Now more than ever, companies must think outside the box and innovate in order to remain competitive and relevant in a constantly changing technology landscape. A previous article in this series addressed how to protect innovation through non-disclosure agreements (NDA). However, a joint development agreement (JDA) is also an important tool in the in-house lawyer’s toolkit.
As with timing of execution for an NDA, a JDA should be executed by the parties prior to the start of any development. The first reasons for doing so, and perhaps the most important, is the need for the parties to agree on ownership of future IP. Certainly the parties may agree that one entity will be the sole owner of all jointly developed IP, which eliminates many of the joint ownership issues, apart from obligations with respect to perfection and assignment of patent rights. However, the complexities of the issues of joint ownership make it necessary to agree to more detailed terms.
By executing the JDA early, both parties will also be in agreement on the rights and obligations with respect to existing IP, if any. This is not always a consideration, since the parties may not necessarily have any existing IP with respect to the technology involved. When there is existing IP, though, the receiving party is typically granted a limited license (and sometimes the right to grant a limited sublicense) to make, use and/or sell the invention. This is usually done so that the benefits of the collaboration are not hampered, but the IP owner’s patent rights are also not fatally impacted (in other words, to avoid a “patent exhaustion”).
Also laid out in the JDA should be a clear description of indemnification obligations. Indemnification addresses the parties’ obligations of reimbursement for handling third-party claims of infringement based on the developed product. Depending on the terms of the agreement, it will require one or both parties to indemnify the other party for any losses resulting from the infringement claims. In a typical scenario, the risk is allocated to the party that is providing the technology or product accused of infringement.