Intellectual Property
Before agreeing to joint ownership in a joint development agreement: setting the terms needed for commercialization
Joint ownership of development results does not necessarily secure the commercialization each party envisages. Specify who will use what, and how, and determine ownership together with the terms of use, including those for background technology and improvements.
Reviewed by Keishi Yoshikawa, Attorney at Law and Patent Attorney (Dai-Ichi Tokyo Bar Association)
Contents
1 Identifying the terms of use needed for the planned commercialization
First, specify how each party plans to use the results in its business. Will it incorporate them into its own products or services, allow contractors or subsidiaries to use them, or rely on licensing to third parties as a principal source of revenue? Then identify the relevant acts, such as reproduction, modification, incorporation into products, supply, and licensing to third parties. There is no need to classify the parties by attributes such as company size or whether a party is a university. Identify the necessary terms of use from each party's business plan.
Where the results include patents and copyright in software, the legal starting point for a co-owner's own use differs between the two. Unless otherwise agreed, each co-owner of a patent may work the patented invention without the other co-owners' consent. Uses of jointly owned software copyright that fall within copyright protection, such as reproduction and adaptation, require the agreement of all co-owners, except where the law permits use without authorization. Distinguish merely launching or running a program from these acts, and check the conditions for each right where both apply to the same product or service.
The parties may agree to permitted uses in advance in the contract; a fresh agreement is not necessarily required on every occasion. Do not determine the position solely from a sentence stating that the results will be jointly owned. Check the scope of permitted use against the contract as a whole and the circumstances in which the agreement was reached.
A co-owner of copyright may not prevent an agreement from being reached without justifiable grounds. However, simply deciding for yourself that a refusal is unjustified does not entitle you to begin a use that requires agreement. If agreement is refused, check the reasons and the scope of any existing agreement, and consider adjusting the scope or conditions of use.
Equal ownership shares do not necessarily provide equal opportunities for commercialization. A party that plans to work a jointly owned patent in its own products and a party that plans to generate revenue by licensing it to third parties need different consents and contractual terms. Alongside the ownership percentages, check the terms of use required by each business plan.
What to check for each commercialization plan
| Planned commercialization | Points to check under joint ownership | Matters to settle before signing |
|---|---|---|
| Use in your own products or services: patents | Unless otherwise agreed, a co-owner may work the invention without the other co-owners' consent. | Whether any special terms restrict working the invention, and the scope of those restrictions. |
| Use in your own products or services: copyright in software | Reproduction, adaptation, and other uses within copyright protection generally require the agreement of all co-owners. | Agreement on the software covered and the scope of reproduction, modification, incorporation, and supply. |
| Use through contractors or subsidiaries | Subsidiary status alone does not confer authority to use the results. Check whether outsourced manufacture constitutes the patent co-owner's own working of the invention, and whether reproduction or modification of software is permitted under the agreed terms of use or another applicable basis. | The entities and acts covered, necessary consents and licenses, and the scope of subcontracting and information disclosure. |
| Licensing to third parties | Both jointly owned patents and jointly owned copyright require the other co-owners' consent or agreement. | Licensees, permitted uses, and conditions agreed in advance; allocation of licensing revenue. |
| Transfer of a co-ownership share with the business | Transfer of the share requires the other co-owners' consent. | Transfer conditions and succession to related agreements governing use. |
Note: This table addresses jointly owned patents and copyright. Where both rights apply to the same product or service, check both of the first two rows. Take account of existing agreements and uses permitted by law, and separately check the conditions concerning background technology and third-party rights.
2 Checking the permitted commercial use of background technology
Identify the patents, software, and know-how each party brings to the project, and distinguish them from results arising from the joint development. Also check that the definition of results does not capture technology acquired or developed independently of the project.
Disclosure of background technology for research does not, by itself, mean that the technology may be used to manufacture and sell products or provide services. Distinguish research use from commercial use, and check the technology covered, permitted purposes, authorized users, and duration against the contract as a whole and the circumstances of the agreement. For technology that will remain necessary after the joint development ends, also set the conditions for continued use.
Specify the information to be supplied, the authorized users and duration, and continued use after termination. If a party brings in technology obtained from a third party, check the scope within which that party is entitled to license it to the other participant.
3 Distinguishing joint development results from subsequent improvements
Draw the boundary between improvements included in the present results and development or subsequent improvements undertaken separately by each company. Assess this by reference to the development theme, who contributed and how, and the technology used—not merely whether the work arose during the contract term.
For improvements, consider not only ownership but also the disclosure and licensing terms needed for your own use and for licensing to third parties.
Consider the ownership of the initial joint results separately from an obligation to assign inventions or other improvements to those results to the other party. Sole ownership of the initial results does not in itself immediately create an issue under the Antimonopoly Act. By contrast, the Japan Fair Trade Commission takes the position that requiring a participant to assign inventions or other improvements to joint results to another participant, or to grant that participant an exclusive license, constitutes an unfair trade practice unless there are special grounds justifying the requirement.
Nor does agreement to the contract, by itself, eliminate issues under the Antimonopoly Act. Abuse of a superior bargaining position may arise where a party in such a position, without justifiable grounds, unilaterally allocates rights in the results to itself or demands unjust restrictions on working them, and the other party has no practical choice but to accept because of concerns about future dealings.
4 Combining ownership with terms of use and settling them before signing
Compare joint ownership with advance consent to the necessary uses against sole ownership with a license granting the other party the uses it needs, in light of each party's business plan. Check both the authority and restrictions arising from ownership and the terms of use that can be secured by contract.
Avoid leaving the minimum terms essential to commercialization simply “subject to further discussion.” For matters that cannot be settled at signing, specify when a decision will be made, who will conduct the discussions and make the decision, and what happens if no agreement is reached.
Present the other party with a single proposal combining the ownership arrangement with the results covered, authorized users and acts, necessary background technology, and treatment of improvements. Present ownership together with the necessary terms of use, rather than settling ownership alone first.
Deciding ownership first can leave out terms of use essential to the planned commercialization. We advise on identifying the uses required by a business plan, structuring ownership and terms of use—including background technology and improvements—and negotiating the agreement with the other party.
Related article: Technology and trademarks used by group companies: designing post-reorganization use and future separation (where intragroup use or a future reorganization also needs to be considered).
Disputes involving license agreements are addressed in Disputes over intellectual property licenses.
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