Collaborations between corporates and startups can be a powerful catalyst for innovation. Corporates can identify real-world problems that need addressing and startups can bring new ideas and innovations to solve those problems.
However, these collaborations are not simply ‘plug in and play.’ Extra care must be taken when corporates and startups unite to ensure both parties get what they want from the partnership or project.
What is Background and Foreground Intellectual Property?
One of the main issues startups and corporates find themselves up against is ownership of Intellectual Property (IP). When a corporate and a startup work together, a host of overlapping IP rights are at play that, if not carefully managed, can prevent both parties from exploiting that IP in future.
In this context, IP is typically divided into “background IP” and “foreground IP”. Typically, background IP is all the IP each party had before working on that collaboration – for example, a startup’s field-specific expertise. While this does not just include patents, patents and applications are useful indicators because they contain a written explanation of that IP.
Other forms of background IP can include confidential information and know-how, but this can be harder to identify without it being extensively recorded in some form. Foreground IP is usually all IP created after the date the collaboration began. This can include improvements made upon IP that was formerly background.
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The Challenges of Intellectual Property in Collaborations
In a collaboration, IP may be developed independently by each party, but there are often joint developments of IP, too. Sometimes, clarifying if something was independently or jointly developed can be very difficult.
This is not helped by the fact that collaborations are fast-paced in nature - something to be applauded - but this can come at the expense of good record-keeping, making it very hard after the event to ascribe ideas and innovations to a certain party.
If either party wants to commercially exploit the fruits of their labours, they will need to come to an agreement or arrangement with each other. Particularly if the startup later decides to work with another corporate that is a competitor to the original collaborator they initially worked with – neither corporate would want their IP included in something the other is offering.
How to Manage Intellectual Property in Collaborations
To mitigate these challenges, collaborators should set up an IP agreement, or at least a Heads of Terms (HOT) agreement, before the collaboration starts that sets out the expectations around IP ownership. Often, it is accepted and reasonable that each party owns their background IP (but often with a licence to use background IP to work with the foreground IP if necessary). Still, ownership of foreground IP can be up for discussion.
For example, the corporate may want ownership of all foreground IPs relevant to their field of interest, with the rest going to the startup. This can avoid costly and time-consuming wrangling around who owns what after the event. It can also ensure everyone’s expectations are equal before investing time and money.
Another helpful tool is to have accurate records – for example, logbooks or lab books noting the time and date when innovations were developed (something that many corporates already do in their R&D departments). This has the added benefit of pinpointing when an invention was created and by whom, which helps resolve IP ownership disputes.
Other things to consider as part of the agreement might be what each party gets in return for the collaboration – does the corporate get a stake in a startup’s equity for helping them to commercialise their offering? And if so, what percentage stake in equity is common or fair? Does the corporate get a licence to the developed technology (foreground and background), and under what terms/royalties? Who acquires ownership of improvements to background IP that are not directly relevant to the project’s scope?
How to Establish Your Background IP
Because ownership of background IP is usually ascribed to each party, it can be beneficial to ascribe as much information as possible to background IP to ensure you retain ownership of it.
Defining the background IP can be more complex than it sounds. One way to establish this is by filing a patent application (or multiple applications) to encompass all ideas and act as a public statement of ownership. A patent application does not require a working prototype of an invention; therefore, it may be possible also to include any forward-reaching ideas of what you hope the collaborative project will look like, to an extent.
Another way to establish your background IP is to record and circulate detailed minutes of all collaborative discussions. These records can then act as evidence of the nature and scope of your collaboration.
There are clear advantages to corporates and startups working together to foster innovation, but if ownership of resulting IP is not considered at an early stage, this can cause time-consuming and expensive roadblocks to commercialising the technology in future.
If you’re looking for space to innovate or want to connect with exciting innovators at the leading edge of their industries, book a tour of a Plus X Innovation hub in London, Slough, or Brighton.
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