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I’ll be entering into a joint development software project with 2 other companies. I’m considering how best to deal with the intellectual property ownership. I suppose one company could be the owner of the final product with the other 2 having the exclusive right to license the software royalty free. Another option, I suppose, is to have each company own the software – i.e. 1/3 ownership each. What do people usually do? What are your thoughts on these options? |
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Typically, joint development agreements have three categories of IP that should be addressed in the agreement:
Generally, you will want to retain ownership of your background IP. Background IP derivatives is where the discussion can become heated. The best position for each company is to retain ownership of the derivatives and license it to the other two developers for limited use as an intrisic part of the end product. Consider adding a provision that limits use of the derivative IP in competing products for a period of time, maybe a year. Joint derivative IP - if you all own the end product equally, it will be considered a joint work under the Copyright Act. Thus, you will each have the unlimited use and licensing rights to the joint derivative IP provided that such use and licensure does not diminish the value of the IP. Unless otherwise agreed, you will owe pro rata proportion of your royalties to the other owners. Key Points: a) if the other parties are using your background IP or retained derivates thereof, address that in the agreement and provide a license for this use for the limited purpose of developing the end product; b) if you choose an ownership model other than equal shares in the end product of background IP derivatives, you will want to be clear about what rights you have to use your derivative IP for the purpose it was created. For example, if you come up with software improving search engine speed, that would be commerically valuable. If you have no control over the marketing or licensing then you will want to try to reserve your own use and licensing rights; c) set out in the agreement ownership of IP developed for the project should one or more parties terminate the agreement of if you want to replace them. Good luck! |
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Whatever you choose make sure your contract outlines what happens when "it hits the fan":
In other words, it's the same issue as when starting a partnership or corporation: Anticipate problems and solve them in the contract because later they will be much harder to solve. The most advantageous for you is that you own the IP and give them appropriate licenses to use the IP, but the other partners might have something to say about that idea... |
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In addition to what gmagana said- who is going to control the direction and development of the IP if everyone owns an equal share? That sounds like a recipie for disater- 3 equal partners going in 3 different directions. Or two partners dragging a third along. Somone needs to be in control of the IP and its future. |
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3-way joint IP sounds like a scary proposition. Why are you doing this, and do you have the required 1,000 developers on payroll to make this kind of project work? More seriously, be very careful. Most 2-way joint developments fail. 3-way? No way. You may want to try to structure this differently. I'm guessing that each company offers one piece of the puzzle, they each have unique technology. Treat this as a standard vendor deal, and you just doubled your chance of success. If you need components from people, buy it from them. Offer royalties if need be. |
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