless they take part in the proceedings.
Any damages awarded for the infringement will be apportioned between the owners according to their share in the IP. A joint owner who does something like granting a licence without the consent of the other owner or owners commits an infringement and the others who own the IP with them will be able to sue for infringement.
Summary
If you share ownership of intellectual property with someone else, it's important to have a clear agreement in place to define each person's rights and responsibilities. Our experienced intellectual property solicitors can draft bespoke, legally binding agreement for you. We can also assist if there's a dispute over jointly owned intellectual property.
