Every business has intellectual property (IP) in one form of another but who owns what can be an area of conflict.
Here are some common intellectual property (IP) ownership problems.
Who owns the IP created by employees and contractors?
Many businesses engage employees or third party service providers to work on new technologies or designs. These technologies or designs will often become valuable assets of the business.
Businesses often assume they own the IP rights in those assets, because they paid for the work. However, this is not always true.
Under New Zealand law, the author or inventor is usually the first owner of the IP in any new technology or design.
But there are exceptions
Under New Zealand law:
- if a person commissions someone else to make a certain work and agrees to pay for it, the commissioning person will be the owner of the copyright in that work
- if the author of a work is an employee acting in the course of their employment, the employer will usually be the owner of the copyright and design rights in that work
- if an employee invents a patentable invention during the course of their employment, the employer will usually beneficially own the rights in the invention.
Don't rely on default rules
It may be unclear whether the individual who created the work was an employee or independent contractor at the time. And even if the person who created the work was an employee, it may still be unclear whether the work was created during the course of their employment, or whether the person was employed to create works of that type.
It is dangerous to rely on default IP ownership rules. The best approach is to have a contract that outlines who owns the IP from the outset.
All key contracts for the creation of new IP (i.e. employment contracts and service or commissioning agreements) should contain well-drafted IP clauses.
A well-drafted IP clause will state clearly who owns the IP, and what rights each party has to exploit that IP.
If the person creating the work or invention is not to own the IP, the IP clause should state the inventor or author agrees to assign the IP to the intended owner.
Get an assignment
If you are meant to own the IP but don't have a well-drafted IP clause in the relevant contract, you may be able to rely on the default ownership rules. If not, you will need the other person to assign ownership to you.
If you can't rely on those default rules but are on good terms with the inventor or author, they may be prepared to sign an assignment document without fuss or extra payment. If not, you could face a costly battle to enforce your rights.
What can go wrong if you fail to secure ownership?
- You may be unable to protect, exploit or commercialise that IP, because someone else may have better rights to it.
- If a third party investor's or buyer's due diligence exposes your IP ownership problems, that third party may choose not to continue with the deal. Alternatively, the third party may demand that any deal be conditional upon you fixing the problem, or may discount the value of your IP assets.
- It may be difficult to obtain a release or assignment of IP from the relevant employee or contractor because they may demand an extra payment before signing anything. Occasionally, the person may have disappeared or even died.
- You may be unable to give warranties and indemnities (e.g. that you own the IP) to customers, licensees or other third parties about the IP. This may jeopardise a future commercial deal.
- You may not be able to stop a third party from using or exploiting the IP.
Other things to consider
The complex world of IP law requires different solutions depending on the nature of the IP and the country involved. A 'one size fits all' approach does not always work.
An edited version of this article was published in Her magazine, August/September edition.