Dr. Sean X. Zhang gave a presentation about handling IP ownership on January 27, 2023. IP refers to intellectual property and can be co-owned. Splitting the ownership of IP can lead to complicated and unexpected situations. This presentation explained three cases illustrating how a firm can benefit or lose when the IP is co-owned by A and B, contrary to what would have been expected when people agreed to “share” the IP. This presentation also compared some patent rights in Canada, the USA, and China. The key to handling jointly developed IP is allocating the benefit obtained from IP properly in view of ownership and control allocation.
Guest Speaker Introduction
Dr. Sean X. Zhang is an Ontario lawyer and a partner in the intellectual property practice group at Dale & Lessmann LLP. Sean is also a patent agent registered to practice before the Canadian Intellectual Property Office (CIPO) and the United States Patent and Trademark Office. He is also a trademark agent registered with CIPO. Prior to becoming a lawyer, he got his PhD degree in physics from the California Institute of Technology. He has done research in the United States, Canada, and Italy. He has also worked as a software engineer in Canada.
1. What is IP, and Why Does It Matter?
IP refers to intellectual property. It is an intangible personal property. It is a significant portion of business assets that can generate revenue and value. IP may include patent, trademark, copyright, industrial design, trade secret, and domain name, among others.
2. What is Split Ownership, and When Can It Happen?
IP can be co-owned. There is split ownership when IP is not owned by a single entity. This can happen, for example, when parties to a joint development did nothing to their jointly developed IP or agreed to share the jointly developed IP as co-owners. This also typically happens in a high-tech start-up when co-founders, who worked together to develop the IP before or shortly after the incorporation of the high-tech start-up company, failed to assign their jointly developed IP to the company. They would be co-owners of the IP that enables the high-tech start-up.
3. Legal Consequences When There Is Jointly Owned IP
Splitting the ownership of IP can lead to complicated and unexpected situations. Each type of IP is under different statutes. IP rights vary in different countries. Relying on what one understands for one country or one type of IP as a guide for all types of IP in all countries can be a mistake.
Exploit without consent from other; not to account
Exploit without other’s consent; not to account
Exploit for own benefit, no consent from other; not to account
May license but require other’s consent; not to share license fees
May license without other’s consent; not to share license fees
May license, without other’s consent; but share license fees
No consent required but must join other owners when sue
Cannot sue if no willing cooperation from all owners
Consent from other owners required when sue for infringement
Jointly owned IP can have lead to unexpected legal consequences.
Here are three examples showing how a firm can benefit or lose when the IP is co-owned by A and B, contrary to what would have been expected when people agreed to “share” the IP:
Example 1: infringer avoid litigation
To “torpedo” the litigation launched by A, the defendant/ infringer has the following options:
(1) get a license from B
(2) ask for the transfer of IP rights from B
(3) ask B to refuse to participate in the litigation (e.g., in the United States).
Example 2: competitor increase market competitiveness
The competitor may have a disadvantage in the business competition because of lack of IP A has. Instead of developing another new product or new IP to compete with A, the competitor has the option to obtain the IP from B through a license or transfer. This way, after obtaining the IP, the competitor can increase its market competitiveness and A’s market advantage due to its IP would disappear.
Example 3: apply for a patent
B’s investment in its products could be protected by patent. But, Eeven if B would like to apply for a patent, without A’s support, B can hardly do so just by itself. When the patent is abandoned, B’s investment will no longer have patent protection.
The above three examples are not uncommon, especially when one owner can benefit a lot through the IP (owner A in examples 1 and 2, or owner B in example 3) but the other owner cannot (owner B in examples 1 and 2, or owner A in example 3). This would provide a motive for the other owner not to cooperate. As a resultTherefore, it is recommended to deal with the IP co-ownership issue as early as possible, at least before a the prospect of huge benefit occurs.
4. How to Handle Jointly Developed IP
The key to handling jointly developed IP is allocating the benefit obtained from IP properly in view of ownership and control allocation. People often confuse three concepts: benefits, ownership, and control. In fact, these three are not the same thing.
The jointly developed IP can be handled by separating the three. For example, the ownership can be allocated to one party, but the benefits can be shared regardless of ownership.
In another example, the ownership can be allocated to one party, but the other party can retain or share control and benefit from it by signing athrough contract by entering into an IP agreement.. Having an agreement also provides an option to handle jointly developed IP consistently in a global scheme.
These two examples illustrate potential ways to handle a jointly developed IP. Of course, the best solution would be to consult a lawyer for your specific situation.
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