Joint Ownership Of Intellectual Property: Decision-Making, Licensing And Exit Risks

Intellectual property (IP) can be one of the most valuable assets a business owns, and sometimes that ownership is shared.

Two business partners might jointly own a product they've developed, or two companies might agree to share rights in software, designs or other intellectual property they've created together.

But while sharing ownership might sound straightforward, it can raise some important questions. Can either owner use the IP independently? What happens if one wants to license it to another business? And what if the owners eventually decide to go their separate ways?

Under Australian law, the answers aren't always the same. Much depends on the type of intellectual property involved and any agreements between the owners.

In this article, we'll look at how joint IP ownership works, what rights co-owners have and what businesses should consider before entering into an arrangement.

Can Two People Or Businesses Jointly Own Intellectual Property?

Yes, two or more people or businesses can legally own the same intellectual property. This is known as joint ownership or co-ownership.

Joint ownership can arise in different ways. For example, two individuals might qualify as joint authors of a copyright work, while two businesses might agree to share ownership of an invention they've developed together. Ownership can also be shared through a properly documented transfer of IP rights.

However, creating something together doesn't automatically mean everyone involved owns it equally.

For copyright, joint authorship has specific legal requirements. People working on the same project might create separate works rather than jointly authoring one. Employment arrangements, contractor agreements and existing ownership rights can also affect who legally owns the finished work.

There's another important distinction worth making. If two founders each own 50% of a company, that doesn't necessarily mean they personally own half of its IP. The company may own the intellectual property itself, while the founders own shares in the company.

Does Intellectual Property Need To Be Registered?

Not always. In Australia, copyright generally arises automatically when an eligible original work is created. This can include software code, written content, photographs and artwork. There's no official Australian copyright registration system, but that doesn't make copyright inherently less legally enforceable than registered IP.

Patents and registered designs, on the other hand, generally require registration to obtain the relevant statutory protection. Trade marks can also be registered, although some protection may be available for unregistered brands under other laws.

Different rights protect different aspects of a creation, so it's important to establish exactly what IP is being shared and who legally owns it. If you're unsure about your position, getting IP legal advice can help clarify your rights before entering into a commercial arrangement.

Does Joint Ownership Work Differently Depending On The Type Of IP?

One of the more important things to understand is that Australian law doesn't apply the same co-ownership rules to every form of intellectual property.

The rights available to joint owners can differ considerably depending on whether they're dealing with copyright, patents, trade marks or registered designs.

Copyright

Where copyright is jointly owned, an individual owner generally cannot independently reproduce, license or otherwise exploit the jointly owned work without the other owners' permission, unless an agreement or another legal basis allows it.

For example, this could affect two creators who jointly own copyright in software they've developed.

It's also worth remembering that creators may retain separate moral rights, such as rights relating to attribution, even where copyright ownership has been transferred.

Patents

Under section 16 of the Patents Act 1990, joint patent owners generally have equal, undivided shares unless they've agreed otherwise.

Each owner can ordinarily exploit the patented invention independently for their own benefit, without having to share the resulting profits. However, granting a patent licence or transferring an ownership interest generally requires the other owners' consent.

Trade Marks And Registered Designs

Joint trade mark ownership operates differently. Under the Trade Marks Act 1995, the rights of joint registered owners must be exercised as though they belong to a single person. There are also particular requirements for jointly applying to register a trade mark, so sharing a brand isn't necessarily as simple as registering it in two names.

For registered designs, the Designs Act 2003 generally allows each joint registered owner to exploit the design independently, while requiring consent to license it or transfer an interest, unless otherwise agreed.

Why Does This Matter In Practice?

Say two businesses jointly own a registered design protecting a product they've developed.

One wants to manufacture and sell the product through its own channels, while the other wants to license the design to a third-party manufacturer.

Although both businesses own the design, those activities are treated differently. An owner may generally exploit the registered design independently, but granting a licence ordinarily requires the other owner's consent.

This is why knowing that you jointly own an IP asset is only the starting point. Understanding what each owner is legally entitled to do with it is just as important.

Can One Joint Owner Use, License Or Sell The IP Without Permission?

Owning IP doesn't necessarily mean you have complete freedom to make commercial decisions about it.

There's a legal difference between using intellectual property for your own business, giving someone else permission to use it and transferring your ownership rights altogether.

An IP Licence Agreement, for example, allows another party to use IP under agreed conditions without transferring ownership. An assignment transfers ownership rights instead.

For jointly owned IP, whether either transaction can proceed without the other owners' approval depends on the relevant legal rules and existing agreements.

