Intellectual property (IP) ownership issues may arise in a wide range of legal and business contexts, often reaching beyond what some might consider traditional IP law. Such issues may come up quite unexpectedly when the primary focus is not the development or protection of IP. For business owners and their representatives, asking the right questions early and often can prevent costly disputes, protect valuable assets, and help maintain a competitive advantage. On the other hand, addressing IP ownership considerations late in the game can delay transactions and other business activities or otherwise lead to unnecessary expenses and headaches that could have been avoided with more proactive assessment and planning.
Examples of “non-IP” areas where IP considerations tend to surface include in the context of employment disputes, business transactions, and in advertising and marketing. Before exploring these areas, it’s helpful to understand the primary categories of IP rights, which includes trademarks, patents, copyrights, and trade secrets. Trademarks serve as source-identifiers for goods and services and might otherwise be simplified as branding, including brand names, slogans, and logos. Patents provide inventors with exclusive rights to their inventions for a limited period of time. Copyrights protect original works of authorship (i.e., creative works). Trade secrets is information that has commercial value, are not readily ascertainable, and are maintained as secret.
In the context of employment disputes, IP ownership issues may arise as to who owns deliverables, developments, inventions, and other work products created by employees or independent contractors during their employment or engagement. In the case of copyrightable works (such as written content, graphic designs, software code, etc.), the “work made for hire” doctrine provides that works created by employees in the scope of their employment are automatically owned by the employer. On the other hand, independent contractors retain ownership over the work unless the work is specifically ordered or commissioned for use in one of nine categories (namely, as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas), and the parties expressly agree in a duly signed, written agreement that the work is considered a work made for hire.
Notably, the work made for hire doctrine does not extend to inventions or proprietary technology. Generally speaking, absent an agreement otherwise, an individual retains ownership of the patent rights to the subject matter of which he or she is an inventor, even if that invention was conceived or reduced to practice in the course of his or her employment. Although an employer may have a reasonable argument to assert that it is entitled to an implied license or “shop rights,” such license would tend to be limited in scope and non-transferable. Similar ownership or control issues may also arise in the context of domain names and social media accounts or content. As such, it is critical that employment agreements or contractor agreements are clear as to expectations and boundaries as to ownership rights in connection with any IP created during the employment or engagement.
IP ownership issues in the employment context can easily bleed into business transactions. For example, in course of an asset or stock purchase, any open questions as to ownership of copyrightable works, proprietary technology, software developments, inventions, or other intellectual property assets and rights are likely to come out in the diligence process and negotiation of representations and warranties. Such issues can be costly and difficult, in some cases impossible, to completely resolve after the fact, and may result in delaying the diligence or negotiation process, impacting the purchase price, halting the transaction, and/or exposing the company to liability or legal action.
Other types of business transactions where IP ownership considerations could arise include manufacturing agreements and other business activities, which often revolve around proprietary designs, processes, and technology. Clarity as to ownership and control of IP rights may well come into play here, and further extend to ownership or control over improvements or contributions from the manufacturer. There may be additional considerations to properly safeguard trade secrets, know-how, and other confidential information. Trademark owners seeking to license trademarks to others will also need to consider necessary quality control measures and licensing terms to protect their trademark rights.
Finally, in the realm of advertising and marketing, again, the question of ownership is likely to be a point of consideration. Businesses engaging third parties to create logos, develop branding, or prepare marketing materials should exercise caution and seek appropriate documentation regarding the ownership of the deliverables, as payment alone does not result in a transfer of rights. Should there be a need for the company to enforce its IP rights against a third party, any lack of clarity as to the company’s ownership of the rights in question may be a roadblock in the enforcement process. Businesses should also be mindful of the IP rights held by other entities and ensure that they have proper authorization or license to use any content or materials sourced externally. It’s also critical to avoid false or deceptive advertising and exercise caution, particularly in areas such as comparative advertising, to mitigate the risk of potential infringement, unfair competition, or trademark dilution claims.
Whether in employment agreements, commercial dealings, or marketing initiatives, clarity as to IP ownership is imperative. In many circumstances, failing to properly consider and address IP ownership considerations upfront could result in costly delays, exposure to liability, and other hurdles down the road.