January 2022
Jaime Cheng and Albert Yen
“Joint development” generally refers to the joint participation of two or more business entities (hereinafter, “Participants“) in the research and development of new technology or a new product. In selecting joint development partners, Participants will seek out other entities that complement their competitive advantage to create a synergistic effect. A successful joint development project allows Participants to share the benefits and lays a solid foundation for a long-term and stable business relationship.
Various types of intellectual property rights may arise in a research and development project. Technical ideas may be filed to obtain patents; a form of expression of technical ideas may result in copyright upon the completion of the creation, and adequately protected technical knowledge may be protected as a trade secret if it has economic value. In joint development projects, Participants should identify the ownership of intellectual property rights jointly created from the project in a well-drafted joint development agreement to avoid potential future disputes.
In the remainder of this Article, the authors will briefly address the Taiwan default ownership rules for jointly developed intellectual property in the absence of a contractual agreement and the issues that may arise.
1. Patents
Pursuant to the Taiwan Patent Act, in the absence of a contractual agreement, the person who contributes to the patentable technology (i.e., the inventor, creator, or designer) should be treated as the owner of the right to apply for a patent. In a joint development project, where each Participant contributes to part of patentable technology, Participants will co-own the right to apply for a patent and further co-own the granted patent right.[1]
As a result, for a Participant to file a patent application for the jointly developed technology, the Participant must obtain the consent of each of the other Participants. Without the consent of the other co-owners, a Participant can neither assign or abandon the entirety of the right to apply for a patent for the jointly developed technology nor can the Participant assign their share of the right to apply for a patent to another party.[2] Accordingly, issues may arise where one Participant wishes to patent the technology, but the other Participant(s) objects based on the belief that the value of maintaining a patent in a specific jurisdiction is disproportionate to the costs or that protecting the technology as a trade secret is a more beneficial course.
Further, after a technology is patented, without the consent of all the co-owners, Participants may not assign, license, entrust, pledge or abandon the entirety of the patent and may not assign, license, entrust, or pledge their own share.[3] Such restrictions may defeat a Participant’s purpose in entering into the joint development project.
2. Copyrights
Pursuant to the Taiwan Copyright Act, an author owns the copyright upon the work is completed[4]. Copyrights consist of moral rights to works and economic rights to works. Moral rights allow the copyright owner to decide whether the work will be published with attribution or anonymously/pseudonymously. Further, moral rights allow a copyright holder to preserve the integrity of the work by, for example, objecting to alterations to the work that may be “prejudicial to the author’s honor or reputation.” Given its exclusive nature, moral rights cannot be assigned or inherited[5]. On the other hand, economic rights allow the copyright owner to derive financial benefits from the use of their works by others and are assignable and subject to being pledged.
In a joint development project, if Participants jointly complete a work and the creation of each Participant cannot feasibly be separately exploited, the copyright of the completed work shall be co-owned by all of the Participants. In the absence of a contractual agreement, the ownership shares of each of the Participants shall be determined by the degree of their participation. If the degree of involvement of each Participant is unknown, the ownership shall be presumed to be equal.[6]
Where the copyright is co-owned, neither the moral right nor the economic right may be exercised without all co-owners consent; provided, however, consent cannot be unreasonably withheld. Further, the consent of all the co-owners must also be obtained before a co-owner may assign or pledge his share of the economic rights to a work, which, again, consent cannot be unreasonably withheld by the other co-owners.[7]
3. Trade Secrets
Pursuant to the Taiwan Trade Secrets Act, each Participant in a joint development project shall co-own the trade secrets that are jointly developed. In the absence of a contractual agreement, the ownership shares of each of the Participants shall be presumed to be equal. Without the consent of all co-owners, a co-owner of a trade secret shall neither use or dispose of the entirety of a trade secret nor assign their share to another person. In addition, a co-owner shall not license the co-owned trade secret to another person for exploitation without the consent of all the co-owners (who shall not refuse to give their consent without justification).[8]
As detailed above, unless otherwise provided for in a contract, other than the exploitation of patent rights by a patent co-owner themselves, the exploitation and disposal of co-owned intellectual property rights are subject to the consent of the other co-owners. This becomes an issue where the relationship between the Participants sour and a co-owner deliberately leverages their right to withhold their consent to the exercise of the intellectual property.
