As industry and markets have progressed, the technology they create has seen a commensurate increase in complexity. In practice, this results in the hyper-specialization of businesses so that they may continue to innovate at the rate needed to remain competitive. However, in many cases, the ultimate product a business may want to offer requires the integration of multiple systems devised by two or more specialized businesses. In these joint-development scenarios, the involved parties should understand the consequences of sharing information and how it can impact their planned project outcome.

Decisionmakers may often believe that a confidentiality agreement, such as a non-disclosure agreement, is enough to protect their interests before engaging in meaningful discussions. While this false sense of security may lead to significant collaboration and progress on a technical front, it may close off opportunities for the business to capitalize on its intellectual property (IP) interests and sabotage or even result in termination of the project before it reaches its goals. Thus, it is important for intercompany discussions to cover the various IP considerations that may apply. These considerations may then be memorialized in some form of Joint Development Agreement or Design Services Agreement. As with most agreements, it is better to outline these expectations while the sides are in the amicable “honeymoon” phase of their joint venture.

The nature of the IP agreement covering development activities will vary based on the needs of each business, as well as the type of intellectual property inherent to the field of the product or technology. While some of these issues exist with multiple types of intellectual property, this article focuses on patent-related issues that can arise during joint development projects.

Background IP and Foreground IP
Background IP describes the IP already owned by any of the parties. A company may need to practice other party’s existing patented technology to aid in development or testing. In some cases, the subject of the joint venture may practice existing patented technology and a party will need a license to the other party’s portfolio to sell the resulting product. When background IP is required, agreements can address these issues as to the scope and duration of licensing to other parties. Without the proper licenses for background IP, a company may be liable for infringement just by selling the product it helped develop.

Foreground IP refers to the IP that is created during collaborative work activities. For joint ventures, it may not be straightforward who should be assigned what foreground IP and it also may not be clear what is considered jointly developed versus independently developed IP. Without addressing the assignment of foreground IP, a company may not be able to protect its investment in the new technology from infringers.

Patent Inventorship and Assignment
For patents, inventorship poses unique challenges for companies seeking ownership of a patent. For example, if an agreement defines patents covering a certain category of inventions in the foreground IP as belonging to company A, if any claimed feature was conceived by someone at company B, that person would need to be listed as an inventor on the applicable patents. In these situations, an agreement should address the assignment of inventions from employees of company B to company A where needed. Additionally, it may be prudent for company A to check that company B has an adequate employment agreement in place with each of its employees working on the project. Otherwise, some inventors may not be obligated to assign their patent rights to company A even if company B agrees with the course of action with respect to the IP assignment.

Who Is Responsible for the Prosecution of the Patents?
The process of prosecuting a patent requires a substantial amount of time, expense and business decisions. If parties are going to jointly own patents, then an agreement should address how the prosecution of these patents should be managed. The responsibilities involved in patent prosecution may last well beyond the joint development activities described in the statement of work. From the moment an engineering team reduces an invention to practice to when a patent is issued often takes a few years. After issuance, U.S. patents require ongoing maintenance fees at 3.5, 7.5, and 11.5 years to stay enforceable. Also, business interests may change over time and either party may want to abandon an application or spend the time and capital to expand the patent family for stronger protection. Parties may also have different interests regarding the drafting of a patent and the scope of the invention each wants protected by the claims of the patent.

Enforcement of Jointly Owned Patents
To enforce a jointly owned patent, all co-owners of that patent must join as parties to the litigation. This can be a major obstacle for companies trying to enforce their patent rights, especially when litigation is often initiated many years after the joint development begins. Successors in interest should also be mindful of this requirement if they are purchasing co-owned patent rights or a company that co-owns a patent.

Other Considerations
While the considerations presented in this article apply to patents, the broader concepts have application to other forms of intellectual property such as copyrights, trademarks and trade secrets. By having an agreement in place at the outset of the relationship that identifies each party’s IP licensing, ownership and enforcement goals, businesses can avoid some of the pitfalls and maximize the benefits of a joint development project.

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