Behind most great products there will have been a great team, and behind that great team, great ideas. But of equal importance is a great contract. That is, a contract that clearly sets out the parties’ respective rights to own and exploit the intellectual property required and generated by a project, and their obligations to maintain and protect it.
There are many potential pitfalls when it comes to collaboration. To ensure that you receive the benefits that you are expecting and avoid costly legal disputes along the way, it is important to ensure that you have considered and addressed these potential pitfalls upfront.
How do issues commonly arise?
Many countries, including the UK, provide incentives for collaborative research or development. This might include government subsidies (for example through Innovate UK) or tax relief (such as corporation tax deductions for qualifying R&D expenditure and the Patent Box (see here)), as a way of promoting business growth. There are also broader business benefits of collaborating, such as gaining a competitive edge, de-risking investment in research, monetising existing technology, developing new and more advanced products and getting them to market quicker.
Parties might contribute finance, pre-existing intellectual property rights (IPRs), know-how, research, marketing, or some other expertise to the venture. The IPRs generated by the venture, and their successful exploitation, will be key to the success of the collaboration. But it is easy to make the wrong assumptions about the rights that you will have on the basis of the contribution that you have made. Such assumptions are a frequent cause of lengthy and costly legal battles that can also kill off the chances of further, profitable collaboration.
When do I need to think about this?
Collaborations are not always obvious and can evolve out of informal working arrangements and other contractual relationships. For example, joint ventures, joint development agreements, partnerships, strategic alliances, co-marketing arrangements, mutual licences and even NDAs could all potentially disguise a collaborative relationship between two or more parties, without the stamp of “collaboration” or “research and development” upon them.
Moreover, IPRs can be generated during the very early stages of sharing ideas or expertise, sometimes before agreements have been entered into.
What are the common issues?
Depending on the complexity of a collaboration arrangement and the number of parties involved, working out which party gets which IPRs can be a challenge. Some of the common themes and issues that give rise to disputes are as follows:
- your existing/background IPRs: Ensure that you continue to own your existing IPRs and that your rights to use and exploit them are not diluted further than necessary in licensing them to others;
- the collaborator’s existing/background IPRs: Ensure that you have an appropriate licence to use your collaborator’s existing IPRs for the purposes of the collaboration and/or for exploitation of the resulting product or technology;
- new/foreground IPRs developed during the project: Depending on the parties’ bargaining positions and size of contribution, different ownership rights and licences of foreground IP may be granted to different parties. Be clear about who owns the foreground IP and whether it is owned outright or jointly with others. If you do not own it, ensure that you have the scope of licence you need for its use and exploitation, including the right to sub-license to third parties if needed;
- registering and maintaining IPRs: Consider who will take responsibility for registering and maintaining new and existing IPRs and for defending legal rights in them. If no one does, then the legal rights may lapse, or be found to be ineffectual when you need to call on them. Registration is particularly important for new inventions in competitive fields, where a patent’s monopoly right to use the invention will be granted to the company that files its application first;
- integrity of IPRs: Seek reassurances that your use of a collaborator’s contribution will not subject you to third party claims or jeopardise your existing IPRs; and
- confidentiality: Ensure that all applicable confidential and technical information and know-how is kept secret and not disclosed to third parties. Inventions will not be patentable if they are disclosed other than under a confidentiality agreement and leakage of know-how and ideas can threaten the realisation of a project.
What if I don’t have the rights I need?
If you do not own or have an appropriate licence to use the IPRs that you rely on, your use and exploitation of it will infringe the owner’s rights. The consequences of infringement can include:
- an injunction to immediately cease use of the IPRs;
- payment of damages or an account of profits to the IPRs owner or third party rights holders;
- costly product recalls;
- customer claims if you have given contractual reassurances about the use and ownership of IPRs in products and/or if the IPRs owner brings additional claims against them;
- wasted resources in participating in the collaboration and any further internal development;
- difficult negotiations if collaboration partners leverage your unlawful use of their IPRs to obtain a greater contribution from you or broader rights to use your IPRs;
- reputational damage both internally and externally; and
- difficulty obtaining future research and development funding.
Depending on the terms of your agreement, in some circumstances it may be possible to argue that you have an implied licence to use the contributor’s IPRs and/or that IPRs developed together is jointly owned. However these arguments are context specific and can be exceptionally difficult (and therefore expensive) to prove in the absence of clear terms.
Unfortunately, disputes over IPRs are not unusual, particularly if the IPRs developed during a collaboration are a great success. Friendly collaborative relationships founded on mutual objectives and benefit can soon turn sour when profits are threatened. Aside from avoiding disputes, having clear rights and entitlements can be helpful in leveraging the collaborative relationship for new opportunities and projects.
Joint ownership disputes
Joint ownership is one possible way to deal with jointly-developed IPRs. But this can often be a trap. Generally in the UK, a joint-owner of IPRs can only exploit the IPRs itself and cannot:
- license or assign them to others without the agreement of the other owner or owners; or
- bring an IPR infringement claim against a third party, unless the joint-owner is also joined to the proceedings or the court agrees that they do not have to be.
To avoid disputes, the collaboration agreement should set out clearly what a party can or must do or not do with respect to any jointly owned IPRs.
There is also a strong benefit in registering (and in some cases a legal obligation to register) new interests in IPRs obtained via the collaboration, such as licences of registered rights. Registration ensures that your rights are enforceable against third parties and, in certain circumstances, that the full costs and expenses of infringement proceedings can be recovered.
Getting it right
The benefits of working collaboratively are obvious, but businesses should be vigilant about when collaborations, formal or not, may rely upon or create new IPRs. Collaborators should give careful thought at the outset and document what each of them will be providing and receiving IPR-wise from the collaboration, and what other protections or assurances they might need to ensure that the venture is as successful as possible.