Why Enter Into a Joint Venture?

As defined by Merriam-Webster, a joint venture is “a cooperative business agreement or partnership between two or more parties that is usually limited to a single enterprise and that involves the sharing of resources, control, profits, and losses.” Businesses may enter into these agreements to collaborate on research and development or to acquire and maintain market share value. Joint ventures provide a way to combine the expertise and resources of otherwise unrelated companies to the benefit of all. They are a means for innovative businesses with strong growth potential to acquire the resources they need. Some advantages joint ventures may provide include:

  • Access to greater finance, technology, and other resources
  • Access to specialization and new expertise and knowledge
  • Risk and cost-sharing
  • Greater capacity
  • Access to new distribution networks and markets

What Is Considered Intellectual Property?

Intellectual property (IP) is the result of the creation of the mind. It is a work or invention, such as a design, a manuscript, or an artistic work. It may also be a name, image, or symbol used in commerce. Owners of these intangible assets can be protected by intellectual property rights, which may include:

  • Patents: A patent protects an invention and grants the holder exclusive rights to its creation. It prevents others from manufacturing, selling, or using a patented invention without permission from the patent holder.
  • Trademarks: This refers to certain words, signs, or symbols that distinguish the goods or services of one business from another. Trademarks make it possible for consumers to identify particular products in the marketplace. Both trademarks and patents are registered with the United States Patent and Trademark Office.
  • Copyrights: Copyrights give creators of original works of authorship, such as music, books, software, and art, the exclusive right to perform, display, distribute, reproduce, or license their work. Copyrights are registered with the Copyright Office of the Library of Congress.
  • Trade secrets: Many types of confidential business information, not available to the general public, give owners a competitive advantage in the marketplace. Trade secrets are widely considered an important asset for businesses in the U.S. These are never registered, as the key to protection these rights comes from keeping them secret.

What Are the Risks to Intellectual Property in a Joint Venture?

Although joint ventures may provide many benefits for companies, they also present certain risks. If you fail to protect your intellectual property, your company could face legal disputes, lose its competitive edge, or eventually have a joint venture partner as a competitor. Risks to your IP in a joint venture may include:

  • Inadequate protection for IP rights: Any failure to obtain the necessary copyrights, trademarks, or patents could leave your intellectual property assets vulnerable and allow competitors to make use of your innovations.
  • Unauthorized IP use: Infringement of intellectual property rights can occur when partners in a joint venture use IP without authorization or outside of the scope of the collaboration.
  • Intellectual property leakage: A joint venture may require the sharing of sensitive information among partners. Proper safeguards are needed to prevent the leakage of proprietary information that could present a risk to your company’s competitive edge.
  • IP ownership disputes: Disputes over intellectual property ownership can arise between partners, particularly when a joint venture leads to new IP assets. It is crucial that the joint venture contract clearly defines ownership and rights associated with IP created during the collaboration of the partners.
  • No exit strategy: It is vital to have a clear and well-planned strategy for exiting a joint venture to prevent one partner from retaining control over intellectual property assets when the partnership ends.

Why Is It Important to Protect Your Intellectual Property in a Joint Venture?

Protecting your IP rights in a joint venture is important to create value and opportunities as well as to prevent losses and disputes. Securing your rights to intellectual property can increase your credibility and improve your reputation as an innovator and partner. It can help you gain access to new technologies, resources, and markets and increase your competitive advantage in your industry.

How Can You Protect Your Intellectual Property Rights in a Joint Venture?

If you are entering into a joint venture, it is important to take the following steps to protect your IP rights:

  • Make sure ownership and rights to intellectual property are clearly defined in your joint venture contract, including any IP the collaboration generates. The agreement should specify whether intellectual property is owned separately by either party, owned jointly by the partners, or owned by one partner with licensing rights granted to the other.
  • Safeguard trade secrets and sensitive information by including comprehensive non-disclosure and confidentiality provisions in the joint venture contract. The obligations of both parties to maintain confidentiality of proprietary information shared in the collaboration should be outlined in the agreement.
  • Register and protect all IP assets. When entering into a joint venture, determine which party will be responsible for registering associated patents, trademarks, and copyrights. Outline the steps that will be taken to protect intellectual property from unauthorized use and infringement and how the partners will enforce their IP rights against infringers.
  • Create an exit strategy that protects intellectual property. A joint venture may be dissolved or terminated for any number of reasons. It is important to plan for IP ownership and rights when the collaboration ends. Your joint venture contract should specify procedures for the transfer of IP assets. This may include royalty or licensing agreements that continue beyond the end of the joint venture.
  • Consult with a seasoned intellectual property attorney. IP laws across various jurisdictions can be complex, and it is wise to have the guidance of experienced legal counsel. At Israel & Gerity, we have specialized background and knowledge in intellectual property matters. Contact us for a free consultation at 800-659-7575.