Who Owns the IP in a Business Partnership?

Posted on March 23, 2014 in Business Partners, IP & Social Media

Q.:  I’ve formed a small company with my business partner.  We’ve both brought concepts, taglines, logos, etc. to the business.  Who owns the intellectual property?  I say neither of us — the business does.  My partner disagrees and has her own ideas.

A.:  It depends on what your partnership agreement says.

Q.:  We don’t have one and legal fees are not in our start-up budget.

A.:  Are legal fees in your litigation budget (probably about 20x your start-up budget)?  Because if the business fails or you go your separate ways, you could well have an ugly fight on your hands.

Generally, intellectual property belongs to the person who created it.  If each of you created the IP before forming the business, then whoever created it owns it.  If you created it together — for example, if your logos and taglines were the result of a collaborative brainstorming session — you both own it.  Which means that each of you has the 100% right to do with it what you please.  Could it, should it belong to the business if neither of you would have spent the time if you weren’t in business together?  Perhaps.  But without a written agreement assigning the rights or discussing what happens to the IP upon the demise of the business, you’re in legal purgatory:  there’s a case to be made either way (one supporting your perspective and one supporting your partner’s).

Get some legal fees in the start-up budget right away.  Even if you create your own document outlining what you would like to have happen, there are nuances in legal writing that you might miss.  So make sure to have an attorney look at it.  And if there is absolutely, positively no way you can squeeze another cent for legal fees, give some serious thought to whether you’re adequately capitalized to start and run this business.  Undercapitalization can also get you into serious legal trouble with your creditors.

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