If intellectual property is a pivotal component of your business, you need to ensure you own the rights to that property. Demonstrating legal ownership does more than protect your IP from infringement; it adds to your business value when securing investors or new ownership.
There are times in your business when you cannot assume ownership of certain intellectual property. Special consideration should be paid to IP as part of employee and contractor agreements, in third-party relationships in which another company is developing something for your business, and at the time of business formation.
Employee and contractor agreements
Generally, when an employee does work for a company, the company owns their work product. However, there are exceptions to this rule. The work for hire doctrine does not apply to inventions that could be protected by patents and is not consistently applied outside the United States. Moreover, contractors own all IP created under an agreement, unless there is a written assignment of IP rights.
As part of employee onboarding and new vendor engagements, work with legal counsel to ensure contracts include appropriate IP assignment and that those agreements comply with the laws of any applicable country.
When looking at work developments in retrospect, consider whether someone worked on a project as a consultant or before they were an employee of the company. If IP rights to what you consider your company product are retained by a third party, you will need to get assignment of those rights.
Third-party agreements
The same principle applies whether you’re working with an individual contractor or a third-party firm. The developer owns the work unless the developer assigns ownership in writing. Similarly, if you develop something for a customer, you retain ownership unless you’ve signed an agreement assigning ownership.
When IP ownership negotiations create difficulty, you may find common ground with a joint ownership or exclusivity license. Each of these agreements should be created carefully with experienced legal representation.
Generally, you want to protect your right to use the development and to provide the same development to another customer.
Business formation
This issue comes into play when one of the founders develops something that could be protected as intellectual property before the business was established. For the business to own that IP, the founder must assign ownership to the company.
As an organization, clear ownership of IP is essential to operations. Breach of third-party property rights can result in expensive legal damages or licensure agreements. What’s more, failure to secure IP rights can undermine the value of your company in the eyes of investors or potential acquirers.
