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Give that back, it’s mine!

Give that back, it’s mine!

In this modern era where technology and branding are at the heart of every business it has become ever more apparent how crucial intellectual property is. From your brand name to underlying source code, ensuring that your business has the ability to enforce its intellectual property rights (“IPR”), use them freely and even commercialise them is of upmost importance. 

The default position is that when an employee creates IPR in the normal course of their employment the employer will be the owner of the IPR.  However, this is not always straightforward, as the recent English case of Sprint Electric Ltd v Buyer’s Dream Ltd shows. What happens if you engage with a third party, like a marketing agency or consultant, to create a new product name and branding for you? Who owns the IPR that is created there?

Sprint Electric was thankfully decided in favour of the party commissioning and paying for the IPR. However, the relationship between the parties was not easy to define, making it tricky to establish who owned and had rights to use the IPR.  As is so often the case, there was also a lack of detail on this point in the documentation between the parties. This lead to an expensive and time consuming court case to come to a decision on IPR ownership. The case is a useful prompt to make sure you have your contracts in order when engaging third parties or instructing employees to create material containing IPR for use by your business.  

When engaging with a person or company who is not your employee, the position in the UK is that the creator of the IPR is the owner of it. This means that the all-singing all-dancing marketing agency that has come up with this amazing product name and branding for you will own the IPR, unless the contract says otherwise. 

This may come as a shock if you assumed that paying the third party for their services would automatically mean that any IPR created was yours. That isn’t the case. As such, if the relationship breaks down and the marketing agency says you can’t use the IPR that was created, it is far easier to rely on clear contracts than argue that an implied licence is in operation (which would continue despite the relationship coming to an end).

It is therefore crucial that you secure the contractual position from the outset to ensure that there is no dubiety. Without doing so, you will not have the ability to enforce the IPR against someone who you believe is infringing. This will hinder you from obtaining additional registered IP rights, such as a trade mark.  Anyone who has watched Dragons Den will know that your business could be less valuable to investors or buyers if you don’t own the IPR.

At the start of your engagement with the third party everything is likely to be rosy. The creative juices are flowing, you are a new customer to them and they want to do everything they can to assist you and keep you happy.  The beginning of the relationship is therefore the ideal time to ensure that you have crossed the t’s and dotted the i’s when it comes to IP ownership.  As we all know, not all relationships continue on such good terms and trying to clawback IPR after a fall out is far more challenging. It could involve protracted discussions and inflated costs from the third party as they are well aware that you are desperate for the IPR to be in your name. 

However, discussing this with the third party is certainly not something to put off if the existing contract you have in place is not quite up to scratch. You want to be able to enforce your IPR at the drop of a hat if you become aware of an infringer without having to first sort out the question of ownership, all the while the infringer profits from using your rights.

In order to avoid disputes arising with third parties, you should ensure that appropriate and unambiguous agreements are in place to provide that the IPR is held by the correct legal entity. Be precise in establishing and defining your IPR to leave no room for alternative unfavourable interpretation by a court. Whilst there is statutory protection when it comes to the creation of IPR by employees, this is not as easy to establish as you might think - so don’t simply rely on this position.

All contracts with employees, workers and consultants who may create IPR should explicitly state that any IPR created during their employment or engagement is your property. This provides you with back up should the individual leave and try to take IPR with them.

The additional effort and cost required to ensure appropriate protections are in place will be invaluable down the line to avoid potential disputes and protect what may be one of your business’ most important assets. 

We regularly advise businesses on the steps which can be taken to protect their intellectual property rights and mitigate the risks of these being compromised.  If this is something which you think your business could benefit from, please do not hesitate to get in touch.

Megan Briggs
Senior Solicitor

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