Who Owns Intellectual Property in a Business Partnership
Protecting Your Intellectual Property in a Business Partnership
Going into business with someone has tremendous advantages. Ideally, you and your partner have a shared vision for the business and have different strengths that support the mission. When you are both in alignment and have a shared passion, you may not consider the possibility of that changing. Still, establishing in writing how your partnership and resulting intellectual property are managed is essential.
What Is Intellectual Property (IP)?
IP can be computer code, inventions, song lyrics – anything the mind can create.
There are four types of intellectual property:
- Trademarks. A trademark can be any word, phrase, symbol, design, or a combination of these things that identifies a business or person’s goods or services.
- Trade Secrets. Private business information that gives the business its competitive edge, such as recipes, processes, and methods.
- Patents. There are utility, design, and plant patents. Patents give exclusive rights to a product or process that offers a new solution to a problem.
- Copyrights. This gives the originator the ability to print, publish, perform, film, or record literary, artistic, or musical material.
IP can be owned by an individual, two or more people, or a business. Patents, copyrights, and trademarks can be licensed to a third party.
At Scaringi Law, our talented lawyers have a deep understanding of business and intellectual property laws. We will advise you based on your personal and business goals as well as existing and possible future IP assets.
Intellectual Property from Joint Effort
Who contributed more, which idea was pivotal, who originated the idea: These and other questions are often subjective and prone to revisionist history and are reasons to formalize your creative works. Whether you are just beginning your partnership or have been in business for years, if you don’t have agreements in place, now is the time to complete them.
Setting clear expectationscan help eliminate confusion and misuse of the IP. Legal agreements can include the following:
- Put in writing the specific role each person has and what they create or contribute. If roles change in the business, the plan is updated.
- Once you establish defined roles, next you will negotiate the ownership of intellectual property. Joint ownership is an option, divided according to the agreement. There also can be single ownership by one person with the other partner being compensated for that arrangement.
- The partnership plan can include timetables for projects, how to handle delays, who coordinates intellectual property filings, and how the fees are paid.
IP Brought into a Partnership
Like ideas and innovations that come from collaboration, an individual who brings intellectual property into the partnership should consider how they want to protect their original idea. Apply for any patent, copyright, or trademark before embarking on a joint venture. How you are compensated by the business for your IP should be part of negotiated legal agreements establishing the details of the partnership. Your IP documents should identify a wide variety of potential situations.
Importance of Protecting Intellectual Property
Safeguarding intellectual property protects creators, owners, and investors as well as provides the framework for relationships with clients, distributors, and other third parties that support the business. Protecting IP with patents, trade secrets, copyrights, and trademarks can keep bigger competitors from making the same product and essentially “stealing” it from underneath you.
Additional reasons IP is worth protecting:
- Encourages innovation and discovery
- Reassures potential investors
- Boosts economic growth
- Incentivizes the creative process
IP Ownership When a Business Dissolves
Many founders fail to consider IP during their formation, even though it is an asset like physical property. The best time to address ownership and the procedures for company dissolution is ideally long before it happens. The business’ formation agreement can be written to address what will happen to the intellectual property should partners go their separate ways. IP can be sold or transferred. If a business enters bankruptcy, assets are liquidated and sold at auction. If a business is sold, the intellectual property is usually part of the sale.
Don’t Leave Your Investment to Chance
Our experienced lawyers can help shield your creations and guide you on how to best protect you, your business, and your intellectual property.
To schedule a consultation, contact us online or via phone at (717) 775-7195.