© 2004, Dawsey Co., LPA
April, 2004

Contrary to popular myth, inventing is generally not the province of the single inventor working completely alone. Even Thomas Edison employed large teams of associates to develop new inventions. With the increasing complexity of business, more and more companies are coming together to create new intellectual property, sometimes in loose arrangements and sometimes in tightly defined joint ventures. All of these types of arrangements are filled with opportunities for problems.

In a way, a proper joint development agreement (JDA) resembles a pre-nuptial agreement in a marriage. New business associations arise in a flush of enthusiasm, often with little concern for potential problems down the road. Also like a marriage, a joint development project begins with parties who have individual property who are seeking to become more than what they are individually. If the rights of the parties are not well defined from the outset, when the honeymoon ends, the trouble begins.

Basic JDA planning strategy takes into account three categories of IP rights that need to be considered:
” The IP owned by each party before the JDA
” IP jointly developed during the JDA
” IP developed by the parties during the JDA, but arising from work unrelated to the JDA

The IP owned by each party before the JDA means any confidential or proprietary information that the separate parties possess. It is not just patents, trademarks, or copyrights; and a thoughtful examination must look at trade secret material and processes and research projects that are still in development.

The definition of jointly developed IP must be thought about with extreme care, and is one of the most common areas for later disagreement. Most commonly, one party will feel that while it developed a technology during the time of the JDA, it was developed entirely separately from the JDA and should be “separate” and not “jointly” held property.

A rigid definition that defines “jointly developed” as anything that arises during the time of the JDA can be particularly unfair to the party that has the larger R&D establishment, as it is more likely to be working on a multitude of projects. A better definition is to tie the degree to which the developing party relied on the other party and the degree to which the development relates to the JDA subject. Typically, an agreement will include such language as “information conceived or developed solely or jointly by either party during the term of the JDA, and in connection with or related to the party’s performance” under the JDA.

After IP is properly categorized as separately or jointly held, two more critical questions need to be answered:
” Who can use the IP
” Who controls the IP
These concepts are more different than they may appear. The right to use the IP is just that, the right to use either the other parties’ IP, the jointly developed IP, or the separately developed IP. On the other hand, the right to control is the right to determine what other, outside, parties may use the jointly developed property, and on what terms.

Commonly, the parties license each other to use each other’s separately owned IP to accomplish the goals of the JDA. There may be restrictions placed on these licenses, however, and such common limitations often involve field of use, time, royalty, and sublicensing restrictions.

Jointly held IP raises very serious questions of control, especially in regard to patented IP. U.S. law allows each of the joint owners of a patent to make, use, sell, or offer to sell the patented invention without the consent of, or an accounting to, the other owners. This is unlike most other types of jointly held property, where even if one party can act without the other, there is often a requirement for a sharing of any proceeds. Fortunately, the law on this topic contains an escape clause, which says that joint patent owners may limit each others ability to dispose of rights in the patent, if they have “an agreement to the contrary.”

The Sixth Circuit Court of Appeals, whose rulings govern patent law in Ohio, described this as a situation where the co-owners of patent rights, if they do not have such a written agreement, are “at the mercy of each other.” It is critical to stay out of this situation. Make sure that a written agreement covers such topics as the right to license jointly held property, the right to bring infringement actions and an allocation of the costs of doing so, and a formula for sharing any damages recovered.

In short, joint development agreements allow companies to act together to accomplish more than they could on their own. But without careful planning, they can also be an invitation to a business relationship of confusion, unhappiness and loss.