Risks of IP co-ownership and unclear ownership agreements

The growing awareness of intellectual property (IP) and strengthening of co-operation between enterprises is driving a rising number of enterprises to participate in market competition through collaborative development of new products. This presents both pros and cons. On the one hand, the increasing collaborative development activities help promote and stimulate the research and development of new technologies. On the other hand, problems attributable to the lack of clearly defined ownership for IP resulting from collaborative development are emerging. In addition to collaborative technical development activities, many joint ventures, co-operative ventures, and merger and acquisition deals, are also troubled by disputes over unclear IP ownership agreements.

Scenarios of unclear IP ownership agreements. Legal risks of an unclear IP ownership agreement may be easily ignored in the early stages due to enterprises’ strong eagerness for co-operation. Especially in the case of popular and urgent projects, many enterprises consider putting off legal risk prevention until agreements on collaboration are signed. In this context, it is not uncommon that the two parties to a co-operation agreement reach consensus on co-ownership over potential IPs.

However, these agreements may fail to define ownership-related issues clearly, especially in respect of the specific model of co-ownership, and rights and obligations of the parties. At the later stages, disputes may arise due to an imbalance of commercial interests that may result from the parties’ different understandings regarding exercise of specific IP-related rights with regard to, among others, production, sales and licensing.

Frank Liu is a partner at TianTai Law Firm