Written by Mark Radcliffe
Companies are increasingly working cooperatively to develop technology, particularly software programs. One critical issue is the ownership of the resulting intellectual property in the software programs. This decision is complicated because software programs can be protected by multiple forms of intellectual property rights: copyright (works of authorship, like books and music) and trade secrets (information which is not commonly known and whose confidentiality is protected by the developers) are available for virtually all software programs. In addition, many software programs can be protected by patents (although the company must file with the appropriate national patent office for such protection). During these negotiations, one company frequently proposes “joint ownership” because it has an attractive ring of “fairness”. However, joint ownership of intellectual property has major risks and should only be used after careful consideration of its many disadvantages and careful drafting to deal with the uncertainties raised by joint ownership.
The major problems of joint ownership are:
1. The rights of joint owners vary between different forms of intellectual property. For example, the joint owner of a copyright in the United States has an obligation to share in profits from exploiting the copyright (called a “duty to account”) and not to “decrease” the value of the copyright. On the other hand, the joint owner of a United States patent has no such obligations.
2. The rights of joint owners for the same type of intellectual property, such as copyright, vary in different countries. Each country has its own intellectual property laws and the rights under these laws may vary. For example, the joint owner of a US copyright in a software program can grant a non-exclusive license to third parties without the permission of the other joint owners. However, in France, the consent of all joint owners of a copyright in a software program are required to grant a non-exclusive license.
3. The enforcement of jointly owned intellectual property rights may require participation by other joint owners. For example, all of the joint owners of a United States patent are required to participate in the lawsuit for it to proceed. This problem was recently highlighted in a case in which University of New Mexico (“UNM”) tried to enforce a patent against Intel Corporation without the participation of its joint owner Sandia Corporation (“Sandia”). Sandia refused to join the lawsuit and there was no agreement in place between UNM and Sandia to require a joint owner to join a lawsuit. The district court dismissed the lawsuit for a lack of standing and the Court of Appeals for the Federal Circuit (“CAFC”) affirmed the dismissal. The CAFC stated: “as a matter of substantive patent law, all co-owners must ordinarily consent to join as plaintiffs in an infringement suit”.
4. The effect of bankruptcy by one of the joint owners is uncertain.
5. Jointly owned patents have special issues: the owners must determine how the patent prosecution will be managed. The prosecution of patents requires fundamental decisions, such as which inventions to protect by patent (instead of keeping them as trade secrets), the countries in which to seek protection and responsibility for payment of the costs of prosecution.
Although many of these issues can be mitigated by appropriate contract provisions, joint ownership is not a simple solution to intellectual property rights ownership. We generally recommend that companies avoid joint ownership of intellectual property rights. Instead, we recommend one company be the owner of the intellectual property rights and grant the other company a very broad royalty-free, non-exclusive worldwide license.