Working collaboratively with other professionals is one of the most effective ways to develop good ideas into profitable businesses. You build on each other’s ideas and the energy flows. This is how creative people work and the outcome can be intellectual property (“IP”) that can be licensed or sold. But who owns the IP?

To prevent disputes, it is important to clarify who owns the intellectual property in business situations.

For Employees
Usually, employment terms provide that an employer owns the rights to works produced by an employee. The employee is the inventor (patent) or creator (copyright) and it is important to have a clear assignment of the employee’s rights to the employer. Without such assignment, inventions of the employee belong to the employee, even though the employee developed the invention during work hours and using the employer’s materials and equipment. The employer retains “shop rights” in the invention. This means that the employer can use the invention without cost in its operations.

Tip: Require employees to sign an invention disclosure and rights assignment form.

For Contractors
An independent contractor retains rights in works that s/he creates unless there is an explicit statement that it is a "work for hire." Contractor agreements need to clearly identify that the Company owns the rights to works created and whether any intellectual property rights are retained by the Contractor.

Tip: Include in the independent contractor agreement a provision that says Contractor is performing a “work for hire” and Contractor assigns all rights.

For Joint Development Projects
If intellectual property is included in a project involving two companies, it is important to make it explicit who owns the rights to any intellectual property that results from the collaboration. Creators retain rights in their creations unless those rights are assigned. Inventors must be named on any patent.

Tip: Joint ownership of intellectual property rights is fraught with risks. There are numerous models that can work. The most important is to have clarity about who owns what rights. If it’s a patentable invention, it is usually better for one party to “own” the rights and have the responsibility to pursue a patent (if appropriate), and grant the other party an unrestricted license to use.

In conclusion, as you move ahead with an interesting project or collaborative effort, ask yourself, “Are my IP rights protected?” It’s a good business practice to have documents in place that clearly establish ownership and how you plan to share the profits. When it comes time to license or sell the work, clear ownership will be critical.

Jean D. Sifleet, Esq., CPA
Business Attorney
120 South Meadow Road
Clinton, MA 01510 USA
t. 978-368-6104
f. 978-368-6105
c.978-618-2162

Big firm expertise - Small firm accessibility.

P.S. Intellectual Property is one of those areas where an ounce of prevention is worth many thousands of dollars of legal “cure.” My office assists individuals and companies with protecting their intellectual property. Is it time for a review of your “IP” business practices?

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Jean Sifleet, business attorney, CPA and three-time entrepreneur, is pleased to announce the release of her new book, Advantage “IP”: Profit from Your Great Ideas. Visit the Smartfast Bookstore for details, and to order the book.