Resistance is futile: all paths lead to co-ownership of IP

You have probably encountered this scenario.  A university, a small company and a large company are engaged in a research collaboration.  The parties have entered into a written collaboration agreement.  As one might expect, the agreement addresses the question of which of them will own any intellectual property arising from the collaboration, which is defined as Foreground IP.

During the negotiation of the agreement, various proposals were made on the ownership of Foreground IP.  The university suggested that a party would own any IP in improvements of the technology that it brought to the collaboration.  Unfortunately the parties couldn’t agree what would happen if the improvement related to more than one party’s technology.  The large company suggested that it would own all the Foreground IP and license the other two parties.  The small company’s investors wouldn’t accept this solution.  The small company suggested that the three parties should be joint owners of the Foreground IP.

The university’s technology transfer manager vaguely recalled that her patent agent had recommended against having joint ownership, but she couldn’t remember why.  The parties briefly discussed carving up ownership of Foreground IP according to fields of interest, but the parties couldn’t agree on the fields, and anyway what would happen if the IP was useful in more than one field?

In the end, it was agreed that a party would own any Foreground IP that it generated.  This was thought to be the fairest and simplest solution.  Someone pointed out that some IP might be jointly created, so as a fall-back it was agreed that if more than one party generated an item of IP, it would be owned by those parties jointly.

The main problem with this solution, in IP Draughts’ view, is that once the parties are working together in their collaboration, there will be a tendency to assume that any IP generated in the collaboration was the fruit of collective thinking by all of the parties’ scientific representatives, and therefore should be jointly owned.  The parties may be influenced in this by the approach taken in relation to authorship of scientific publications, where all the contributors (and sometimes people who were not contributors) tend to be added as co-authors of the paper.

It will take a brave and clear-headed party to say, thanks for your contribution, it was useful but at a relatively low level, not intellectually distinguished enough to claim ownership of IP.  Of course, this should not be how the parties think, as they should treat IP ownership as a technical legal issue that has no bearing on the worthiness of the scientific contribution.  But in IP Draughts’ experience, parties do not always take this lofty, dispassionate view; he has advised on several, acrimonious disputes over inventorship and ownership of IP arising from scientific collaborations.  Thus, what is originally conceived as a fall-back for the rare case (joint ownership) may become the de facto standard approach during the collaboration.

In IP Draughts’ view there is nothing inherently wrong with parties agreeing joint ownership, as long as they include detailed provisions in their agreement as to how the joint IP is to be owned, protected, enforced, defended, managed, and commercialised, and how revenues from the commercialisation are to be allocated.  At a practical level, parties do not always address these issues in sufficient detail, and if that is likely to be the reality, then it may be better to avoid joint ownership.

There is insufficient space in a blog article to discuss all of these provisions.  Some key legal issues that should be taken into account include the following:

  1. The parties probably intend co-ownership rather than joint ownership.  Under English law these concepts are different.  For example if a husband and wife buy a house together, they can choose whether to be joint tenants or tenants in common.  If they are joint tenants, when one of them dies, the other automatically becomes the sole owner.  If they are tenants in common, the deceased person’s share passes to the beneficiary under their will.
  2. If the parties don’t specify differently, they are likely to own the IP in equal shares.  For example, section 36(1) of the UK Patents Act 1977 provides: “Where a patent is granted to two or more persons, each of them shall, subject to any agreement to the contrary, be entitled to an equal undivided share in the patent.”  Thus if there are 5 inventors from party A and 1 inventor from party B, A and B will each own 50% of the patent, rather than having a split of 5:1.
  3. Under the UK system, and in most countries outside the US, a co-owner cannot assign or license his share without the consent of the other co-owner(s).  In our example, the large company may be able to generate revenue from the IP without licensing or assigning it, ie by using its own manufacturing, distribution, marketing and sales resources.  By contrast, the university is unlikely to be able to generate revenues without licensing or assigning.  If the parties do not address the question of commercialisation and revenue sharing in their agreement, and merely state co-ownership, then the university may be left at a relative disadvantage.

3 Comments

Filed under Intellectual Property

3 responses to “Resistance is futile: all paths lead to co-ownership of IP

  1. Comment from IP Draughts’ friend Alex Yule posted on LinkedIn: “And do I not recognise the scenario you’ve laid out……..Never easy, balancing diplomacy with pragmatism but as a (so far) unbroken rule, I would never agree to shared ownership for many reasons, not least the complications it causes for future licensing. Grant of royalty free access for defined (non-commercial or non-competitive use) is a reasonable quid pro quo”

  2. ct

    Joint ownership in the international context is a potential disaster… except for IP litigators.

  3. Alasdair Taylor

    Thanks Mark. This made me guffaw: “The university’s technology transfer manager vaguely recalled that her patent agent had recommended against having joint ownership, but she couldn’t remember why.”

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