Key Issues on IP Ownership: Do you really own your IP?

In the IP world, determining the ownership of rights such as patents, trade marks, copyright, and designs is a day-to-day occurrence, but its complexity is often overlooked. 

Getting it right from the outset is vital for all businesses to ensure no loss or devaluing of key IP assets. Importantly, you should never assume anything when it comes to IP ownership: consider every individual or service provider contributing to the creation of IP and whether you need to assign certain IP to the business. 

Here is a summary of the key IP ownership issues under English law. 

Employees 

Typically, the employer will automatically own IP created in the “course of employment” unless there is an agreement to the contrary. 

This principle is enshrined in various legislation dealing with the respective IP rights. Therefore, although an inventor may create a patentable invention, ownership will typically pass to the employer by virtue of the employee/employer relationship. 

In addition, even though the employer typically owns the flow of IP generated from its employees automatically, the position is normally confirmed in the employment contract for absolute clarity.

It is also worth noting that complex issues can arise in relation to the creation of IP by employees in their spare time. For example, if the substance of the IP is evidently created outside the “normal duties” of the employee, then the ownership will often reside with the employee. However, very often, and depending on the particular IP involved, it is not so clear-cut. 

Consultants/Freelancers/Agencies

If you engage with any consultant, freelancer, external service provider/agency, or business advisor, importantly, under English law, they will own IP created by them unless there is an agreement otherwise.

For example, imagine a scenario where you outsource the creation of your brand, logo, website design, photography, or marketing materials to an expert marketing agency or freelance designer. You pay for the services, and they deliver various IP-rich materials for you to use on your campaigns over many years.

You will only own the IP in these materials if you have an agreement in place to assign the IP from the consultant/agency to you.

If you want to fully own the IP (rather than simply having a licence to use), the absence of a written assignment can add layers of complexity later on. For example, if you are seeking investment or an exit, these ownership issues will likely be spotted during the due diligence process and could obstruct the progress of a deal.

Further, if, for any reason, the consultant disappears or a dispute arises between the parties, it becomes more challenging – and sometimes impossible - to seek a retrospective assignment. Worst case, it could mean you are stopped from using the relevant IP altogether.

Company Founders and Directors

Company founders and directors will own IP created by them, similar to consultants/freelancers/agencies unless there is a written agreement otherwise.

This situation often arises: founders of early-stage businesses create the core IP/technology before company formation. There may be no effective assignment at that point, so the IP sits outside the company.

Any potential investors/buyers would likely flag the absence of such assignment from key individuals. It also has repercussions on who is deemed the “applicant” in any IP registration process, such as a patent application.

An assignment to the company is required to address these issues. This may take the form of a founder IP assignment, suitable provisions in a director’s service agreement, or other consultancy agreement with the key contributors.

The assignment to the company may also form part of the company formation documents/process or be dealt with as a prerequisite to an investment/exit to ensure the core IP sits within the company at all times.

For more information about IP ownership issues, please email us at mail@stratagemipm.co.uk.