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Who owns your IP?

July 31, 2020, By

For some startups intellectual property is their main asset. But if you are not careful, one of your most valuable assets might not actually belong to your company.

The starting point is that the owner of IP is the person who creates it.

The actual position will be different depending on who created the IP for your company and there are some exceptions to the general rule:

Employee

A general rule is that if the IP is created by an employee in the course of their normal duties, such IP will belong to the employer. In practice however it is not always the case, depending on the circumstances.

To avoid any doubt, it is sensible to include an IP clause in employees’ contracts that will specifically state that all IP they create belong to you and that they agree to the transfer of ownership after the IP is created and to sign any additional documents to that effect if required.

Freelancer / External Consultant

It is quite common to assume that if you paid for freelancer’s services, then the IP they create will belong to you. However, if there is nothing in writing, the freelancer will retain ownership of the IP and you will only get an implied licence to use it.

This can lead to potential problems later on – for example, external investors or buyers of the business if you decide to sell it will always look into ‘chain of title’ of the IP – i.e. whether you have a paper trail of documents proving ownership. This can also mean that the web developer owns the code to your website, the designer owns your logo or the appearance of your product – and they can stop you from using these in certain circumstances.

It is therefore highly recommended to make sure that you have a written assignment agreement from the outset, which will save you a lot of potential trouble down the line.

Director / Owner of the company

Rights created by company directors and shareholders fall outside the general rule relating to the employer’s ownership of IP rights created by employees.

This means that IP created by the director or shareholder will belong to them rather than to the company. If the director or shareholder leaves, they could stop the company from using their IP, which can be highly problematic if the IP is what the company’s value is based on.

Therefore, it is sensible to include terms dealing with the creation and ownership of IP in all directors’ service contracts and to procure IP licence or assignment from the shareholders who create IP.

Briffa lawyers are experts in all aspects of contentious and non-contentious intellectual property law and practice. If you are starting a business and would like more information about ownership of IP or to know more about IP in general, please drop us an email or give us a call and we will be happy to arrange a free consultation with one of our specialist IP lawyers.

Written by Anastasia Troshkova, Solicitor

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