Joint Development Agreements: Managing IP in Collaborations

Joint development agreements (JDAs) represent some of the most complex and consequential IP transactions that companies enter into—and some of the most frequently mismanaged. When two or more parties collaborate to create new technology, the resulting innovations can be extraordinarily valuable, but the IP ownership questions they raise are notoriously difficult to resolve after the fact. Who owns a patent on an invention that emerged from a collaboration? Can one joint owner license the patent without the other’s consent? What happens to each party’s pre-existing background IP when it is incorporated into the jointly developed technology? These questions do not have intuitive answers, and the default legal rules that apply when a JDA fails to address them are often deeply unsatisfying for all parties involved. Under U.S. patent law, for example, each joint owner of a patent may independently practice the invention and grant non-exclusive licenses to third parties without accounting to the other joint owner—a rule that can allow one collaborator to effectively give away competitive technology without the other’s knowledge or consent. Planning for these contingencies before the collaboration begins, not after, is the difference between a JDA that creates shared value and one that creates shared litigation. At PerspireIP, we help companies design JDA frameworks that align IP ownership with each party’s strategic interests and protect the value they bring to the collaboration.

Background IP vs. Foreground IP: The Foundational Distinction

The most important conceptual distinction in any joint development agreement is between background IP and foreground IP. Background IP (sometimes called pre-existing IP or background technology) refers to intellectual property that each party brings to the collaboration—patents, trade secrets, software, and know-how developed before and independently of the joint project. Foreground IP (also called project IP or results) refers to intellectual property created during the collaboration as a result of the joint development activities. Getting this distinction right is critical because the parties typically have very different interests in each category. Each party almost universally wants to retain full ownership of its background IP, while the allocation of foreground IP is the central negotiating point of the JDA. A company contributing primarily funding may want a license to all foreground IP but may not need ownership. A company contributing primarily technical know-how may want to own foreground IP outright. A company in a symmetric partnership may want joint ownership with clear governance rules. The JDA must define precisely what constitutes background IP for each party—typically through schedules listing existing patents and technology areas—and must define what constitutes foreground IP in a way that captures all innovations created during the project. Vague definitions in either category lead directly to disputes about ownership and access rights when the collaboration ends or when a valuable invention emerges.

Ownership Structures for Jointly Developed IP

JDAs can structure foreground IP ownership in several ways, each with distinct legal and practical implications. Under sole ownership by one party, all foreground IP is assigned to a single party, typically in exchange for a license grant or financial consideration to the other party. This structure avoids the complications of joint ownership but requires agreement on which party is the sole owner—often resolved by assigning ownership based on inventorship (who invented it) or commercial field (who will primarily exploit it). Under joint ownership, both parties own the foreground IP together, subject to the complications of joint patent ownership described above. A well-drafted JDA can modify the default joint ownership rules by contract—requiring consent of both owners for licensing, establishing a management committee to make joint decisions about prosecution and enforcement, and specifying how the costs and revenues of the jointly owned portfolio are shared. Under field-of-use allocation, foreground IP is divided between the parties based on commercial application: Party A receives exclusive rights in Field X, Party B receives exclusive rights in Field Y, and each grants the other a license in its assigned field. This structure works well when the parties operate in distinct markets and the jointly developed technology has applications in each. The optimal structure depends on the nature of the collaboration, the relative contributions of each party, and the commercial landscape each party operates in.

Access Rights, Licenses, and Sublicensing in JDAs

Even in a JDA that allocates foreground IP ownership to one party, the other party typically requires some form of access to the jointly developed technology to realize value from its participation in the collaboration. Access rights in JDAs typically take the form of licenses from the IP-owning party to the non-owning party, which may be exclusive in the non-owning party’s field, non-exclusive, or limited in scope. Background IP licenses present a separate question: each party must grant the other a license to use its background IP to the extent necessary to carry out the joint development activities—without such licenses, neither party could legally use the other’s pre-existing technology during the project. These project licenses are typically limited in scope to the collaboration activities and expire when the project ends, although the parties often negotiate ongoing licenses to use each other’s background IP in connection with the commercialization of foreground IP. Sublicensing rights—whether either party can license the foreground IP to third parties—are another critical negotiating point. Allowing sublicensing without consent can expose a party’s technology to competitors; requiring consent for every sublicense can create delays and disputes. PerspireIP’s experienced counsel helps clients navigate these access right negotiations to reach balanced agreements that enable commercialization without creating unacceptable competitive risks.

Patent Prosecution and Enforcement in Joint Development

A JDA must address not just who owns jointly developed inventions but also who is responsible for patenting them and who has the right and obligation to enforce the resulting patents. Patent prosecution—the process of filing and prosecuting patent applications through the USPTO—is expensive and requires coordinated decision-making about claim scope, continuation strategies, and international filing. In a joint ownership structure, the JDA should specify which party leads prosecution, how the costs are shared, how prosecution strategy decisions are made (by consent, by one party with notice, or by a committee), and what happens if one party wants to abandon a jointly owned application that the other wants to continue pursuing. For enforcement, the JDA should address which party has the right to bring infringement actions against third parties, whether the other party must consent or join as a co-plaintiff, how litigation costs and recoveries are shared, and what happens if one party refuses to enforce against an infringer that is prejudicing the other party’s commercial interests. These provisions become critically important when a jointly owned patent is infringed by a significant competitor, because the default rule—that either joint owner may grant non-exclusive licenses without accounting to the other—means that one party could inadvertently undermine the other’s enforcement position by settling separately.

