Intellectual property (‘IP’) can be one of the most valuable assets to a business. It refers to ‘creations of the mind’ such as literature, art and music. If your IP is protected, you can earn recognition and benefit financially from what you invent or create.
But the intangible nature of ideas makes them difficult to protect. It’s even difficult to discern the true ownership of the IP in some cases. Working out who owns the IP in an idea, design, or a logo (for example) becomes particularly murky when the IP was created by a consultant, or in the course of a joint venture.
In this blog, we’ll look at the ways you can make sure that IP ends up in the ownership of the correct person or entity, and it hasn’t transferred elsewhere by some quirk of law, or lack of watertight contractual drafting.
Protecting IP – the general rules
There are three ways that you can protect IP that belongs to you:
- Patents: Patent protect inventions. The owner of a patent can decide whether, and how, their invention can be used by others.
- Copyright: Copyright vests in original literary and artistic works, such as books, music, and films. But it also extends to things like computer games, maps and databases. It protects your work from being copied. Copyright arises automatically as soon as the work is published (or at least created and fixed in the material). You can make it clear that the work is copyrighted, and to whom it belongs by including © [owner] [year]
- Trademarks: Trademarks distinguish the goods and services of a particular entity. Any logo or name with ‘™’ next to it is trademarked.
When it comes to ownership, the general rule is that the creator of the work has first rights to copyright.
However, that rule doesn’t hold fast in every situation. If an employee creates the work in the course of their employment, then usually the rights belong to employer. And if IP is created by a consultant, or in the course of a joint venture agreement, the rules change again.
We’ll look at these messier situations below, and how you can create some certainty in the ownership of new IP, through contractual measures.
Special considerations for consultants
Any IP created by a consultant will be owned by that consultant. It doesn’t automatically belong to the company that engages them.
If you want to amend that default position, so that your company owns the IP in the consultant’s creations, then you need to draft the consultancy agreement accordingly.
You’ll need a clause that expressly transfers the IP in the deliverable to your business immediately upon creation. For additional reassurance, specify that the consultant should co-operate to transfer ownership where required.
Vigilance with Joint Venture agreements
The default position with joint ventures is that the joint venture will have no rights to use the shareholders’ IP and the shareholders will have no rights to use the joint venture’s IP unless the rights are conferred under a separate licence.
In most cases, you will need to draft this licence, which sits alongside (but separate to) the shareholders’ agreement and the joint venture agreement. Within the terms of the licence, you’ll need to agree whether the owner of the IP will earn royalties under the agreement.
A shareholder may want to retain ownership in the developments and improvements that the joint venture makes to the licenced IP. To do so, they might insist on what’s called a ‘grant-back’ clause.
Summary of contractual protection for IP
Depending on the nature of your business, and the protection you need for your IP, there are a number of routes you can go down. These are the contractual mechanisms that can create protection for your IP:
- Intellectual property protection clause to clarify who owns the IP created by a consultant
- Grant-back clause to retain ownership in the improvement of IP
- A licensing agreement to permit other parties to use protected IP in certain, limited ways
- A confidentiality clause in your agreements with consultants
- Non-compete agreements
If you would like any help in navigating the challenges of IP protection, please get in touch with us at SME Comply.
