This Practice Note focuses on the IP aspects relating to the development of new and emerging technology, provides practical advice for parties engaging in collaborative working and the key considerations for protecting and enforcing their IP rights.
New technology
IP rights are valuable business assets and like any other asset owned by a business, that asset should be protected. There are a number of different IP rights in the UK, including but not limited to, trade marks, design rights, copyright and patents. Essentially, IP and the required protection depends upon the characteristic of the technology. For more information, see Practice Note: What IP assets a business may own and how best to protect them.
New technology is no different as it's an asset with resulting IP rights. Further, such new technology is often a consequence of collaborative working between two or more businesses. It is strongly recommended that businesses actively consider at an early stage in their commercial relationships who will own any resulting IP and how best to protect such valuable rights.
Importantly, and in order to fully capitalise on the commercialisation of new technology, parties should be proactive in seeking an express agreement at the outset of any collaborative working. This includes joint ventures setting out the parties' respective IP rights and duties. Such contractual certainty avoids conflicts and potentially expensive litigation at a later date.
Although it is important to consider each of the IP rights which may be available, technology relating to a new and inventive process or products can often satisfy the criteria for patent protection. The application process for patent protection is a complex area and one that parties are advised to seek specialist advice at an early stage. Considering whether this would be necessary is crucial in the early stages of a project when agreeing budgets and any division of responsibilities.
These issues as outlined can arise when parties engage in collaborative working. Common arrangements parties considering their IP rights can enter into include the following:
- assignment-transfers the ownership of IP rights to another party, the other party who will be the assignee will become the new owner of the IP rights. See Precedents: Intellectual property assignment-pro-assignee and Intellectual property assignment-pro-assignor
- collaboration agreement-deals with the ownership, management and exploitation of jointly created IP. See Precedent: Collaboration agreement
- licence agreement-authorises another party to exercise some of the rights of the IP owner in the IP while the owner still maintains ownership and ultimate control of the IP. A licence of IP rights can also form part of a larger partnership and is often dealt with in a contract for manufacturing and research and development
- joint venture agreement-can specifically deal with the IP rights between the parties and be tailored to the technological and commercial requirements of the arrangement. See: Joint venture agreements-overview and Practice Note: Intellectual property aspects of corporate joint ventures, and
- royalties-an exploitation clause in a commercial agreement can deal with the payment of royalties, if both parties have contributed to the development of the technology equally then this clause may provide for royalty-free cross-licensing of each party's IP rights
Another key issue which should be expressly addressed in any agreement is which party will bear the cost of obtaining and maintaining such IP rights in the technology. It is also worth considering which party has the best means or resources of maintaining IP rights. In basic terms parties should ask themselves, does one party already have a framework in place for managing an IP portfolio, does one party have the international know-how to obtain universal protection if required, does one party have greater resources to expend more on renewal fees or any possible infringement action? Ownership may be best vested in the party who is able to adequately meet the aforementioned requirements.
New business models
Technology companies entering into arrangements with third parties including manufacturers, knowledge providers and research and development experts in order to assist in the process of commercialising their technology is becoming more common place. We are seeing an emergence of what some have described as the 'open innovation model'. This model, unlike the classic closed model allows businesses to operate and innovate by sharing internal and external resources with third parties. This model enables businesses to operate by more profitable means, reducing costs, improving their design to market timescales and increasing the gap between themselves and their competitors.
This IP-based business model is potentially advantageous for start-ups which would allow these new firms the ability to continue progressing and focusing on their technological know-how while outsourcing functions they do not have the capacity or experience to do themselves. This could include outsourcing manufacturing and distribution responsibilities to established market players that already possess the required resources to facilitate these functions and thereby the growth of the start-up. For more information about outsourcing, see: Preliminary issues in outsourcing-overview and Outsourcing agree-ments-overview.
The consequence of this model on a company's IP rights is that any technology developed, albeit covered by various IP rights and therefore able to be protected, is owned by different parties. Licensing agreements, along with non-disclosure agreements (NDAs), play a crucial role in open innovation for this reason. A licence will allow a third party a right to utilise the IP of another which would otherwise constitute an infringement of their IP rights. The party granting a licence and therefore providing the contractual right to a user to exploit the IP can be restricted based on the terms of the licence, common examples include restricting sublicensing to competitors, limiting the scope by territory, fields of use or exclusive/ non-exclusive terms.
Further when entering into agreements with third parties, if you are to share your own IP with a third party (often referred to as Background IP) care should be taken to govern the terms upon which the Background IP can be used. It is also key to ensure that any agreement deals with the ownership of IP which may be generated during the term of the agreement (Foreground IP). For more information about Foreground and Background IP, see Precedents: Background IP and Foreground IP definitions and Collaboration agreement.
Parties should be cautious in adopting an open model without due consideration as any publication or sharing of information relating to a patent, for example, would lose the right of patent protection, if it can be said that the novelty of the invention had been lost. Parties are nevertheless encouraged to seek legal advice when entering into new commercial relationships where the development of new technology is to be involved.
Freedom to operate searches
When first considering the development of new technology and prior to the launching of a new product into commercial markets, freedom to operate searches should be considered. By examining this issue businesses are provided with an assurance that the technology is considered commercially safe to be made and sold in a particular country, without constituting an infringement of someone's existing IP. Such searches can also prove beneficial when seeking external investment or board approval due to the level of assurance it provides.
Should searches reveal that the technology may preclude an existing right, then the technology could be adapted to be produced in a way that does not constitute an infringement, therefore the sooner this information is obtained the more cost and time effective it will be to the business. A search could also reveal opportunities to collaborate with a party with existing technology that you could seek to license a right of usage from. It is worth highlighting though that this is a specialist question and specialist advice should be obtained.
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Originally Published by LexisNexis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
