Happy Business Marriage Part 1: The Background Check

Fotolia_4362607_XS-Heart-300x287.jpg

By Heather N. Shafer (Intellectual Property Attorney, Independent) The creative endeavor is one of the most beautiful relationships that two or more people can enter into together. Creative ventures thrive on collaboration and there is no law against how many can join the venture. However, it is important to know a sobering effect of joint works and inventions under both the patent and the copyright laws:

If there is more than one inventor or creator -– each inventor or creator owns an equal and undivided interest in the whole invention or creation.

This means that each of the co-inventors or co-creators can exercise any of the rights that patents or copyrights bestow (e.g., making, using, selling, and importing patentable inventions and reproducing, distributing, performing, and making derivative works of copyrightable inventions).

More importantly, each of the co-inventors or co-creators may exploit those rights without the consent of and without sharing the profits to the other co-inventors or co-creators!

Therefore, in the honeymoon bliss that occurs at the genesis of a creative project, it is important to get a few things straight up front. Such as:

For each party to the collaboration – what kind of contracts might we have entered that would give a third party ownership interest in our creations, be they patentable or copyrightable?

  1. Think –- employment agreements, independent contractor agreements, our spouse (especially if one party has a pending divorce), University policies (if the parties are graduate students or faculty). We can refer to these as STI’s (Secret Third-party Interests).
  2. If one of your collaborators is subject to, say an employment agreement or University IP policy, all of a sudden your database expert, Jane, is no longer at the table – instead you are a co-owner with her Behemoth employer or her University. These entities may have very different ideas about how to exploit the work and may make exploitation of the work complicated if not impossible.
  3. Case in point –- two engineers get together to work out a novel method of cleaning up oil spills. Each engineer works for a different company. One works for a small local company that provides the skilled ground crew to clean up the oil spill. The other engineer works for an international Behemoth company that manufacturers oil remediation equipment. The engineers, being at the bottom of the totem pole, envision leaving their companies and starting their own venture around the method -- one in which they merely buy equipment from the Behemoth and then set out to save the world and receive 100% of the market share. However, Behemoth has a different idea -- it owns the rights to the invention through its employee agreement with the co-inventor engineer. Even though the Behemoth cannot stop the small co-inventor from practicing the invention, it can practice the resulting invention in competition with the small co-inventor. With its international distributors everywhere on earth, it quickly dominates the market for the method and leaves the two inventing engineers empty handed.The importance of a background check (firmly scrutinizing your future collaborator’s existing agreements to identify STI’s) is lost on many in the first blush of love.The important problems that can be raised by unrevealed third party interests will be further explored in the next post.Until then -– the take home message is to:
    1. Keep copies of your contracts and policies.
    2. If you don’t have copies, go ask for them.
    3. Ask to see the paperwork showing that your collaborators are clean of STI’s before things get hot and heavy.

    This post was originally posted at IP Law for Startups.

    Editor's note: Got a question for our guest blogger? Leave a message in the comments below. About the guest blogger: Heather N. Schafer is an independent intellectual property attorney with more than five years of experience in protecting, enforcing and licensing intellectual property rights. Heather started her practice in Chicago Illinois at Brinks Hofer Gilson & Lione, one of the largest intellectual property firms in the country, Brinks Hofer Gilson & Lione. Heather is a registered patent lawyer and counsels companies regarding strategic protection of their intellectual property including trade secrets, patents, copyrights, and trademarks.She blogs at IP Law for Startups.