Joint ventures are important business strategies for entrepreneurs and companies to consider. According to the Harvard Business Review, the first five years of the 21st century brought the formation of more than 5,000 joint ventures. However, in a separate study, when senior JV practitioners in 20 S&P 100 companies with involvement with over 250 JVs were polled, they estimated that between 40 and 60 percent of completed JVs either underperformed or failed. Problems besetting JVs noted in this study include: excessive hurry, and a lack of adumbration of the variety of risks and adverse operational realities intrinsic to the JV.
Which party owns the intellectual property (IP) in a joint venture and how those rights can be protected, are often central issues in the formation of a JV. Risks abound. For example, how does a rights owner protect its IP after assignment to the JV, or when the JV is wound up. In addition, frequent parties to JVs consistently cite the loss of background IP rights as a major risk. What form of legal instrument—be it a license, assignment, or otherwise—will optimize the rights holders’ ability to protect its IP? Finally, though jointly owned IP is often essential to the JV, it is recommended in one instance to the IP owner to “avoid like the plague.”
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