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Joint ownership of intellectual property (“IP”) often feels like a neat solution at the start of a collaboration. Everyone who contributes owns a share: it feels fair, avoids difficult conversations, and allows the project to move forward quickly without getting bogged down in detailed negotiations about rights, control and exploitation.

For founders, creatives and collaborators who are keen to preserve momentum, joint ownership can seem like the path of least resistance. In many cases, however, it is adopted not because it is the best structure for the project, but because it feels like the easier approach.

The difficulty is that joint ownership rarely remains simple once the project starts to generate real commercial value.  “Let’s just own it jointly” is an expression that solves one uncomfortable conversation today and creates several much harder ones later.

• Why joint ownership can cause problems

Under English law, joint ownership of IP is rarely as flexible or as simple as parties anticipate. The precise consequences depend on the type of IP involved and the terms of any agreement between the co-owners, but in many cases joint ownership can stop a co-owner from selling or using the IP independently of the other co-owner(s).

Common issues include:

• Restrictions on exploitation: depending on the IP right and the contractual position, granting licences to third parties, assigning rights, or taking enforcement action may require the consent of all co-owners.
• Commercial deadlock: as commercial relationships evolve, co-owners’ interests may diverge over time and decisions about how the IP should be exploited (or whether it should be exploited at all) can become contentious. One party may want to scale the project aggressively, while another wants to take a more cautious approach. One may want to pivot into a new market that the other is uncomfortable with. Joint ownership can make managing these changes harder, particularly where there is no clear mechanism for resolving disagreements or buying out a co-owner.
• Investor and buyer pushback: investors often prefer clean ownership chains. IP that is jointly owned with third parties can raise due diligence questions, complicate, and potentially lengthen the transaction process.
• Lack of control: parties often underestimate how frustrating it can be not to have unilateral control over core IP that underpins a business or product.

The real challenge is timing. By the point these limitations become apparent, the IP may already be central to the project’s value, relationships may be strained, and restructuring ownership can be both expensive and sensitive.

What felt “fair and simple” at the outset can become a significant commercial obstacle.

• Are there better alternatives?

There are other structures that still recognise multiple contributions to IP without splitting ownership itself.

A common alternative is for IP to be assigned to a single entity, with the other contributors receiving:

• carefully defined licence(s);
• agreed exploitation rights;
• revenue shares, royalty arrangements and/or equity interests; and/or
• contractual protections around how the IP can and cannot be used.

This approach can preserve clarity of ownership whilst ensuring contributors are properly rewarded and protected. It also tends to be easier to explain to investors, partners and buyers.

Other options may involve separating different categories of IP or allocating ownership based on background versus foreground IP.

There is no single “correct” solution: the right structure will depend on the nature of the project, the parties involved, the type of IP being created and how it is likely to be used in practice.

• Joint ownership is not always wrong but it should be deliberate

None of this means that joint ownership should never be used. In some circumstances, it can be appropriate, particularly where the parties understand the consequences and take the time to document how the arrangement will operate in practice.

The problem arises when joint ownership is adopted by default, without proper documentation or consideration of:

• exactly who owns what;
• how the IP will be exploited;
• what happens if one party wants to exit or sell;
• how decisions will be made; and
• how disputes will be resolved.

• Investing time early can save costs later

Spending time at the outset to structure IP ownership clearly and proportionately is rarely wasted effort. While it may feel uncomfortable to address these issues early, doing so can avoid significant costs, friction and uncertainty further down the line.

If joint ownership is chosen, it should be a conscious, informed decision that should be documented in a formal written agreement clearly addressing the above issues. If it is only sought to be adopted because it is the “easier” option, there are often better ways to achieve the same objectives, with far fewer risks that complications arise later on.

If you are considering joint ownership or how to best structure IP ownership, Hansel Henson can help you put clear written terms in place that reflect the intended ownership position and how the IP will be used in practice.