One of the main reasons to enter into a joint venture (JV) is to enable both parties to take advantage of the intellectual property (IP) available under the agreement. IP in this sense can take several forms, including industrial designs, patents, trademarks, and copyrights. IP issues and problems are, unfortunately, not uncommon when it comes to JVs; however, by drawing up a clear and concise JV agreement that sets out the ownership and terms of use of any IP, this can be avoided. Some of the issues which may arise include:
IP licencing issues
In many cases, a JV will utilise the IP owned by a parent company – doing so is one of the many reasons to enter into a JV in the first place. The risk of not licencing IP correctly is that it may not be used in the agreed way, or it may be at risk of being copied. Rather than transferring the IP ownership to the JV, it is more typical for the parent company to retain ownership and simply license its use to the JV. By doing so, if the JV does not succeed, the IP is retained by its original owner. It is important for a written licencing agreement to be reached and the description/ownership of any technology to be included in the JV agreement. Where the JV creates new IP, an agreement also needs to be reached as to how this should be licenced. Parties to a JV should also consider what happens if the parent company develops or gains access to new IP not available at the outset of the JV and whether IP should be automatically licenced?
Competition issues
IP and competition law are closely related, largely because exercising IP rights can, in some cases, breach competition law. One of the benefits of joint ventures, however, is that it may be possible to make use of the Technology Transfer block law (under competition law) which provides an exemption from anti-competition law when transferring technology.
Exit issues
Another key consideration is what will happen to IP when exiting the joint venture. Questions that need to be considered include:
- What will happen to the property rights of the parent company if these have been licensed to the JV?
- What will happen to IP developed and owned by the JV?
- What happens to IP licenses in the event of a default by a party to the JV – from the perspective of the non-defaulting and defaulting party?
- Under which circumstances can IP continue to be used if a JV is terminated, but the party concerned did not technically default on the agreement?
The above are just some of the many potential IP related issues which should be considered, and potential resolutions set out from the start of the venture.
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