To minimize potential disputes regarding intellectual rights in a joint development project, Participants should, before the commencement of the joint development process, consider and address the following points in a joint development contract:
– what background intellectual properties do they each own prior to the joint development;
– can each of the Participants use the background intellectual properties of the other Participants in the joint development process, and if so, what are the parameters;
– how should the jointly developed intellectual property be allocated among the Participants;
– which Participants should be responsible for the prosecution of the patented technology derived from the joint development process;
– to what extent should each of the Participants be obligated to maintain the confidentiality of the confidential information derived in the course of the joint development; and
– what are the measures to deal with the early termination of the joint development agreement?
All the above are important points regarding intellectual properties in a joint development case and should preferably be noted during the negotiation process.
(The authors’ opinions do not represent the position of this law firm.)
[1] Article 5, Paragraph 2 of the Patent Act: “Subject to provisions of this Law otherwise prescribed or the covenants otherwise set forth in an agreement, the term “the owner of the right to apply for a patent” shall mean an inventor, a utility model creator, a designer, or the assignee or successor thereof”; Article 12, Paragraph 1 of the same law: “Where a right to apply for a patent is jointly owned, the patent application related thereto shall be filed by all the joint owner(s)”; and Article 13, Paragraph 1 of the same law: “Where the right to apply for a patent is jointly owned, the right to apply for the patent shall not be assigned or abandoned without the consent of all joint owners.”
[2] Article 13 of the Patent Act: “Where the right to apply for a patent is jointly owned, the right to apply for the patent shall not be assigned or abandoned without the consent of all joint owners. Where the right to apply for a patent is jointly owned, none of the joint owners shall assign his/her own share therein to others without the consent of the other joint owners. Where one of the owners of the right to apply for a patent abandons his/her own share, such a share shall be vested in the other joint owners.”
[3] Article 64 of the Patent Act: “Where a patent right is jointly owned, except for exploitation by each of the joint owners, it shall not be assigned, entrusted, licensed, pledged, or abandoned without the consent of all the joint owners)”; and Article 65, Paragraph 1 of the same law: “Where a patent right is jointly owned, no joint owner may assign, entrust or establish a pledge on his/her own share without the consent of all the other joint owners.”
[4] The first part of Article 10 of the Copyright Act: “The author of a work shall enjoy copyright upon completion of the work.”
[5] The first part of Article 15, Paragraph 1 of the Copyright Act: ” The author of a work shall enjoy the right to publicly release the work”; the first part of Article 16, Paragraph 1of the same law: ” The author of a work shall have the right to indicate its name, a pseudonym, or no name on the original or copies of the work, or when the work is publicly released”; Article 17 of the same law: ” The author has the right to prohibit others from distorting, mutilating, modifying, or otherwise changing the content, form, or name of the work, thereby damaging the author’s reputation”; and Article 21 of the same law: ” Moral rights belong exclusively to the author and shall not be transferred or succeeded.”
[6] Article 8 of the Copyright Act: ” A joint work is a work that has been completed by two or more persons where the creation of each person cannot be separately exploited”; and Article 40, Paragraph 1 of the same law: ” In the case of a joint work, each author’s share of the ownership of such a work shall be as stipulated by the joint authors; where no stipulation has been made, ownership shares shall be determined according to the degree of each author’s creative contribution. Where the degree of each author’s creative contribution is not clear, it shall be presumed that each author owns an equal share.”
[7] Article 40-1, Paragraph 1 of the Copyright Act: “Joint economic rights in a work shall not be exercised except with the consent of all the joint economic rights holders; no economic rights holder shall transfer its share to another person or establish a pledge of its share in favor of a third party without the consent of all other joint economic rights holders. A joint economic rights holder shall not refuse consent without a legitimate reason.”
[8] Article 5 of the Trade Secrets Act: “Where a trade secret is the result of joint research or development by several persons, the respective shares in the ownership of the trade secret shall be determined by contract. In the absence of a contract, an equal share of the ownership shall be presumed”; Article 6, Paragraphs 2 and 3 of the same law: “Any use or disposal of a jointly-owned trade secret shall be unanimously approved by all joint owners in the absence of a contractual agreement. However, no joint owner shall refuse consent without proper justification. No joint owner may assign its share of the ownership without the consent of the other joint owners, unless otherwise provided for in a contract, in which case the contract shall prevail; and Article 7, Paragraph 3 of the same law: “No joint owner shall grant a license to another person for the use of the jointly-owned trade secret without the unanimous consent of the other joint owners. However, no joint owner shall refuse consent without proper justification.”