Disputes over IP ownership

When developing innovative technology, it is likely that this will be done in collaboration with others, for example: founders, employees, consultants, universities, and government funding agencies are just some of the people you may need to talk to.

Disputes over IP ownership can be messy, and best avoided by having a clear IP policy and framework in place from the outset. However, if IP ownership disputes do occur, the good news is that they can be resolved with the help of IP specialists.

Owners and employers

The first owner of IP is typically the creator of the IP. Where more than one person has a relevant input, there can be joint owners. However, the law in the UK is such that IP generated by employees in the course of their employment will typically be transferred automatically to the employer. The company then becomes the owner of the IP without the need for any specific assignment.

There are, however, exceptions to this rule. This is to be expected, because otherwise employers could potentially claim rights to any invention made by an employee during their employment term regardless of whether it was related to their duties/ responsibilities and/ or relevant to the business. However, the exceptions can provide scope for employees to try to claim ownership in IP that properly belongs to the company.

The status of company directors or shareholders can take them outside of the automatic transfer of IP because the law refers specifically to employees. This can be addressed by ensuring that their contracts contain clear provisions on IP.

Contractors and suppliers

External consultants or contractors are not company employees, and no automatic transfer of IP to a company takes place merely because there is a contract for service. The external supplier will be the default owner of the IP, although most will include contractual clauses in their terms of business to transfer the IP to the customer company. It is worth checking these agreements carefully though, to ensure that they are sufficient to achieve the necessary transfer of rights. It is never ideal to have to go back to a consultant to buy the rights to your IP after the launch of a successful product or service.

Current and ex-employees

There is a risk that current or ex-employees could file applications to register IP rights in their own names. Even if this is done innocently, the company could lose control of rights that should be held in the company name, and formal steps would need to be taken to have the IP transferred to the company. Where the individual is unwilling to agree to the transfer, either because of a belief that the IP should belong to them or because of a breakdown in the relationship with the company, regaining control of the IP can be considerably more complicated.

Better education of employees can help to avoid inadvertent filings by individuals. Highlighting the legal position and any other contractual terms can also help to dissuade any more malicious filings. A formal reward system for inventors within the company can also be very helpful in ensuring that relevant developments are reported to the company so that the IP position can be assessed, and any relevant applications to register the IP can be managed by the company.

Employees should also be advised of the importance of confidentiality of their work on projects where inventions are likely to arise. Any public disclosure can be detrimental to the patentability of an invention, but a further risk is that a competitor hearing information about a project could undertake their own work and file their own legitimate patent application, potentially restricting the company’s freedom to make or use the invention. Another potential risk is a former employee taking work done during their employment and trying to subsequently register the IP personally or in the name of another company. Disputes can turn on how and when the IP was generated, because this will likely be key to determining who the owner should be. Clear record keeping and regular project reviews can help a business to show when an invention was made.

Dealing with IP ownership disputes

If a company becomes aware of applications for their IP filed by individuals or competitors, then there are various steps that can be taken to try and recover some degree of control. In some cases, particularly if an application was filed in good faith by an employee unaware of the regulations or contractual provisions, then it may be possible to simply arrange an assignment from the individual to the company. Where no such agreement can be reached, there are formal channels to challenge the ownership of the IP. Remedies include an order to transfer the IP back to the rightful owner. In addition, it can be useful for the company to also file applications to protect the newest developments or upgrades to a key product. These applications can then be used as leverage in possible negotiations with a competitor or supplier or could form the basis of a formal cross-licensing agreement so that the third party’s IP is not a restriction to the operations of the company.

Establish IP ownership from the outset

While these remedies exist, they typically carry a degree of work and cost that could potentially be avoided by having a robust IP policy and framework in place at the outset and ensuring that employees and outside contractors/ consultants are fully aware of their obligations and/ or agreements in relation to IP. While it may be possible to have documents executed later, complications can arise if relevant individuals move or if relationships break down.