When Companies Share Intellectual Property for Mutual Benefit
Posted on Monday, August 13, 2018 Share
The phrase "two heads are better than one" can easily apply to corporations and their intellectual property (IP).
When two or more companies agree to share their IP for mutual benefit, the payback can be considerable. Not only can collaboration result in additional revenue, it can also create additional IP that can further benefit those in the relationship.
Entering into a new venture with another company can be exciting. However, the benefits can appear so enticing that little time may be spent wondering what could go wrong.
There can be tremendous pressure to begin sharing IP right away, especially if the advantages of doing so have a material impact on your company's financial performance. But sharing with a third party is inherently risky. Theft or unauthorized use of the property needs to be a major concern.
To reduce the risks of sharing IP with another entity, here are nine steps your company can take:
1. Ask yourself if sharing really makes sense. Partnering with a suitably qualified company can provide tremendous benefits. However, take the time to consider whether your company may be able to attain those benefits independently. Will the strategic partner share IP that your company is unable or unwilling to create on its own? Is it possible to license the IP from the partner instead of being required to share your IP in return?
2. Engage legal counsel early in the process. The first step to a mutually beneficial collaboration is the creation of a solid legal contract that is agreed upon by both parties. The agreement should detail the following:
Exact descriptions of the IP to be shared.
How IP will be identified by both parties. For example, all paper documents as well as electronic files will contain a watermark noting that the information is a trade secret as well as being confidential.
The protocol for exchanging and storing the data. Will parties email data, or save it to a common server?
Who within the respective organizations will have access to the data as well as the circumstances where such access would be revoked?
Will your company's IP be shared with your partner's vendors? If so, under what circumstances?
In the event that new IP is created as a result of the collaboration, how will ownership rights be assigned? Who will have the ability to license or assign the newly created IP?
3. How will collaboration affect your "day to day" operations? To be effective as well as minimize risk, collaboration requires your company to invest in people, processes and technology. Such investment can result in considerable time, effort and expense and create an unwanted distraction from the company's regular operations. Before the collaboration begins, take the time to assess how the effort might negatively impact the company and what steps you can take today to avoid such disruption.
4. Ensure that incentives are aligned. Before any agreement is signed, all parties to the collaboration should meet and discuss their goals and expectations for the arrangement. This "courting" phase is exceptionally important as it allows both parties to discern the other party's true intent. In addition, research the other party's participation in previous collaborative efforts. Do they have a track record of successful collaboration or acrimonious litigation with prior partners?
5. Determine how technology can help. There are a number of commercially available technology solutions that can help protect your company's IP even when it has left your company's control. For example, software can be embedded within a PDF document that restricts access to the file, how often it can be printed, and how long the data is accessible.
6. Educate employees involved. In addition to implementing processes and technology to prevent intellectual data abuse, misuse or theft, educating employees on what is expected of them is also important. Employees involved in the exchange of IP should receive training on what information they can share, and with whom they can share it — both internally and at the partner company.
7. Determine what happens if an employee steals the IP. Unfortunately, despite a company's best efforts, employees routinely commit fraud and IP theft. The risk of an employee theft taking place is far greater when your company shares its IP with a third party because the typical "checks and balances" may not be in place to protect assets not owned by the company. In the event that theft results, is your company prepared to respond?
8. Monitor market developments and patent filings. Despite the best efforts of both parties to create value together, either by design or by accident, IP shared during the collaboration may end up being used to create a new product or service without approval of the other party to the collaboration. As soon as the collaboration begins, someone with your organization should be tasked with monitoring new product/service launches within your company's sector as well as new patent applications (if applicable).
9. Determine when it is time to say goodbye. Figuring out when to gracefully exit an intellectual property sharing arrangement must be established well in the advance of the time to part ways. How will intellectual property in the possession of the other party be returned? How will the opposite party demonstrate that all of the intellectual property that it had in its possession belonging the other company is returned?
Of course, there are no guarantees that you still won't wind up in court, but following these steps may help pave the way to a mutually beneficial arrangement.
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Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.