Ownership of Intellectual Property Rights

Intellectual property rights can be valuable assets for companies, so it is very important to understand who owns what. The general starting point is that the owner of intellectual property is the person who created the tangible asset from which intellectual property rights vest, i.e. owner of copyright in a photograph will be the photographer. This position may vary depending on what agreements have been entered. Separately, ownership may also be different depending on who created the tangible assets from which intellectual property vests for your company. There are some exceptions to the general rule:

Employee

The general rule is that if an employee created an asset of which intellectual property vests, and this asset is created by an employee in the course of their normal duties, any intellectual property rights will belong to the employer. In practice however it is not always the case, depending on the circumstances. To avoid any doubt, it is sensible to include clauses which deal directly with intellectual property rights in employees’ contracts that will specifically state that all rights of any assets created by an employee belong to the company and the employee agrees to the transfer of ownership.

Freelancer / External Consultant

It is quite common to assume that if you paid for freelancer’s services, then any intellectual property rights vesting in the creation will belong to you. However, if there is nothing which expressly says otherwise, the freelancer will retain ownership of the intellectual property rights and you will only get an implied licence to use it.

This can lead to potential problems later on – for example, external investors or buyers of the business if you decide to sell it will always look into ‘chain of title’ of the intellectual property – i.e. whether you have a paper trail of documents proving ownership. This can also mean that the web developer owns the code to your website, the designer owns your logo or the appearance of your product – and they can stop you from using these in certain circumstances.

It is therefore highly recommended to make sure that you have a written assignment agreement from the outset, which will save you a lot of potential trouble down the line.

Director / Owner of the company

Rights created by company directors and shareholders fall outside the general rule relating to the employer’s ownership of intellectual property rights created by employees.

This means that anything created by the director or shareholder which has intellectual property rights vested in it will belong to them rather than to the company. If the director or shareholder leaves, they could stop the company from using their intellectual property, which can be highly problematic if the intellectual property is what the company’s value is based on.

Therefore, it is sensible to include terms dealing with the creation and ownership of intellectual property in all directors’ service contracts and to ensure a valid licence or assignment from the shareholders who create intellectual property has been executed.