iIntellectual property (IP) rights and contracts regarding IP rights can be complicated.
As an example, consider the potential IP rights in a simple hypothetical toy skateboard called BLADEBLAST. First, there are the trademark rights in the name BLADEBLAST. Second, there are potential utility patent rights in inventive aspects of the skateboard, such as a novel polymer that makes up the wheels that lead to more skateboard speed. Third, there may be ornamental aspects, like a unique trapezoid-shaped board, which design patents could protect. Fourth, there may be copyrights related to the marketing material or a jingle in a commercial advertising the skateboard. Lastly, there may be confidential or trade secret information related to the skateboard, such as manufacturing techniques, pricing, or competitor information.
Given this landscape, retailers should consider their current and future IP rights and obligations before entering an agreement that may implicate those rights. This article discusses how IP rights can potentially be allocated in an agreement with a manufacturer, distributor, promoter, advertiser, or another retailer.
Joint Ownership
A retailer may combine forces with another party to develop new IP. While joint ownership may offer both parties a strategic position, it is important to understand the risks associated with such an arrangement. Without an express agreement addressing the rights of each party in a joint ownership agreement, it can be difficult to discern who has rights to, for example, product improvements, which can lead to costly disagreements. To avoid confusion, one should understand how joint ownership is generally defined for patents, copyrights, and trademarks.
Patents can be jointly owned by multiple parties.1 Each joint owner of a patent enjoys an undivided interest in the entire patent. This means that individual claims or aspects of a patent cannot be assigned or contracted—rather, parties must assign the whole patent or none of it.2 Furthermore, a joint owner can assign only the interest that she holds. That is, a joint owner cannot unilaterally assign the entirety of the patent by herself.3 If a party is considering a joint ownership agreement for a patent, it is important to know how many joint owners are involved and what, if any, restrictions on assignments would be beneficial. Patent enforcement rights should also be considered: a patent joint owner cannot sue for patent infringement unless all joint owners join as plaintiffs in the suit.4 Thus, a joint owner can impede another joint owner’s attempt to enforce the patent against a third-party infringer by not suing or, worse, by granting a license to the third-party infringer without consent from the other owner.5 Finally, improvements in the invention should be considered such that there is certainty about who owns rights in future inventions and variations.
Copyright has similar rules to patents on joint ownership: assigning rights is all or nothing.6
Trademarks, however, are slightly different. While the general rule is that trademark rights are lost if the mark is not used, joint trademark ownership includes a lower burden of maintenance. That is, if just one joint owner continues to use the mark in commerce, each owner retains his rights in the mark.7 In regard to suing infringers on a registered mark, the law states that only the named trademark registrant has standing to bring an infringement act to protect his mark.8
Other Exploitation Considerations
Unless specified in an agreement, joint owners generally can exploit IP without restriction. However, exploitation of the IP may be restricted according to an agreement. Restrictions can include field of use, territory, and distribution channel. Joint owners may also agree that transfer of the jointly owned rights may be transferred only if certain conditions are met, such as unanimous consent.
Regarding trademarks, it is especially important to agree on quality control. Trademarks designate the source of goods, so it is particularly frustrating when a joint owner uses the trademark on inferior products and damages consumer perception of the brand. Therefore, retailers collaborating on a product may want to consider forming a joint venture to streamline production and commercialization. At minimum, it may be necessary to require the parties’ mutual approval of any licensees or alternative uses of the brand.
Finally, it is important to note that different countries offer different protections. Before entering a foreign market, be sure to engage with local IP counsel to understand local default rules and protections.
Conclusion
In any collaboration involving a retailer, it is necessary for each party to outline their rights and obligations in the IP. One should be wary of agreeing to share IP rights before fully understanding the other party’s expectations, rights, and obligations. A cautious, well-drafted agreement that considers current and future IP rights and obligations can avoid a headache for all involved.
Daniel Schultz also contributed to this article.
FOOTNOTES
1 Note that joint ownership is not the same as joint inventorship. Generally, joint inventorship is a relationship between a patent and multiple inventors, not necessarily the owners. Absent an agreement, if a patentable invention is made by two or more joint inventors, each joint inventor owns an equal undivided interest in the entire resulting patent. See Univ. of Pittsburgh v. Hedrick, 573 F.3d 1290, 1297-98 (Fed. Cir. 2009).
2 See Lucent Techs., Inc. v. Gateway, Inc., 543 F.3d 710, 721 (Fed. Cir. 2008) citing Pope Mfg. Co. v. Gormully & Jeffery Mfg. Co., 144 U.S. 248, 252 (1892).
3 Manual of Patent Examining Procedure § 301: Ownership/Assignability of Patent and Applications.
4 Israel Bio-Eng’g Project v. Amgen, Inc., 475 F.3d 1256, 1263 (Fed. Cir. 2007).
5 See Schering Corp. v. Roussel-UCLAF SA, 104 F.3d 341, 345 (Fed. Cir. 1997).
6 17 U.S.C. § 201(a).
7 See Mears v. Montgomery, 2006 WL 1084347 at *8-10 (S.D.N.Y. Apr. 24, 2006), aff’d in part on other grounds, 535 F. App’x 37 (2d Cir. 2013).
8 The Lanham Act § 32(1).