This becomes particularly important when one owner wants to pursue an opportunity that the other doesn't support. A business might receive an attractive offer to license jointly owned technology, but still be unable to grant the proposed licence without obtaining the necessary consent.

Who Receives The Profits Or Royalties?

Equal ownership also doesn't necessarily mean every commercial return must be divided equally.

As mentioned earlier, joint owners of Australian patents and registered designs can generally exploit those rights independently for their own benefit without accounting to the others, subject to any contrary agreement.

Licensing revenue and royalties may raise different questions, depending on how the arrangement is structured and who has authority to grant the licence.

If the intention is to share income from the IP, it's worth clearly establishing how that will work, including which activities generate shared revenue and which returns each owner can retain.

What Happens If Joint IP Owners Disagree?

Even where two owners have a good working relationship, they won't necessarily agree on every decision involving their intellectual property.

One might want to expand into a new market, while the other prefers to keep the IP exclusive to their existing business. They could also disagree about licensing fees, protecting the IP or investing in further development.

A 50/50 ownership arrangement doesn't automatically mean every decision requires unanimous approval. Some decisions may fall within an owner's independent legal rights, while others require agreement.

Problems can arise when an important commercial decision requires both parties' approval, but neither is willing to compromise.

For jointly owned patents, section 17 of the Patents Act 1990 provides a mechanism for the Commissioner of Patents to give directions concerning certain dealings, licensing arrangements and co-owners' rights. However, this isn't a general solution for every IP dispute.

Where possible, it's better to establish how important decisions will be made before a disagreement arises.

This might involve agreeing on which decisions require approval from all owners, who has authority over day-to-day matters and what process will apply if the parties reach a deadlock.

What Happens If One Joint Owner Wants To Leave The Arrangement?

A business relationship might come to an end, but that doesn't necessarily mean the parties' joint ownership of IP ends with it.

This can create difficulties where one owner wants to continue using the IP commercially while the other wants to sell their interest or move on to another venture.

For example, if two businesses jointly own software, what happens when one decides to leave the collaboration? Can the departing business continue using the software independently? Can the remaining business obtain exclusive ownership?

The answer depends on the IP rights involved and any agreements already in place.

An owner also can't necessarily transfer their interest to someone else without approval. As we've seen, particular consent requirements apply to jointly owned patents and registered designs.

Where the parties agree to transfer ownership, an IP Assignment Deed can help document the transaction, subject to the applicable legal requirements.

Existing licences also need to be considered. If customers or third parties already have permission to use the IP, ending the collaboration won't necessarily bring those arrangements to an end.

Unclear ownership arrangements can become especially problematic when a business is seeking investment or preparing for a sale. A buyer or investor may want reassurance that the business owns, or has sufficient rights to use, the IP it relies on.

This is why exit arrangements deserve attention while the parties are still working together, rather than only when someone decides to leave.

What Should An IP Joint Ownership Agreement Cover?

Joint ownership can work well, particularly where multiple businesses are contributing resources, expertise or technology to a shared project. However, there's more to consider than simply agreeing on ownership percentages.

An IP joint ownership agreement should clearly identify the intellectual property being shared, each party's ownership interest and how the IP can be used commercially.

It should also establish who can approve licences or transfers, how commercial returns will be divided and who is responsible for maintaining and protecting the IP.

For example, where registered IP is involved, the parties may need to agree on renewal costs and decisions about enforcement. This can help avoid a situation where one owner wants to protect the IP but the other is unwilling to contribute to the costs.

Future developments are another important consideration.

If two businesses jointly own software but one later develops additional features, those improvements won't necessarily become jointly owned automatically. The position may depend on who created them, whether they incorporate existing IP and what the parties originally agreed.

Finally, the agreement should establish a process for resolving disagreements and managing exits. That might include how an ownership interest will be valued, whether the other owners have an option to purchase it and what rights each party retains afterwards.

Is Joint Ownership Always The Best Option?

Not necessarily. While joint ownership may seem like the fairest arrangement, it isn't always the most practical one.

In some circumstances, having one business own the IP while granting another a licence to use it may provide clearer control over commercial decisions. Alternatively, the parties might establish a company to hold the IP, with each founder owning shares in that company.

The right approach depends on how the IP will be used, who needs control over it and the parties' longer-term business plans.

Need Help With Jointly Owned Intellectual Property?

Sharing ownership of intellectual property can be a practical arrangement, but it's important to understand what each owner can do and how commercial decisions will be made.

Whether you're entering a new collaboration or reviewing an existing arrangement, getting the ownership and licensing terms right early can help avoid complications later.

If you'd like help with this, you can reach us on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.