The pitfalls of joint ownership in IP

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By Thomas Schmidt

The Montana Meth Project, an American non-profit organisation, infamously popularised the phrase “meth: not even once” as part of a media campaign to raise awareness about methamphetamine use. In Intellectual Property law, replacing the word “meth” with “joint ownership” would admirably encapsulate the feelings of some attorneys on this matter.

Joint ownership of IP occurs wherever two or more applicants cannot separate their contributions to a given piece of IP, and so apply for protection of the same subject matter together. In South African Law joint ownership is recognised in Patents, Design Registrations, Copyright and Plant Breeder’s rights. Almost without exception, the existence of other joint owners severely restricts the ability of an applicant to develop, use, promote and generally enjoy the fruits of the jointly owned IP.

A representative can be found in the form of joint ownership of patents. In terms of the South African Patents Act 57 of 1978, joint applicants for a patent are deemed to have ownership of it in equal, undivided shares where no other agreement to the contrary is present. Further, consent of all joint patentees is required to make, use, exercise, sell, grant licences, assign his interests in the patent, or institute any proceedings related to the patent. In effect, each joint patentee is granted a negative right against the other/s over any matter not directly related to the maintenance of the patent. This extends to the court, where joint patentees are allowed to institute proceedings for infringement on their own. Even here, however, they must give notice to every other joint patentee. In the event of disputes between joint applicants, any applicant may apply to the Commissioner of Patents to decide the matter in dispute.

Taken together, the above is a recipe for strife. Even where good intentions are evident on both sides (a state of affairs which money tends to dilute), the inability of one joint patentee to act without the other can paralyse any attempts to properly exploit the invention. Short of a truly comprehensive agreement, there will always be cases where one of the joint inventors is unwilling or unable to provide consent. And when one obstreperous partner can effectively veto any aspect of the commercialisation of the patent, the potential for brinksmanship becomes exceedingly high.

In order to avoid the pitfalls of joint ownership, care should be given to the legal relationships governing the people involved in creating the IP. These legal relationships can be managed by putting agreements in place which set out clear rules for dealing with the IP, and which provide mechanisms for resolving potential conflict between the joint owners. Several options are available to joint IP owners in this regard. Joint patentees may retain their joint ownership but conclude a Joint Ownership Agreement in terms of which one party is authorised to make, use, exercise, sell, grant licences, assign his interests in the patent, or institute proceedings related to the patent independently of the other, or they may assign the IP to a separate IP holding company in which both parties hold shares and have a board of directors manage the IP. Alternatively, the parties may wish to deliberately re-separate the IP by assignment thereof from one party to the other party or by both parties to a third party or by cross-licensing. It is good practice to have all parties involved sign Non-Disclosure Agreements in order to preserve the novelty of inventions, and contracts of employment should always include clauses assigning the rights arising from IP from the employee to the employer so as to ensure that any IP that is created is capable of being exploited.

The above-mentioned approaches all, of course, involve a certain amount of care and investment on the part of the stakeholders. This investment, however, is amply rewarded in the form of regularising of relations and de-escalation of conflicts that arise from issues of ownership.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.