CENSIS white paper: Intellectual Property in Business

Intellectual Property in Business: IP basics, IP management, IP strategy
IP Basics for Start-ups (continued)
4 IP ownership - Keep records
of where ideas come from
Allocation of IP ownership is a critical issue for every
business (regardless of its maturity). Investors and
buyers will always require ownership information –
after all, they will pay only for assets that belong to
the business.
Employment contracts
Certain rules regarding ownership are set out in law.
For example, in the UK, IP developed by an employee
in the course of employment will usually belong to the
employer. Although this is the typical legal position, it is
advisable for the sake of clarity and certainty to include
an explicit clause in the employment contract (or in a
separate agreement during the onboarding procedure).
And since directors are not necessarily considered as
employees, it is also advisable to use directors’ service
contracts and to include IP clauses in them. 11
In terms of ownership, companies should also pay
attention to:
1 IP registration processes, e.g., in the US, patents must
be assigned to a company. A company is not named
as a patent owner in the document, only in the
digital files visible in the USPTO system.
2 IP acquisition from third parties such as web design,
content design and branding suppliers. Copyright
ownership could otherwise remain with the content
creators after delivery, thereby potentially restricting
future use.
3 Purchases made by individual employees, e.g.,
domain names. In such cases, a company should
ensure transfer of ownership.
4 Joint developments with other organisations
(e.g., development documentation, IP ownership,
exploitation rights). A company should be clear
about its intentions and interests when joining such
projects, negotiate accordingly and capture agreed
terms in a collaboration and exploitation agreement.
Once the project starts, it should document its own
developments, e.g., tracking the work of employees
involved in the project.
Background IP
In the R&D context, background IP is pre-existing
IP brought into a project by a collaborating party.
At the end of the project, if the background IP has
been incorporated into new developments
(the foreground IP) or is otherwise required to work
the foreground results commercially, the party wishing
to exploit the foreground must ensure it also has the
rights to the relevant background IP. This can be done
through an assignation or a licence, whichever is
agreeable to those involved and legally possible.
The position is very similar in a start-up context. When
part of the IP has been developed prior to the company
being established – a common scenario for spinouts
from academia, research facilities or corporations – the
funders should ensure that the relevant IP is licensed
(preferably exclusively) or assigned (if possible) to the
start-up in a written agreement.
Start-up idea vs ‘day job’
The situation can easily become complicated when
company founders work on a new solution for a start-up
when concurrently employed in a different organisation.
In such situations, it is critical to draw a clear line
between the time and efforts invested in the start-up
technology and the work done in the ‘day job, carefully
recording the start-up work that has been done, the
resources used and where the work was done.
Even with this recorded, those clear lines may still
become blurred if the start-up technology and the
day job happen to be in the same field of technology/
business 12 . As explained, in most cases employees will
be required, as part of their contract of employment, to
sign an IP assignment clause (or a separate agreement);
in doing so, they assign to the employer ownership of
ideas and solutions related to their role in the business.
This could also apply to ideas developed outside the
day job where the employee is using the same skills and
know-how that their job requires of them. Furthermore,
employment contracts often include a non-competition
obligation – adding fuel to the fire if a start-up idea
overlaps with the day job.
Take-home message: Make sure that your employment
contract includes both confidentiality provisions and IP
assignment clauses. As a practical tip, it should become
second nature to define transfer of ownership or
licensing of IP rights solely in a written form.
11
There is an exception in the higher education sector, where academics retain rights in their academic works, even if they are created as part of
their employment. ‘Getting your IP in order: stay in control of ownership’ (Pinsent Manson, 2 November 2020) accessed 2 December 2022.
12
Harroch (n1).
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