Jointly Owned Intellectual Property

Often a place loaded with pitfalls, joint ownership is commonly misperceived to be a “fair” solution for situations involving multiple contributors.  Consider a proposed partnership or merger where both parties want to have the ability to use the patent for any purpose.  One might suggest one party keep the patent and to license it to the other party without any fees or royalties for a perpetual period. However, because both parties would like to retain the exclusionary right of a patent, completing negotiations of this point of a contract is not easy.

The most common form of IP allocation, therefore, in collaborations, is joint ownership, eliminating license agreements and sharing exclusionary rights.  This, of course, requires joint registration with the USPTO. But the solution of shared IP assets is problematic. A common misperception of jointly owned IP is that it allows each party to use the IP freely, that no one else can use the IP, and that it’s fair (not favoring either party). In reality, each joint owner may have the duty of accounting to the other joint owner. Each owner may or may not have the ability to license to third parties or sue third parties for infringement without the consent or cooperation of the other joint owner. Essentially, to join in any suit enforcing the patent, all the joint owners must join. This is a major problem, as not all parties may have shared interests in litigation. Additionally, depending on the nature of the IP and the resources of each party, joint ownership would favor or be problematic for at least one party.

One should also know that the default rules vary from one kind of IP to the next, such as the duty of accounting for copyrights but not patents.

Also, the rules vary based on jurisdiction; for instance, joint owners of U.S. patents can license to third parties without the other’s consent, while Canadian and UK patent owners cannot.

As a general matter, joint owners should say “no” to joint IP; it is often unfair and, of greater importance, unworkable. There is typically a better way to structure the allocation of rights for shared IP assets. It is important to conduct due diligence by reviewing the relevant agreements, learning the facts, and performing any necessary legal research. Be sure to cover your bases with explicit representations and warranties about any agreement.