Investors, buyers and licensees will all want to see that you do in fact properly own your IP. It can be a huge headache to find out during a due diligence exercise or licence negotiations that assignments and other transfer documents were not properly completed or stored. You need to be able to show a paper or electronic document trail clearly establishing ownership of all valuable IP, starting with the creator, e.g. the inventor or designer, and finishing with your company.
Registerable IP rights are often filed in the names of individuals prior to a company being established. This often cannot be avoided and is particularly likely to happen in the case of an entrepreneur taking his or her first steps towards commercialisation. Sometimes a company name change or sale further confuses the ownership issue. In other cases, the original parties may not be available to sign, or may for various reasons want to make life difficult; parties who are more than willing to sign a document at the time of an intended transfer can often take a different view later, especially when IP is seen to have significant value. Sorting out these kinds of issue early on and making sure that there is a correct and unambiguous chain of title for any IP rights will pay dividends further down the line.
Assignments from one party to another, e.g. from an individual to a company, should be made in writing, prepared with appropriate legal advice and executed at the time of the transfer. Verbal assignments or retrospective written assignments should be avoided. Transfer documents should be stored with other valuable company papers. Joint ownership of rights is not recommended: it is usually best to have a single owner and to deal with other parties using side agreements such as licences.
For patents, only those who were key to making the invention should be named as inventors. Avoid the temptation to name those who made only marginal contributions, e.g. to keep “the team” happy. A patent application is not a scientific journal publication. The more inventors that are named, the more likely it is that problems will arise in the future. On the other hand, it is essential to make sure that none of the key contributors to an invention are omitted. Inventorship is a question of fact and is the starting point for determining who is entitled to a patent. Getting it wrong can have severe consequences – the patent even may be deemed invalid in some cases – so take proper advice on this. Also keep in mind that some jurisdictions will always require an assignment from an employee inventor to an employer, even when the employee’s contract makes it explicit that IP rights belong to the employer. It is advisable to have the employee sign a confirmatory assignment at the outset.
It is also worth bearing in mind that you will be unlikely to own all the IP you wish to exploit and may need to license some in from third parties, in a mirror image of your own licensing out. Contracts for both licensing in and out will need to address issues such as remuneration (upfront fee, milestone payments, royalties etc.), commercialisation obligations and whether any exclusivity is conferred with reference to territory or technical application. Financial modelling for licences is a complex exercise but the general rule of thumb is, the later in the developmental stage you license your IP out and the more exclusivity you confer, the more money you should be asking for.
In some sectors, such as the pharmaceutical industry, exclusive licensing is the norm whereas in others, such as off the shelf software, non-exclusivity makes more sense. An exclusive licensee will usually want to take over the patent-filing strategy and any attendant costs and the right to go after infringers.
One final point. Before you use any Open Source Software (OSS) to generate your own IP check the licence terms carefully. You don’t want to find that “copyleft” provisions in the OSS licence in any way limit your ability to assert ownership rights over or commercialise the technology you have built on top of that software.
