This article is written by Ananya Singh who is pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho.

Introduction

In today’s world, we often witness more and more companies and organizations entering into collaborations resulting in strategic alliances or forming innovative joint ventures, thereby making the increase of joint ownership of intellectual property (IP) a common sight. Joint ownership increasingly being perceived as a fair solution whenever multiple parties are involved. However, such collaborations are not as simple as they appear on the surface and if the nitty-gritty of such collaborations is not addressed in a planned manner, such joint ownership can be fraught with danger. With this in mind, in this article, I aim to address the complex questions that arise with respect to the ownership of IP when parties collaborate on creative projects or to conduct research and development and become joint owners of such resulting IP. In such a scenario, parties have certain statutory rights and rights against each other depending on the terms and conditions of their contractual agreement. I will discuss all these rights in this article and talk about the challenges that parties need to overcome in order to make their rights against each other ironclad to avoid any monetary and non-monetary damage. Before proceeding further, we need to understand what is indeed meant by IP. 

The World Intellectual Property Organization (WIPO) defines IP as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.” Certain kinds of IPs are protected by law, including but not limited to trademarks, patents, copyright, industrial designs, geographical indications, and trade secrets. The legally protected IP enables people to receive legal recognition and reap financial benefits from their creation or invention. It is also vital for the economic development of the country due to the significance of “mind” as represented by IP wields enormous power. It is because the owner(s) of this property is given a certain exclusive right(s) to know, by law, and to control what is being done to their property as it is the product of their own human mind, labor, skill, judgment, and efforts.

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Jointly owned intellectual property rights (IPR)

The jointly owned IPR may be defined “as two or more parties having shared ownership and control of the very same intellectual property rights.” This essentially means that all the decisions in relation to the disposal of IPR have to be made by parties involved together, and, by extension, such disposal or exploitation of rights must be handled contractually to avoid any complications or legal dispute. For example, a clause can be put in place restricting the rights of parties to license or sub-license IP without the written consent of other parties. Another example of restrictive covenants could be to prevent disclosure to competitors.  

While joint ownership may seem like an obvious and equitable solution when parties have worked together in a way that it becomes difficult for them to compartmentalize each other’s efforts with respect to the resultant output, the mistake of not giving a detailed consideration as to how their jointly created IP will be owned, organized and exploited can prove damning. This is because there could arise practical difficulties and legal pitfalls in the process of full commercialization of the IP. Therefore, it is strongly recommended that parties never rely on default legal position and must always sign an express agreement on joint ownership of IP. The express agreements containing worldwide rights and regulations of all parties are also essential as and when the same IP is to be protected in multiple jurisdictions having varied laws and regulations on the same subject matter. This is because parties quite more than often tend to look at joint ownership as per their own domestic laws, and that may lead to having an entirely different understanding of what it really means to be a joint owner.

Joint owners of IP in India and their rights

In this section, I will cover the meaning of joint ownership of trademarks, copyright, and patents, respectively, and the rights contained therein, in India.

Trademarks

When two or more legal entities act as proprietors of a trademark, either for a joint entity created by them or to share and promote the goods and services provided jointly by them, they are called the joint owners of the trademark. No quantification of rights is possible in such a scenario against any joint owner, only the financial outcome upon the utilization of such joint-owned mark can be quantified as per the terms and conditions agreed by them in the contract.

Section 24 of the Trade Marks Act, 1999 states that the joint ownership of a trademark is a mutually stated agreement between the parties to hold the mark together, however, neither of them has the power to be the absolute owner of the mark. Resultantly, the said trademark can only be registered in favor of the parties, when held together. In other words, this section provides for the registration of trademarks where the mark is being used or proposed to be used with respect to goods and services that have a connection with all the joint applicants. A general example of this kind of ownership is very frequently seen in the contemporary world, wherein companies that are good at manufacturing certain products and companies that are good at marketing and trading these products collaborate to establish a joint entity to secure a bigger share in the market. Moreover, to gain local acceptance, the companies coin local names in a particular jurisdiction and apply for joint ownership of the trademark.

In addition, Section 18 of the Trade Marks Act, 1999 states that while entering into the joint ownership, it is essential for either applicant to have a principal place of business in India, and if that is not the case then, it would be mandatory for them have their address for service in India in order to get registered. Lastly, the default legal position is that the economic value generated for any such joint ownership or joint venture must be shared equally among the said joint owners unless they have a contract stating the contrary.

Interestingly, it is also possible for the joint owner(s) to purchase the mark and license it to the other joint owner(s), upon dissolution of the joint ownership. In other words, if joint owners mutually agree at the time of dissolution of joint ownership, to transfer the rights vested in them via assignment or licensing as per the provisions laid out in the Trade Marks Act, 1999 “to either of them, to carry forward the business individually under the same joint trade-name, the same can be carried out by the conditions mutually agreed upon by them at the time of dissolution.”

Patents

Section 50 of the Patents Act, 1970 which deals with ‘rights of co-owners of patents’ states that unless there is a contract to the contrary, joint owners are entitled to an equal and undivided share. Moreover, a joint owner of the patent is free to exploit and retain profits in the patent, without sharing profits with the other owner(s) (Section 50(2)). However, a joint owner cannot assign its ownership interest without the consent of another joint owner (s) or grant an exclusive license of the patent without the consent of another joint owner (s) (Section 50(3)). Generally, joint ownership may become unavoidable in scenarios wherein two or more parties have invested together equally or have a common interest in the commercialization of the product. Therefore, if proper care and attention are not given while drafting these clauses in the contract, it may lead to big legal trouble. 

Section 51 of the Patents Act, 1970 empowers the Controller to give directions to joint owners of patents with respect to the sale or lease or grant of licenses, etc. of the patent. This effectively means one or more joint parties may approach the Controller seeking directions to one or more other joint parties to agree for the licensing (Section 51(1)) if they did not earlier in their private negotiations. The flip side to such a situation is that approaching the Controller for directions may turn out to be a time-consuming process. It also leads to uncertainty as it is unknown what kind of directions and in whose favor, Controller decides to give the directions after hearing the other joint party.

Copyright

As per the Copyright Act, 1957, the joint authors are seen as co-owners of the work created by them. They carry no exclusive rights to use such work, they have to take the permission of other co-owners. Section 2(z) defines ‘work of joint authorship as “produced by the collaboration of two or more authors in which the contribution of one author is not distinct from the contribution of the other author or authors.” The explanation to Section 13(2) states that in joint authorship of a work, “the conditions conferring copyright in this subsection shall be satisfied by all the authors of the work.” 

Interestingly, in India, there is no legal requirement to get into a contractual agreement for joint authorship. The legal relationship may solely arise depending on various other factors. In the landmark case of Najma Heptullah v. Orient Longman Ltd., it was held that in joint authorship, the contributions must be of indistinguishable nature and an outcome of “close and active intellectual collaboration with respect to the final product and not the nature of the work done.”

Conclusion

With the rapidly evolving world, we are witnessing an increase in the threshold of interdependence and trust in various areas of business. The joint ownership of IP is one such area; when utilized properly by giving full consideration to the statutory rights vis-à-vis the contractual obligations imposed on each other, it can prove to be an extremely lucrative option for the parties involved. Ownership and rights of IP are seen separately, therefore, should not be confused for each other, as the former is non-transferable, but the latter is not. How the exploitation of such rights will take place during the course of joint ownership should be well documented in the contract to avoid any challenging circumstances or legal disputes. 

References 

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