The “Mine” Field of Intellectual Property

by Jill D. Singer

Before product development begins, establish a contract that defines licensing limits and delineates patent ownership.

The “sharing” skills we learned in kindergarten probably earned us a few gold stars on our teachers’ charts. But, in the world of intellectual property (IP), sharing may actually create risks. When it comes to copyrights, patents and trademarks, the operative word is “mine.”

Protect What You Paid For

Small businesses that lack experience with IP law may inadvertently put themselves at risk when they use intellectual property they believe they paid for, but, in fact, don’t own. For example, a small business might contract with a photographer to shoot photos for a company promotional brochure. The small business, trying to conserve limited resources and believing it owns the copyrights to the pictures, uses the same photos on its web site.

Or, a business might hire a contractor to develop software for one function and later, with modifications, combine it with other programs and market the new software package for sale.

In both cases, the small business has put itself in danger of an infringement lawsuit because the copyright would belong to the contractor. Even though the hiring company commissioned and paid for the work, it essentially is entitled to copyright ownership only if the author is an “employee” of the hiring company under common law rules of the agency.

To establish rights to full use of the work you are paying a contractor to create, you should enter into a written agreement—before the work begins—that assigns some or all of the copyright to you. The indepen-dent contractor may require an additional fee in exchange for giving up the copyright.

All Things Being Equal

Joint owners of a copyright have a duty to account to each other for profits made by use of the copyrighted work. Patents, however, provide joint inventors/owners with equal and undivided rights to full use of the invention with no duty to account to each other.

For example, a small business might team with an independent contractor, with whom it develops and patents a new product. Under the patent, unless a contract specifies otherwise, the independent contractor is free to license the product in any way he or she wishes—even to a competitor of the small business that helped develop the product in the first place.

The solution? Before product development begins, establish a contract that defines licensing limits and delineates patent ownership.

On Your Mark

Problems also arise over the question of multiple ownership of a trademark or service mark. By definition, a trademark or service mark indicates a single source of goods. Therefore, it seems oxymoronic to allow one trademark to be used by several owners who offer the same goods from different sources.

A small business partnership may own, use and even register a trademark, because the mark indicates that the partnership entity is the single source of the product.

But what if the partnership dissolves and the partners individually want to continue manufacturing and selling the widgets? Unless the partners determine ahead of time who will retain sole rights to the mark, they risk long and expensive litigation as a court tries to deter-mine which owner has the greatest rights to the mark.

To avoid litigation when the relationship ends, partners should agree ahead of time which of them holds primary rights to the mark (and to the related business and goodwill). A written agreement can include a right of first refusal for the mark’s primary ownership, so the mark can be assigned to another pre-determined partner if the first partner no longer wants to continue in the business. Such agreements making sure that the mark will be owned by a single owner generally are easier to reach at the outset of the business relationship, while the parties are still in the “honeymoon” phase, than at the time of the “divorce.”

The Bottom Line

Written agreements that establish up front what’s “mine” are the safest way for small businesses to negotiate the potential mine fields of intellectual property.

Jill D. Singer is Of Counsel with Hovey Williams LLP. She can be reached at 816.474.9050 or via e-mail at jds@hoveywilliams.com.