Growing a business is complex, and sustaining an acceptable level of growth can be challenging. As a result, businesses often participate in joint ventures or collaborative engagements to acquire or maintain market share value. Such arrangements can be formal or informal for a single set project or period. However, there are risks associated with entering such agreements without understanding their consequences. This article will discuss how intellectual property (IP) and joint ventures work together.
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What is Intellectual Property?
Intellectual property is not tangible like real property such as land. Rather, it is the term given to something that is:
- created;
- invented;
- designed; or
- written by an individual.
The types of intellectual property that may be relevant to your joint venture include:
- inventions;
- patents;
- designs;
- circuit layouts;
- trade secrets;
- know-how;
- data and formula;
- business names;
- internet domain names; and
- confidential information.
As an owner of intellectual property, you enjoy the exclusive right to:
- use the intellectual property;
- commercialise the intellectual property (for example, licence or assign your intellectual property for others to use under agreed terms); and
- enforce your intellectual property rights against those individuals and entities that may steal, copy or substantially recreate your intellectual property without your permission.
Background Intellectual Property
‘Background intellectual property’ is IP that is available to the collaborating parties during the term of the project or throughout the length of the engagement. It consists of intellectual property that you “bring to the table” instead of intellectual property that you create by collaborating with the other party.
This can include IP:
- you create before the date of the engagement;
- you created separately and independently of the collaboration or joint venture after the date of the engagement; and
- that an independent party has created after the date of the engagement, which is made available to the collaborating parties to undertake the project or throughout the term of the engagement.
Project-Specific Intellectual Property
‘Project-specific intellectual property’ is the IP that you create with the other parties during the project or the term of the engagement.
When entering into collaborative or joint venture agreements, it is essential to distinguish between background intellectual property and project-specific IP. You should confirm that background intellectual property remains the property of the contributing party to the exclusion of all others, including the other collaborators and joint venturers. On the other hand, it is standard practice that the parties jointly own project-specific intellectual property to the agreement.
Transferring Your Intellectual Property
“Transferring” your intellectual property may refer to either:
- an assignment of your intellectual property rights to another party; or
- licensing your intellectual property to another party for an agreed term or purpose.
An assignment is a sale and transfer of your intellectual property to a third party. Upon an effective assignment of intellectual property, you give up your:
- rights;
- obligations; and
- claims to your intellectual property.
An IP Assignment Agreement usually records this agreement. On the other hand, a licensing agreement may arise where you allow another party to use and commercialise your IP under licence for a limited purpose or time in exchange for consideration. A licence does not create a transfer of property, and you can still issue enforcement proceedings against parties who breach the terms of the licence.
Suppose you are on the receiving end of an assignment or licensing agreement. In that case, it is vital to remember that the assignor (the owner who is assigning their intellectual property) or the licensor (the owner who is licensing their intellectual property) is the actual owner of the intellectual property or has the right to assign or licence the property to you.
Limiting Liability in Collaborative and Joint Venture Arrangements
When sharing intellectual property under a collaboration or joint venture agreement, it is important to consider how you can limit your liability. In joint venture agreements, this will vary depending on your arrangement with the other party. However, it is common to include:
- disclaimers;
- warranties; or
- limitations of liability.
Primarily, it is essential to ensure that any background intellectual property is the original work of the contributing party and does not infringe the intellectual property rights of third parties. Additionally, suppose the background intellectual property is made available under a licence. In that case, the contributing party has a valid licence to use the background intellectual property in the manner intended under the collaboration or joint venture.
Key Takeaways
When entering into business relationships or joint ventures, it is crucial to know the status of your IP, what rights you have and how you can protect your IP throughout the joint venture arrangement. It would help if you also decided how to share your intellectual property with your business partners. Indeed, you must ensure that you set this out in any written agreements or contracts you sign.
If you need help understanding your IP and joint ventures, our experienced trade mark lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Background intellectual property is intellectual property that you “bring to the table” instead of intellectual property created through collaboration with the other party or as part of the joint venture agreement.
It is a good idea to prepare written agreements setting out the terms of your engagement, how each party may use the background intellectual property and what happens to the project-specific intellectual property once the agreement ends.
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