Governance, Dispute Resolution, and Exit Provisions

Joint development agreements are often long-term relationships that require governance structures capable of managing the inevitable disagreements that arise during complex collaborative projects. A well-drafted JDA includes a joint steering committee or project management structure with defined decision-making authority, escalation procedures for disputes, and deadlock-breaking mechanisms for decisions that the committee cannot resolve by consensus. Dispute resolution provisions should specify the process for resolving disagreements about IP ownership, license scope, or other contractual issues—typically a combination of escalation to senior management, mediation, and arbitration or litigation. The choice between arbitration and litigation has significant implications for confidentiality, speed, and the availability of emergency injunctive relief, all of which are particularly important in IP disputes. Exit provisions address what happens when the collaboration ends—whether by completion, mutual agreement, termination for breach, or expiration. The JDA should specify the IP consequences of each exit scenario: which licenses survive termination, whether the exiting party must assign its ownership share to the other, and whether either party can continue using jointly developed IP in ongoing products after the collaboration ends. Clear exit provisions prevent the most costly and contentious disputes that JDAs generate, which typically arise not during the collaboration itself but when the parties go their separate ways.

Frequently Asked Questions About Joint Development Agreements

What are the default rules for joint patent ownership in the U.S.?

Under 35 U.S.C. § 262, each joint owner of a patent in the United States may independently make, use, offer for sale, and sell the patented invention, and may grant non-exclusive licenses to third parties, without the consent of and without accounting to the other joint owner. This default rule is dramatically different from the rules in many other countries—in Germany, France, Japan, and China, for example, joint owners generally cannot license or exploit the patent without the consent of all co-owners. These jurisdictional differences create significant complexity in international joint development agreements and make it especially important to specify the governing law of the agreement and the IP allocation strategy for each jurisdiction.

How should we handle inventions made by employees of both companies?

When an invention is conceived jointly by employees of two different companies participating in a joint development project, each company typically owns its employee-inventors’ ownership interest by virtue of the employee IP assignment agreements signed at hire. The result is joint patent ownership between the companies, with each company owning the share previously held by its employee-inventors. The JDA can modify this default by having the parties agree in advance to assign all foreground IP to one party or to structure ownership based on contribution level. Accurate inventorship determination—identifying which individuals actually conceived the claimed invention—is essential both for patent validity and for determining which company owns what share, making documentation of each party’s technical contributions throughout the project a critical practice.

Can a JDA include a non-compete provision?

Yes—JDAs between companies can include non-compete provisions that restrict each party’s ability to develop competing technology during the collaboration period, often with a tail period after termination. Unlike employee non-competes (which face significant legal restrictions in many states), business-to-business non-competes are generally more enforceable when they are reasonably limited in scope, geography, and duration, and are supported by consideration such as the rights and resources provided under the JDA. However, antitrust law imposes limits on competitor collaboration agreements, and JDA non-competes that go beyond what is reasonably necessary to protect the collaboration’s legitimate objectives can raise antitrust concerns. Counsel experienced in both IP and competition law should review any JDA non-compete provision.

What happens to jointly developed IP if one party goes bankrupt?

Bankruptcy creates significant complications for IP rights under JDAs. Under the U.S. Bankruptcy Code, a debtor in bankruptcy can generally reject executory contracts, including IP licenses, potentially terminating the non-bankrupt party’s license rights. However, Section 365(n) of the Bankruptcy Code gives licensees the right to retain their licensed rights even if the licensor rejects the license in bankruptcy, provided the licensee continues to pay royalties. For JDA partners concerned about this risk, it is important to structure the IP arrangement so that any critical licenses are protected by Section 365(n), consider whether the non-bankrupt party should take an ownership interest rather than a license, and include provisions allowing the non-bankrupt party to take over patent prosecution and enforcement if the other party becomes insolvent.

Do we need separate NDAs alongside a joint development agreement?

A well-drafted JDA typically includes comprehensive confidentiality provisions that cover all information exchanged during the collaboration, making a separate NDA redundant once the JDA is signed. However, parties often execute an NDA at the outset of discussions—before the JDA is negotiated—to protect information shared during the preliminary negotiations themselves. This pre-JDA NDA is important because parties necessarily share sensitive technical and business information when evaluating whether to collaborate, and that information needs protection before any formal agreement is in place. Once the JDA is executed, its confidentiality provisions generally supersede and replace any prior NDA, though the parties may specify that prior NDAs survive to cover information shared before the JDA’s effective date.