Collaborations often drive innovation when complementary forces work in harmony, like Yin and Yang. The situation may, however, turn tricky when the taijitu (the yin-yang circle) becomes commercially valuable. Such is the case of intellectual property assets which have been created by more than one mind or created in collaboration. Joint ownership of intellectual property ("IP"), be it patent, trade mark, copyright or designs or any other form of IP, is an arrangement of shared ownership and control, primarily opted when multiple stakeholders contribute to the development of the property created. Such an arrangement of sharing intellectual property rights may be entered into even when either of the parties entering joint ownership are not the authors/inventors/creators.
One of the foremost advantages of joint ownership of IP is the ability to pool in and share resources, including but not limited to capital, expertise, and equipment. An individual (or single entity) may have all the innovative ideas in the world but may not have adequate resources to work upon such ideas and create an IP. By collaborating with each other, the parties are able to undertake larger and more expensive projects than they could individually. A classic example of this is a research and development collaboration between an educational university and a company seeking to use the expertise of the university for IP creation. On top of that, shared risks under this arrangement reduces the financial and legal burdens for each party. Such joint ownership also opens doors to diverse markets and opportunities as each co-owner comes with their own network, distribution channels, and business connections. This enables the product or innovation to be commercialised better.
The advantages of joint ownership of IP can easily be overshadowed by the complexities around it if the collaboration agreement is not drafted cautiously. To avoid any potential complications, it is important that the agreement clarifies important aspects like what each party brings to the collaboration, the liabilities, how rights in the jointly owned IP (foreground IP) are allocated, dispute resolution mechanisms, confidentiality and exclusivity provisions. More often than not, ownership of background IP (IP which is already in existence at the time of execution of the collation agreement and is used for creation of foreground IP) is retained by its original owner and only licensed for the purpose of the agreement. In addition to background and foreground IP, ownership of modifications to or derivatives of the background IP is also a contentious issue in case of collaboration agreements. There is a fine line between foreground IP and derivate IP, which can be made clearer by defining the foreground IP to include the expectations from the collaboration. Any modification made to the background IP for creation of the foreground IP is the derivative IP and ownership of the same can be negotiated between the parties at the time of entering into the collaboration agreement.
Addressing the elephant in the room, it is paramount to clearly lay down how the IP will be commercialised: which party has the right to license the intellectual property rights, guidelines around licensing and transfer of intellectual property, license fee and profit sharing. Conflicts around decision making can take toll on the effectiveness of the collaboration, and hence it is advisable that the goals and strategies of the parties are discussed beforehand. It is also advisable to specify in the agreement how the costs towards registration, maintenance and enforcement of intellectual property rights will be borne. If not set out at the outset, these issues may lead to a conflict between the co-owners and defeat the purpose of joint ownership.
It is worthwhile to consider and incorporate exit strategies into the collaboration agreement. Exit of a co-owner is a multifaceted process that can have significant legal, final and operational implications for the remaining co-owner(s) as well as the IP concerned. Common considerations that may be looked into at the time of drafting the collaboration agreement are manner of valuation of IP, and ownership transfer options like buyout provisions and right of first refusal. The remaining co-owners may also look at executing an exit agreement with the exiting co-owner which include reasonable non-compete, confidentiality and non-disclosure agreements. Having these safeguards in place can ensure smooth transition and protection of rights of all parties.
In addition to the above generic issues, there are certain aspects of joint ownership which pertain to specific kinds of IPs. With respect to trade marks law in India, a registration granted to joint owners can vest in the joint owners together and neither of the parties can exploit any rights to the exclusion of the other. Upon dissolution of the collaboration, the trade mark rights also cease to exist unless the same have been transferred under mutually agreed terms before such dissolution. Under the patents law, unless agreed otherwise, each co-owner of a patent is entitled to equal and undivided share thereof. Moreover, while a co-owner of patent cannot assign its ownership interest or grant a license of the patent without the consent of the other co-owner(s), he is at liberty to file an infringement suit without making the other co-owner(s) a party to the suit or being answerable to them. This provision can significantly affect the rights of the co-owner(s) in a case where the patent is declared as invalid, or the claims thereunder are narrowed. The co-owners are also bereft of a share in the damages or compensation awarded in the suit, if any. Interestingly, these provisions regarding rights of co-owners of patent can be rendered inoperative if the collaboration agreement is crafted to expressly say the contrary.
To sum up, while joint ownership of IP can foster creativity and allow pooling of resources and expertise, it comes with its own set of complexities. These complexities can be addressed head-on by effective communication, thorough agreements, and defined roles for each party involved. Accordingly, properly structured agreements are necessary to prevent conflicts over usage rights, decision-making, and revenue distribution. Ultimately, joint ownership, when managed with diligence, can result as a powerful tool for innovation and joint growth.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
