|Services:||Corporate & Commercial, Intellectual Property & Technology|
|Industry Focus:||Agribusiness, Life Sciences & Healthcare|
What you need to know
- When parties collaborate and produce valuable intellectual property, questions often arise about how that IP should be owned.
- The concept of joint ownership can be more complex than it sounds, triggering unexpected consequences and a range of issues around the management, administration, enforcement and commercialisation of the jointly owned IP.
- Those contemplating a joint ownership arrangement should think carefully about whether it is the best outcome to fit their circumstances, or whether an alternative approach might be more practical.
It's hard to ignore the increasing focus on effective R&D collaboration as technology advances more swiftly, and both Federal and State governments seek to drive innovation. With mainstream media outlets recently featuring lively commentary and debate about how best to encourage more (and more effective) collaboration between the academic and corporate worlds, the issue is a hot topic for many Australians.
But a common challenge in getting collaborative research off the ground is negotiating the ownership of, and rights to use, resulting intellectual property (IP).
Joint ownership may seem a 'fair' compromise, especially to parties who are eager to finalise a collaboration agreement so that research can commence. However, the implications of agreeing to joint ownership are complex and can:
- produce results that differ drastically from what the parties expect or would consider 'fair'
- cause administrative nightmares for those managing or enforcing the joint IP
- create obstacles when it comes to commercialising or allowing third parties to use jointly owned IP.
Joint ownership of IP is not the only way to deal with the output of collaborative work – there are alternative models that are often more workable in practice and can achieve a fairer outcome.
What does joint ownership really mean?
This depends on the nature of the IP right. It also depends on the country under whose laws the IP exists – for the purpose of this article we focus primarily on the position in Australia.
Patents, industrial designs, circuit layouts or plant varieties
A joint owner has the right to an equal undivided share in the IP and the right to exploit the IP for its own benefit without accounting to the other joint owners.
However, a joint owner cannot grant a licence or assign its interest in the IP without the consent of the other owners. From a practical point of view, this means a joint owner can use the IP itself but cannot independently authorise others to use it.
This differs from the position for patents in the United States. There, the agreement of all joint owners is only required for the grant of an exclusive licence. In some cases a joint owner can freely sell or otherwise transfer its joint interest – in other situations a co-owner can veto the sale.
Two or more parties connected in the course of trade may register a trade mark together in Australia. However, each joint owner does not have the right to exploit that mark alone. A joint owner may only use the trade mark if they are using it on behalf of all owners, or in relation to goods and/or services with which they are all connected.
Again, a joint owner of a trade mark cannot licence or assign its interest in the trade mark without the consent of the other co-owners.
Each co-owner of copyright has a right to an equal share, but does not have the right to independently exploit the copyright without the consent of the other co-owners. This means a joint owner cannot make a copy of the work, or publish the work, or do any other acts comprised in the copyright, including licensing those rights, without the other owners' consent.
Aside from causing administrative nightmares for those managing the IP, the complexities of joint ownership can also bring about commercial impracticalities or inefficiencies. For example, there may be circumstances in which it would be overly burdensome and time-consuming for one co-owner to have to seek all others' formal consent before granting a simple licence that is clearly in line with all owners' interests and expectations.
To achieve a 'fair' outcome and facilitate a practically workable relationship between joint owners, the co-owners need to reach agreement (preferably from the outset) about who can do what with the jointly owned IP, and subject to what conditions.
Do joint owners of IP automatically share the commercial benefits equally?
For example, in Australia a co-owner of a patent may exploit the invention that is the subject of the patent without needing to pay anything to another co-owner.
If co-owners wish to share any financial benefits obtained from exploiting the IP, they must agree on how those shared arrangements will work. An industry co-owner will invariably be better placed to exploit the IP itself (and it won't have to pay anything in order to do so, unless the collaborators have explicitly agreed otherwise). If the other co-owner is a research organisation which hasn't negotiated appropriate financial returns from its industry collaborator, it may find it misses out on commercial returns from the initiative, as it may not be able to engage another industry partner to help exploit its joint ownership interest.
Relative contributions of joint creators
Where IP is jointly created by individuals from academia and industry, the relative value of those creative contributions may differ significantly. However, in most cases the rights of co-owners are exactly the same – regardless of whether their relative contributions were 1% or 99%, and regardless of whether their stated ownership interest is 1% or 99%.
IP management headaches
Registered IP rights such as patents can be costly and time consuming to manage. Managing the patent application process, with its critical deadlines, can be challenging if a co-owner is uncooperative or simply not interested. To avoid disputes, any jointly owned IP should be governed by contractual terms between co-owners that clearly set out who will be responsible for matters such as:
- instructing patent attorneys
- overseeing the day-to-day management of the application and registration process, and covering related costs
- consultation and consent requirements for key decisions.
Contractual terms should also include clear mechanisms for resolving differences of opinion regarding management of the IP rights.
Enforcing jointly owned IP
Again, the rules governing the enforcement of jointly owned IP differ from country to country and between types of IP.
In Australia, if enforcement proceedings are commenced by one co-owner, any other co-owner usually needs to agree to be joined as a plaintiff. If they do not agree, they must be joined as a defendant. While there is no need for co-owners to actively participate in proceedings commenced by another, their names are on the public record as being involved in the litigation.
Aggressive IP enforcement by one co-owner could result in reputational damage for others. Alternatively, a failure of a co-owner to cooperate could limit the ability of another co-owner to itself take action against an infringer. Further, if one joint owner was able to grant a licence of the IP to an infringer without the other co-owners' consent, then the value of that IP to the other co-owners is effectively reduced to nil.
Contractual arrangements regarding the commencement of and involvement in litigation can assist in some respects, however court procedures will generally override to the extent of any inconsistency.
It's not unusual for IP owners to be dragged into product liability lawsuits, particularly in the US. If a co-owner has the ability to exploit jointly-owned IP, the co-owners who are not in a position to commercialise the jointly owned IP should consider taking steps to protect themselves from such suits, which might include obtaining indemnities and imposing insurance obligations on other co-owners.
There may also be adverse tax and other consequences if co-ownership arrangements could be viewed as a joint venture.
If joint ownership isn't the right approach, what's the alternative?
Often, the best outcome can be achieved by allocating IP ownership to just one party in a collaborative initiative, who then grants the other parties appropriate rights in the context of their relationship and commercial goals. The party obtaining ownership may vary depending on the nature of the IP, geographic region or market segment. At the end of the day, the other parties may not need ownership if they are satisfied with the rights granted to them, which might include licences to use the IP and contractual rights to share in commercialisation revenue.
However, if joint ownership is still the preferred approach, it is critical for the collaborating parties to carefully consider the complexities and consequences outlined above, as 'the default' ownership arrangements may produce inequitable results. To avoid the many pitfalls associated with joint ownership, it's necessary to negotiate comprehensive contractual arrangements and seek professional advice in relation to the respective owners' rights in the IP, including sharing of commercialisation proceeds, exploitation rights, accountability and ability to license or assign the IP.
This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories