A large concern for those looking to enter into a strategic partnership is intellectual property (IP) ownership. Protecting your intellectual property – which can easily be the lifeblood of any partnership – is often of the utmost importance to many business executives. Here I will discuss the reasoning behind intellectual property protections as well as the roles they play in partnerships and business success.
Why Establish IP Ownership?
IP is a creation of the mind for which a person can legally apply for a patent, copyright, trademark or other legal right. Examples of intellectual property include intangible assets like discoveries, manuscripts, phrases and designs, to name a few.
Establishing IP has certain incentives, including:
The Good of Society
With the exception of trademarks, the objective of intellectual property law is to promote innovation in society. When a creator discloses an invention or other creative work to society in exchange for exclusive rights to that work, both society and the IP owner benefit. IP ownership protections therefore incentivize inventors and authors to create and disclose their work.
For creators, the ability to gain exclusive rights to IP ownership is a financial incentive to invest further in the research and development of future IP. Additionally, in the case of patents, IP rights can help pay for associated R&D costs.
The World Intellectual Property Organization Treaty and several other related international agreements were created on the notion that the protection of intellectual property rights is essential to maintaining economic growth. However, if the IP unintentionally creates a monopoly, or severely reduces competition, then economic growth may stagnate. Careful consideration is given when determining IP ownership creation to avoid potential monopolies, therefore aiding continued economic growth.
According to Article 27 of the Universal Declaration of Human Rights, “Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.” This has been interpreted in different ways: some see IP as an extension of an individual person and therefore in need of protection, while others believe that IP ownership stimulates social progress and therefore pushes inventors to further innovation. Additionally, there is a third school of thought that believes the creation of IP protection validates the hard work of invention and creation.
Intellectual Property and Partnerships
Interestingly, the topic of IP has also been raised several times in the comments section of a recent Powerlinx article on R&D partnerships. Some LinkedIn members highlighted the importance of IP when it comes to successfully navigating partnerships. For example David Lyons, Director of Business Development, Asia Pacific, James Hardie Australia, wrote about the importance of defining IP ownership before signing a partnership agreement:
For all partners to get value from such partnerships it is essential that IP ownership is figured out before anything is signed – and take care not to agree to joint ownership of IP – it is a bad idea that often leads to conflict – better for one partner to own and the other(s) to have licensed rights than to try to manage the complexity of joint ownership.
As a general consensus, the rights to any IP brought to a partnership from the beginning remain in the hands of their original owners. Any assets created during a partnership need to be accounted for before the partnership starts; this includes dividing ownership and/or establishing licensing agreements. In the case of a joint venture, a new business entity is usually created and IP ownership within that new entity is generally divided on a percentage basis. The percentages of ownership are determined prior to the creation of the venture.
To formally determine rights and ownership of any potential IP resulting from a partnership, members can sign a legal agreement that lays out expectations of IP creation and ownership before any ideas are discussed. As part of the agreement, a corporate attorney can create a “duty of loyalty” to the partnership that would preclude other partners from stealing or selling IP or from creating a competitor that would utilize the IP. This approach is most common for partnerships that plan to use the pre-existing IP of an individual partner.
Some items executives might consider when formalizing IP ownership in a partnership include:
- Any Patents you may already own or may need to budget for
- Copyright protection for any publications or written documents
- Trade secrets
Intellectual property rights take on an added dimension when partnerships take place across borders. In the case of an international partnership, members should file patents and other IP protection in both their home country and the country (or countries) the partnership will operate in. This might result in filing multiple international patents. Anyone looking into IP rights should check with a patent law expert for best practices.
Intellectual Property and Business Success
Something to keep in mind when considering IP ownership rights: IP protection alone does not determine success for a company. Rather, success is determined by the time and effort of a well-thought-out and executed strategy.
It is also important to note that IP protection does not act as a barrier to entry to potential competitors. While patents, trademarks, copyrights and other protections will help prevent copycats and competitors from duplicating innovations, ultimately IP rights will not allow owners to effectively create monopolies or marketplaces with fewer competitors.
While each scenario for IP protection will be unique to every business and its leaders, this post should serve as a starting point for considering the value and benefits of obtaining intellectual property protection.
Featured image by Trey Ratcliff