Commercial joint ventures are subject to the terms of a commercial contract agreed between the parties. There are different types of contract including collaboration agreements and research and development agreements.
One of the most important considerations in establishing the joint venture is to evaluate and agree the terms of ownership and use of intellectual property (“IP”) used in the project and also developed pursuant to the project.
In the first instance the parties should evaluate what IP they already own and which they propose to use in the project. This IP is called background intellectual property (“Background IP”). The parties should also evaluate upon what terms the Background IP will be used in the project and more specifically by the other partner. In general the owner of the Background IP will licence it to the other partner for at least the duration of the collaboration. Where the Background IP is a fundamental aspect of the project and any final form product and/ or service will require its use then the other party may require a perpetual, worldwide and royalty free licence to continuously use the Background IP, even after the contract and development finishes.
In relation to the Background IP, the party that licenses it may wish to include a third party intellectual property indemnity in the contract. The indemnity would be given by the owner of the Background IP and would indemnify the licensor in circumstances whereby a third party claimed that it owned the Background IP and therefore that the licensor was infringing the third party IP rights.
During the period of the collaboration, the parties may develop IP, whether in relation to a product and/ or service. The IP developed during the period of the joint venture is generally called foreground Intellectual property (“Foreground IP”). The commercial contract should include terms which specifically state which party owns the Foreground IP and the terms upon which it can be exploited.
Where each party wants to exclusively own any of the Foreground IP then the commercial agreement should clearly breakdown which aspect of the Foreground IP will be owned by which party. It is important that where a party wishes to own any of the Foreground IP exclusively then that party either develops the IP exclusively or alternatively gets an assignment of any relevant IP from the partner.
In relation to Foreground IP exclusively owned by a single party, the other party should determine whether it will requires a licence of that IP to enable it to exploit the product and/ or service. If it does then the terms of the licence should be included in the contract. In relation to the terms of the licence the parties will need to determine whether it should be perpetual, worldwide and if there should be a licence or royalty fee.
Where the parties develop the Foreground IP together then the parties may wish to have joint ownership. The contract should clearly state which aspects of the Foreground IP will be jointly owned. It should be noted that any use of the jointly owned Foreground IP by either party will need to be approved by the other party. Therefore, many contracts include a term whereby both parties agree to the use and exploitation of the Foreground IP by the other party.
