Intellectual Property in Joint Ventures: Who Owns What

Introduction

Collaboration is key to any joint venture. However, collaboration can raise concerns about each party’s existing intellectual property and any intellectual property it creates in the course of the joint venture.

Parties often collaborate through a joint venture to explore new opportunities, expand their business, access new markets, gain a competitive advantage and leverage each other’s strengths, resources and expertise. The main benefit of a joint venture is that each party brings in its valuable assets such as its trade secrets, branding or proprietary technology, to ensure the success of the joint venture.

A potential downside of this collaboration, is that if not carefully planned and protected, intellectual property may be unintentionally shared, misused or lost.

This article will explore the different types of intellectual property involved in a joint venture and who retains ownership of the intellectual property.

Background Intellectual Property

Background intellectual property refers to intellectual property that is available to parties collaborating through a joint venture during the term of the project or the length of the arrangement. Specifically, this intellectual property is the intellectual property that is brought by each party to the venture, rather than the intellectual property that is created through the joint venture.

This type of intellectual property includes intellectual property:

1. Created before the joint venture.
2. Created separately and independent to the joint venture after the joint venture has commenced.
3. Created by an independent party after the joint venture commenced that is available to the parties in the joint venture for the term of the project or the engagement.

Typically, background intellectual property will be retained by each of the relevant parties once the project is completed.

A well-drafted joint venture agreement should define and specify how background intellectual property is to be used within the project, how it is to be stored, how it is to be returned and/or destroyed after the project and that it is to be retained by its owner.

Foreground or Project Specific Intellectual Property

Foreground or project-specific intellectual property refers to the intellectual property that is created by the parties during the course of the joint venture and the collaborative activities. Such intellectual property can include new inventions, patents, designs, trademarks, software, research findings, or other creative works.

This type of intellectual property can either be produced / created collectively or individually by the parties in the joint venture, but the main point is that it is created in the course of the joint venture.

It is standard practice that any intellectual property created during the course of the joint venture is jointly owned by both parties. However, a joint venture agreement may specify different ownership terms, such as where the intellectual property is owned by one party that had the primary responsibility of creating it, with usage rights granted to the other party.

When entering into a joint venture, it is integral that the parties distinguish between background and foreground/project specific intellectual property, so ownership of the intellectual property is clear as well as distinguishing who owns any of the intellectual property created during the course of the joint venture.

Limiting Liability in relation to Intellectual Property in Joint Ventures

The sharing of intellectual property, particularly background intellectual property, during the course of a joint venture can come with several risks. As such, it is important to consider how to limit your liability and have this included in any joint venture agreement that you enter into.

Depending on your arrangement with the other party in the joint venture, it is standard that a joint venture agreement include disclaimers, warranties and limitations of liability in relation to background intellectual property.

The purpose of such warranties, disclaimers and limitations of liability is to ensure that any background intellectual property that is being brought into the joint venture is the original work of the party bringing it into the joint venture and that its use does not infringe on the intellectual property rights of any third parties. This is important as if background intellectual property is used that is not owned by the party bringing it to the table and it infringes on a third parties intellectual property rights, both parties in the joint venture will be responsible for any repercussions. Alternatively, if the background intellectual property is not owned by one of the parties but is used under a valid licence, such warranties, disclaimers and limitations of liability ensure that the background intellectual property is authorised to be used in the joint venture.

Conclusion

A joint venture can be highly beneficial for both parties involved. However, effective management of both background and foreground/project specific intellectual property is essential to maximising the benefits of the collaboration. As such, it is incredibly important to define the ownership and usage of intellectual property in the joint venture from the outset to avoid any potential disputes and make the most of any intellectual property created during the course of the joint venture.

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