Joint Intellectual Property Development – Do’s and Don’ts

by Charles Brumlik

Introduction

Intellectual property (IP) brings value to their owner both from their right to use and their right to exclude others. Adding an outside partner to your IP development could offer big benefits, but also complicates how you determine your company’s (and your partner’s) ownership rights both now and in the future.

What you end up owning in a partnership depends on both your ability to create something valuable and your ability to prove what part is yours. You can save tremendous cost and time by thinking of IP before, instead of after you share information with outsiders.

Partnering

In a joint project we co-invest resources and IP with partners, expecting to share the resulting joint business. Partnering helps to more efficiently build value. This motivates us to share costs and risks with partners and leverage our respective strengths.

In a partnership, you are jointly sharing a mix of IP from your company, your partner’s company, and the work developed together. To maximize your ownership, you need to first categorize what to share both within and outside your company.

The effects of partnerships can last a long time. Partnerships often change or fail as the individual partners’ business goals and personnel change. What you do now can have repercussions 10-20 years from now. For example, if you let an outside partner have rights to your information, then your company may be limited in using its own information with other partners or customers.

Information’s Value

Most IP is in the form of know-how and other controlled information. Too much internal control stifles innovation. Too little control increases the risk of loss of your company’s and your partner’s secrets to the competition. Companies can maximize value by varying control of information depending on its value or sensitivity.

The four common levels of information ownership are:

1) Trade secret

Form of IP that can be enforced in court in many countries.
Access is strictly controlled by a few people and by numbered copies.
Should be encrypted and marked as Trade Secret or Top Secret.
Examples: customer list details, internal algorithms, methods of doing business.

2) Confidential

Access is controlled by client or project, and on a need to know basis.
Should be marked as Confidential to your company or a particular client.
Examples: client information provided under a confidentiality agreement, patent applications before their 18 month publication.

3) Proprietary

Minimum level for all your company and client information that is not public.
Also includes valuable combinations of public information.
Examples: databases, internal operations.

4) Public

Information legally available to the public or your competitors.
Can include gossip or other information you mistakenly disclosed.
Examples: your public website, annual report, sales literature.

Since information can have a different value depending on the recipient, the same data can be treated in different ways. Partnering makes information sharing more complex due to distribution limits of your partners’ confidential information.

IP Do's and Dont's Pic 1

Shared value depends on how much value is created, and on who owns or can use the invention. In partnerships, ownership or right to use is not always given to the creator. Much depends on when it was invented, how well it was segregated, how well it was documented, etc. How will you help maximize your company’s share relative to its respective investment and innovation?

Sharing criteria are not fixed in time. Partnership timelines typically have three main phases:

1) Before the joint project

File patent applications on information you need to keep for your company.
Document inventions and information to prove that they are 100% yours.

2) During the joint project

Compartmentalize the joint project from your related projects.
File patents together with your partner where required and alone when possible.
Share patent filing costs with your partner.

3) After the joint project

Know which of your rights are limited by your partnership agreement.
Maximize your remaining IP.
Share patent maintenance costs with your partner.
Review the impact of transferring IP to your partner when you are dropping patents in particular countries.

As shown by the following chart, IP can flow between parties and as a result
IP ownership can change during these three phases:

Joint IP Development – Do’s

Share your IP internally to leverage innovation for your company.
Use your inventions and knowledge of IP to build value for your company.
Maximize the value to your company (1^st) and the joint project (2^nd).
Document how you keep outside confidential information from your inventors who invent outside your joint project.
Retain your rights by documenting any overlapping work before, during, and after the joint project with a provable date and author.
File patent applications before starting the joint project.
Maximize your company use of co-developed information in applications that your company has rights to.
Ask yourself and your team what company information would benefit the joint project and what value your company would receive from sharing any of it.
Know what limitations are imposed by the partnership’s contract terms.
Develop an IP docketing database or other evergreen system to provide notices to your team managers and partners in enough time for them to act.
Give your partner enough notice before dropping a patent to save fees.
Know your partner and their project-related patents, publications, other partnerships, licenses, and motivations before, during, and after your project.
Follow your internal controls so that everyone on the team knows what to share, what not to share, and when to notify your partner.

Joint IP Development – Don’ts

Don’t engage in “Unprotected Sharing”.
Don’t disclose trade secrets to outsiders unless you are sure that they must and will keep it secret forever.
Don’t freely give away your company’s information.
Don’t be so proud of your inventions that you tell your secrets to outsiders.
Don’t publish or publicize before filing patent applications or identifying trade secrets.
Don’t publicize details of much of your daily work life (your project timeline, project problems, IP practices, etc.) that could help your partner or competitors.
Don’t use outside confidential information that could contaminate you, limit your ability to work without your partner, limit your patenting or publication, or limit your clients’ ability to buy from you.

Conclusions

Joint IP development is a necessary and useful part of creating highly complex products and businesses, although it has major differences from internally-created IP.

IP ownership rights can vary depending how you contribute and segregate information from both you and your partner. You must also remain aware of the contract’s requirements not only before and during the joint project, but also long after the project is finished.

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