There are many issues to consider when companies seek to collaborate in the development of a new product for later commercialization. One key issue is patent ownership. Several alternatives exist for allocating patent ownership, such as allocation based on either or both:

Patent ownership is an important joint development consideration because different ownership allocation approaches can have unintended adverse practical consequences.

For more information on joint development agreements generally, see Practice Note, Joint Development Agreements.

Allocating ownership of intellectual property, specifically patents, developed or acquired during a joint development project is a key issue the parties must address. This issue can be challenging because at the start of the project the parties often do not know:

In addition, the parties may have different or conflicting agendas, both during the term of the joint development project and in termination and transition scenarios.

Parties frequently propose that any patentable inventions developed during the joint development project should be jointly owned by both parties. While joint ownership sounds like an equitable solution, it has the potential for undesirable, unintended consequences. For example, in the US, each joint owner of a patent:

Given these complications, rather than agreeing to joint ownership, the parties may decide that one party solely owns all new patents. They can also consider allocating patent ownership by:

The parties may also seek to use a combination of subject matter and inventorship to allocate patent ownership.

Regardless of the mechanism the parties choose, unless one party will be the sole owner of all new patents, parties should bear in mind that the patent ownership allocation boundaries:

To help avoid these disputes and minimize prejudice to the party that is not granted ownership to certain new patents, the parties also should consider including a provision granting cross-licenses to each other under the new patents. These cross licenses may be non-exclusive or exclusive, for example, in the licensee's field.

For more information on ownership of intellectual property developed pursuant to a joint development agreement, see Practice Note, Joint Development Agreements: Ownership of Joint Development Intellectual Property.

The parties may allocate patent ownership to the party who invented the invention covered by the patent. Under the inventorship approach, the claimed invention that was invented:

An approach that allocates ownership to the party who invented it is often the path of least resistance. It avoids the need to assign intellectual property developed by one party to the non-developing party.

A potential drawback to a pure inventorship-based ownership allocation is that it allows a party to retain control over the claimed invention that:

It may also be difficult to administer because of potential difficulties in identifying inventions that are invented solely by one party's representative. This is because each party may claim joint inventorship status for any new inventions resulting from ongoing communications and potential suggestions made by each party's representatives during the collaboration.

Another approach for allocating ownership is to base ownership on patent subject matter and whether it relates solely or predominantly to one party's background technology, regardless of inventorship. Allocating ownership based on subject matter may work well if:

This approach may also address concerns relating to new patents covering inventions that a party derived from the other party's confidential information or other not yet public background intellectual property. This is because the derived invention should be the same subject matter as the disclosing party's background intellectual property and should therefore be owned by the disclosing party.

However, an allocation based on subject matter may not be workable where the parties' activities overlap. A party should also consider whether to use this approach if it wishes to retain ownership of improvements it develops, even if they are derived from or relate to the other party's background intellectual property.

These approaches may be combined. For example, the parties may agree that any new patents will either be:

Before agreeing to joint patent ownership, the parties should understand and consider the rules surrounding joint ownership of intellectual property, which vary based on:

The parties can contract around some of these default rules or add contractual protections in the agreement, such as requiring each joint owner to join the suit, to mitigate potential adverse effects of joint ownership.

If the parties decide to allocate ownership between solely owned patents and jointly owned patents, they should ensure that all jointly owned patents include only jointly owned claims. Commingling solely owned claimed inventions and jointly owned claimed inventions in a jointly owned patent results in joint ownership of the solely owned inventions included in the jointly owned patent because an owner of some of the claims in a patent is the owner of the entire patent (see Lucent Techs., Inc. v. Gateway, Inc., 543 F.3d 710 (Fed. Cir. 2008)).

Whether the parties choose a subject matter or inventorship based patent ownership allocation or a combination of the two, disputes are bound to arise because of the inherent definitional ambiguities of and difficulty in applying certain contract terms and the various technology descriptions. Therefore, the parties should include an adequate dispute resolution mechanism that both:

For a sample joint development agreement, see Standard Document, Joint Development Agreement.

For a checklist addressing patent ownership and other issues in a joint development agreement, see Joint Development Agreement Checklist.