Privacy, Technology and Perspective
Joint IP Ownership: Addressing Challenges and Deallocating Rights. This week, let’s delve into joint IP ownership and the importance of addressing deallocation in contracts (or avoiding joint ownership altogether).
Background: Joint ownership of intellectual property (IP) often seems like an attractive idea to parties at the beginning of a relationship. Certainly, it can offer benefits like fostering collaboration. However, it can also create challenges, including ambiguous rights, decision-making disputes, and inconsistent international treatment where different countries have their own rules for joint ownership, complicating enforcement or exploitation of IP rights across jurisdictions.
Further, when joint ownership agreements don’t address deallocation—that is, what happens to the IP at the end of the parties’ relationship—the parties face additional difficulties, including negotiations, legal disputes, and potential loss of IP value. This can be complicated by the underlying IP laws themselves, such as the United States Copyright Act’s “joint authorship” provisions which allow each co-author to exploit the work independently of the other, but with accounting for profits – sometimes a tricky valuation process, as when, for example, one party has made derivative works from a jointly-authored underlying work.
Think hard before agreeing to joint ownership of IP rights: Before agreeing to joint ownership, consider alternatives like IP assignment, licensing agreements, cross-licensing agreements, collaborative R&D agreements, and manufacturing and development agreements. Properly drafted agreements can provide better control over IP assets, reduce disputes, and clarify each party’s rights and obligations.
Confronting Deallocation: For those who already have agreed to joint ownership, but have failed to come to terms on the deallocation of IP Rights, consider the following options to deallocate:
Buyout: One party buys out the other’s interest in the IP, resulting in a clean separation of ownership. A well-drafted buyout agreement should clearly outline the scope of the IP, the transfer of ownership, and any ongoing responsibilities or restrictions.
Division of rights: Split the IP rights between parties, enabling each to manage and exploit their portion of the IP independently of the other. This can be an effective solution when the IP consists of separable components or when parties have different goals for commercialization. When dividing IP rights, it is crucial to clearly delineate the scope of each party’s rights, including the specific IP assets each party controls, any limitations on use or commercialization, and potential royalty or revenue-sharing arrangements.
Licensing or assignment: License or assign the IP rights to one or both parties under specific conditions, maintaining cooperation while pursuing individual profit. Licensing allows the IP owner (licensor) to grant the other party (licensee) the right to use the IP under agreed-upon terms, without transferring ownership. Assigning IP rights, on the other hand, involves transferring ownership of the IP from one party to another. This arrangement may be appropriate when one party is better suited to exploit and manage the IP. Both licensing and assignment agreements should detail the specific rights granted, any limitations or restrictions, financial terms (e.g., royalties or fees), and enforcement responsibilities to ensure a clear understanding of each party’s role in relation to the IP.
Our thoughts: Joint IP ownership can be fraught with issues. Commercializing IP is often simplified by avoiding joint ownership altogether. At a minimum, parties should carefully consider potential challenges and alternatives to joint ownership before entering into any agreement. If still intent on joint ownership, however, parties should ensure that their contracts address issues like deallocation, decision-making, and the maintenance of IP rights. It is easier to deal with those issues before valuable IP is created.
Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.