When Joint Ownership Arises

 

Joint ownership of IP will arise when:

 

1. the employees of two or more different employers jointly create IP, such as in a collaboration, or

2. an agreement provides that IP arising under the agreement will be jointly owned, regardless of whose employees actually invented or created the IP.

 

In a collaboration where all the collaborators contribute inventively to the creation of the IP, joint ownership is expected.

 

In an agreement where one party undertakes research, and the other party contributes financially to the carrying out of the research, but does not itself undertake research, joint ownership should not be conceded lightly. Joint ownership will not result in the joint owners having the equal benefits that joint ownership implies. See a previous edition of IP Bits: Joint Ownership of Patents Does Not Result in Joint Benefits. Conceding joint ownership in such a case can also adversely impact upon later royalty negotiations. See How Joint Ownership Impacts on Royalty Negotiations.

 

But there has to be joint ownership when there is joint inventorship or joint creation of IP.

 

In a collaboration between two universities or other research organisations, or in a collaboration between a research organisation and a company whose staff actually engage in research, when there is joint inventorship of IP, joint ownership of that IP is to be expected. It will be provocative for one collaborator to require that it solely own all the IP that arises, including the IP created by the employees of the other collaborator.

 

Having agreed on joint ownership when there is joint inventorship, the question that must now be addressed is what the ownership proportions between the collaborators will be.

 

Ownership apportionment is important, as it reflects the relative economic interest of the joint owners in the jointly owned IP, including how the joint owners will share royalties and other financial benefits between them.

 

 

Don’t neglect to address ownership proportions

 

Sometimes collaboration agreements are silent on the ownership proportions.

 

Where the collaborators have failed in their agreement to specify their respective ownership proportions, their ownership proportions will be presumed to be equal. This is the law in Australia (s.16(1)(a) Patents Act 1990); New Zealand (s.24(1) Patents Act 2013); Singapore (s.46(1), Patents Act 1994); and Hong Kong (s.54(1) Patents Ordinance).

 

The courts will not step in and adjudicate a dispute on patent ownership apportionment. If the joint owners have failed to specify their respective ownership proportions, those proportions will be presumed to be equal.

 

This can prejudice a collaborator that has made the bulk of the inventive contribution. If the inventive contributions are 90:10, nevertheless, the parties will be presumed to be equal joint owners. This can be unfair on the collaborator that made the 90% inventive contribution.

 

Relative inventive contributions are irrelevant. Relative resource or economic contributions or expenditure are also irrelevant. If the collaborators fail to specify their ownership proportions in their agreement, their ownership proportions will be equal.

 

An agreement cannot specify that ownership proportions will be agreed later. Such a clause will be void. See a previous issue of IP Bits: Let’s Agree on that Later, Implications for Research Agreements.

 

So, how can ownership proportions be specified in a Collaboration Agreement before the IP has even been invented?

 

 

Agree upon equal apportionment

 

Sometimes the parties might arbitrarily agree that their joint ownership will be equal, reflecting the collaborative nature of their relationship.

 

Agreeing to this arbitrary approach is quite legitimate. If collaborators agree to this arbitrary approach they need to recognise the possibility that one collaborator may make the bulk of, or even all the inventive contributions while the other makes none, but their equal ownership apportionment will stand.

 

 

Agree upon apportionment reflective of economic contributions

 

Sometimes collaborators might agree that their ownership proportions will reflect their economic contributions to the collaborative research, calculating the cash and in-kind contributions to the research, without regard to inventive contributions. This is how Cooperative Research Centers approach the question of the economic interest that Project Participants will have.

 

While this is conventional with CRCs it is not so common with other types of collaborations.
 

 

Agree upon apportionment reflective of inventiveness

 

The most equitable way to provide for ownership apportionment is to agree that ownership proportions will reflect the inventive contributions of the parties. This model recognises and rewards innovation, rather than expenditure and in-kind contributions.

 

But how are inventive contributions to be assessed? In particular, how is the relativity between inventive contributions to be assessed? Who makes the determination? Who is to say that one collaborator made an inventive contribution that has twice, three times, or more, the value of another collaborator’s inventive contribution?

 

Without criteria or guidance for the assessment or quantification of inventive contributions there is a risk that a clause that states no more than that ownership proportions will accord with inventive contributions will be void for uncertainty. If that is the result, the default position of ownership proportions being presumed to be equal will apply, notwithstanding the collaborator’s wish that ownership proportions reflect inventive contributions.

 

A common model is:

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A common model is:

 

1. IP created solely by the employees of a collaborator is solely owned by that collaborator

2. IP created jointly by the employees of two collaborators (Collaborator A and Collaborator B) will be owned by those collaborators jointly, with each collaborator’s ownership proportion in that joint IP, expressed as a percentage, being:

 

 

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where:

 

(a)     IC of CA is the inventive contribution of Collaborator A,

(b)     IC of CB is the inventive contribution of Collaborator B

(c)     an inventive contribution must be expressed as a numeral between 0 and 100 which

 

(i)     Collaborators A and B agree upon in writing, or if they cannot agree

(ii)    is determined objectively by an independent expert (such as an independent

        patent attorney) who assesses the relative inventive contributions of the inventors.

 

The independent expert would be an expert agreed upon by the parties, or failing agreement, appointed at the request of either party by an independent person, such as the President of the Licensing Executives Society.

 

This approach enables an independent and objective qualitative and quantitative assessment to be made of the respective inventive contributions of each collaborator, to enable an equitable appointment of inventive proportions and therefore ownership proportions.

 

If it was left to what the collaborators agreed upon in the future, it would be an agreement to agree and void. See Let’s Agree on that Later, Implications for Research Agreements.

 

What makes this workable however, is that a default will operate: the collaborators agree to be bound by the independent and objective determination of an expert, should they be unable to reach consensus themselves.

 

It is relatively rare to reach the stage of having to appoint an expert to make the expert determination. Usually, the collaborators reach a consensus.

 

But the expert determination mechanism is essential as it saves the agreement from being void. It is an often used legal tool that enables an otherwise void agreement (because of an agreement to agree) to be valid.

 

This model has avoided many a dispute about ownership proportions.

 

Adjusting the formula above, this approach will work with any number of two or more collaborators.

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