Joint ownership of Intellectual Property (IP) can be created in the course of almost every commercial interaction. This is true when collaboration takes the form of a grant of a license, research collaboration, a joint development project, contract manufacturing, a joint venture, services or sub-contacting, as well as retention of external consultants, state employees or academic researchers and the utilization of the facilities and resources of a university or other research institution for carrying out R&D activities. The commercial repercussions of joint IP ownership are a factor that must carefully be  taken into account from the onset of any such form of collaboration.

The advantages of technology collaborations are easily apparent. They are a way of obtaining  access to innovative technologies and greater resources, of jointly bearing R&D, marketing and commercialization expertise and costs and of reducing risks and entering new markets, among other things. These are advantages that justify, in most cases, the existence of all of the modes of collaboration mentioned above. At the same time, all of these business models entail entering into complex agreements that define ownership and use of intangible assets the nature and scope of which cannot be fully predicted by the parties when entering into the collaboration. Within the framework of such interaction, there are also other inherent issues such as the need to preserve confidentiality of proprietary information, different modes of operation, and the different aims and objectives of the parties. These matters pale in comparison to the issues relating to IP created in the course of the collaboration, its ownership and long term use.

The Problem

In the absence of clear contractual agreements between the parties, the issue of joint IP will be governed by applicable law. The law determines that ownership of new IP is vested in the inventor, and if more than one person contributed to the invention, each inventor will have an interest in the invention as a whole, similar to joint ownership of a residential apartment.

Identifying the “inventor” is not always simple and easy to determine. In a joint development project, where the conduct of research tasks are divided between two or more parties, disputes often arise regarding the nature of the contribution of each of the parties to the research and whether such contribution grants rights of inventorship. Thus, for example, assistance in conducting routine laboratory examinations or the normal operation of laboratory equipment is not treated as a contribution that grants inventors’ rights, but merely participation in a project. The table below lays out various parameters. To illustrate, the employment of a consultant who is a civil servant or a university researcher in a management role by a company does not grant rights to the State or the university in the company’s IP, but rather the test is the extent of the contribution of that same consultant or faculty member in conceiving of an invention.

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Even if the parties agreed upon joint ownership, it is still necessary to determine the rights of the parties to utilize the joint IP. In the absence of a pre-agreed arrangement, the default rule will apply according to the laws of the country in which the patents are filed. The applicable rules around the world are not uniform, and there are major differences between the limits of what is permitted to each of the joint owners and their licensees in terms of granting sublicenses, transferring ownership, the division of profits and enforcement. Thus for example, in the absence of any other arrangement, Israeli law states that a joint owner may not grant a license to joint IP without the consent of the joint owner(s). In contrast, under U.S. law, all owners are at the mercy of the others. All these difficulties are accompanied by other complications related to the essence of IP laws and the limitations of the judicial system. In contrast to contractual issues, there is lack of sufficient legal precedents in Israel regarding IP ownership disputes, which could be used by the courts for guidance in new cases. Most of the issues that could be sources of contention have not, as yet, been brought for judicial decision. It is sufficient to mention, that the basic question of who should be considered an inventor, which is a complex question lacking a clear definition, has found the Israeli courts roaming through foreign jurisprudence in its attempts to reach a determination. The fact that completely contradictory legal opinions are prevalent throughout the world only deepens and expands the quantity and intensity of the disputes. To all this, we must add the proliferation of the judicial bodies authorized to rule on IP ownership disputes. This encompasses the district courts, at times the labor courts, and sometimes even the registrar of patents.

Awareness of the complexity should not constitute a deterrent for entering into a joint venture, collaboration or licensing agreement, but requires seeking the appropriate legal advice in anticipation of future disputes. As in all commercial matters, contractual protections are paramount. Any licensing agreement or collaboration agreement that does properly address issues of IP rights and ownership is problematic and can lead to complex legal disputes in the long term.

Contractual Arrangements

One way of tackling the issue of IP ownership so as to obviate the problems around joint ownership is to determine ownership on the basis of the relevant business sector or subject matter of the invention. Take for example, a company that has expertise and IP in the field of electric batteries that cooperates with an international car manufacturer in the continued development of its battery and its adaptation to a certain model of car. In this situation it would be appropriate to determine ownership according to the business sector: that is to say that the improved battery belongs to the company and the connections to the car belong to the car manufacturer or should be jointly owned. Another example is a company developing a drug that collaborates with a contract manufacturer in order to develop a commercial production line for the drug. The parties can decide that all inventions related to the drug and its proprietary formulation belongs to the company and all of inventions related to the manufacturing technology will belong to the contract manufacturer, subject to a use license being granted to  the pharmaceutical company.

On the subject of the exploitation of new IP, it is up to the parties to determine whether each one of the parties is permitted to transfer its part of the ownership or to grant licenses to others without the consent of the co-owner, whether on an exclusive or non-exclusive basis, and if so under what terms. Take for example a pharmaceutical company that did not clearly define its rights in a contract. The company may face difficulties if it wants to transfer production to another contract manufacturer. The original contract manufacturer, which is aggrieved, may demand an additional payment for using its specific manufacturing technology or be uncooperative in transferring the production technology to another contract manufacturer. In the case of the car, if future use of the connectivity invention is not arranged in the contract, the battery company may find itself with a problem if it wishes to install the battery in the car of another manufacturer. 

Another substantial issue which arises in the case of collaborations that generate joint technology is the subject of maintaining confidentiality and the confidential information of each one of the parties, both background technology which a party brought to the collaboration and new technology that is developed within such framework. By the nature of collaboration, a research partner is exposed to a range of trade secrets and such exposure is potentially damaging to the disclosing party. Unsupervised disclosure can thwart the ability to register IP, and commercially damage the partner whose confidential information is revealed. Moreover, the confidentiality clause in an agreement usually defines confidential information as information that one side reveals to the other side. This determination may clash with determining ownership of the new IP in the event that the researcher disclosing the confidential information in not the owner of the new confidential information according to the agreed ownership arrangements. A rigorous reading of the confidentiality clause and ensuring that it is in synch with the ownership clauses or an agreement are crucial for preventing contradictions between the confidentiality and the ownership clauses of a collaboration agreement.

Another contractual topic that requires attention is managing joint new IP and enforcing it. In this context, it should be determined who will administer the joint IP and what the agreed prosecution strategy is, which party will bear the costs of registering and maintaining the IP in different countries and who will enforce it and in what manner in the event of infringement. Related matters are the division of costs and applicable arrangements should one party decide not to participate in the costs of registration/ enforcement in certain countries. In the absence of such understandings, the matter will be governed by applicable law and here too the difference between jurisdictions is large. Many countries will require both parties to be claimants in the event of infringement or enforcement proceedings, a situation that raises additional issues such as the choice of the counsel, the objectives of the proceedings and sharing the risks and rewards of the outcome.

Summary

IP disputes are universally considered one of the most complex areas of the law. They frequently trigger complex legal and scientific questions in many areas, alongside substantial costs and legal uncertainties. The unique characteristics of IP disputes combined with the uncertainties and difficulties inherent to joint ownership in the context of collaboration agreements, teaches us that only contractual arrangements reached in advance, clearly setting forth the rights of each party to the agreement can make all of the difference between a success story and a failure