Innovation is key to the success of all business whether it means that you have new ideas for delivering existing goods and services or are creating new ideas, product lines or services.
How we deal with intellectual property rights is therefore very important, not least for our technology-driven industry and our North Sea contracts.
Many of the contracts entered into between operators and service providers have clauses dealing with intellectual property. An operator will often provide that any intellectual property rights, or “IPR” (this is a generic term covering rights such as patents, copyrights and database rights), will vest in the operator. On the other hand, a contractor’s standard terms will, not surprisingly, specify that the contractor retains ownership of these rights.
Sometimes, in an effort to reach a compromise on this issue, one party will suggest that the operator and the contractor (or it may be a contractor and a sub-contractor) share ownership of the IPR, thinking that this will give each party what they want.
This, however, is a very dangerous solution, unless fully thought through and carefully drafted, because joint ownership, unlike certain trademarked products, does not necessarily do what it says on the tin.
You might assume that if you are a joint owner then you will have all of the same rights that a sole owner would have and so can do what you like with the IPR, but this is not so.
Under English and Scots law, joint ownership means that certain decisions can only be made with the consent of both owners. Just to complicate matters, the law is different depending on which type of IPR you are discussing.
For instance, in the case of patents, a joint owner can use the patent himself just as a sole owner could, but he cannot license or assign it without the consent of his co-owner. In the case of copyright, the situation is even worse and a joint owner cannot do anything with the copyright without the consent of his co-owner – he cannot exploit it himself, license it or assign it.
Therefore, if you are going to go down the route of joint ownership, you need to decide at the outset and write down in your agreement what rights each party will have to use, license or assign the IPR.
You also need to deal with succession in the event of insolvency or death. Do the IPR go to the deceased’s estate or his creditors or does it automatically pass to the other party?
What if one party wants to sell. Does the other have a right of first refusal? If only one party has the right to use the IPR, does it have to account to the other party for some of the money it makes from that use? If the IPR is registered, who is responsible for maintaining the registration? The parties will also need to decide what they agree on enforcement if someone else is infringing their rights.
Therefore, rights must be expressed clearly where the parties decide on joint ownership.
In many cases, the operator may have no particular interest in joint ownership and its complexities – all he wants is a clear right to continue to use the IPR for the purposes for which he engaged the contractor.
If this is the case, all the operator needs is a clear, express, irrevocable and royalty-free licence to use the IPR for the purposes of the project in respect of which it was commissioned, with the right to sub-license for this purpose and the right to assign these rights to a successor operator.
If the IPR in question has more general application, then the operator may wish to negotiate a royalty-free licence for it, its affiliates and co-venturers to use the IPR for any internal business purposes, but without the right to exploit commercially by licensing to third parties.
This does not, however, require a share in ownership and, as you can see, ownership may be more trouble than it’s worth.
Penelope Warne is head of energy at CMS Cameron McKenna, which has 55 offices in 24 countries