Laura Trapnell © Paris Smith
Laura Trapnell © Paris Smith

What you need to know about supply chain collaboration and IP protection

1 March 2023

Collaboration with supply chain partners is on the rise, opening up opportunities for businesses, as well as profound IP implications for the unwary

Supply chain collaboration is on the rise and is seeing more entities working together toward shared objectives. Acquiring knowledge from the ground up can be expensive, so taking advantage of the experience and know-how of others is often economical in terms of cost and time. It can be a way to leverage knowledge without committing to the outlay of setting up your own infrastructure. This is particularly useful when navigating new territories or markets.

There is, however, a downside. Alliances, particularly in the intellectual property (IP) world, can open the door to anti-competitive behaviour as by its very nature IP is anti-competitive: it grants the owner a monopoly to stop others from using (in general terms) identical or confusingly similar technologies, designs or names in the specified territory.

So when collaborating with a partner, it is essential to have clarity on the long-term implications of the partnership, particularly in relation to the IP of both parties. It is wise to confirm:

  • What IP each party is bringing to the project,
  • How that is protected and how it will be licensed during the term of the collaboration, and
  • What happens when the project comes to an end, either because the contract expires, the purpose of the collaboration is concluded or because one party is in breach?

Usually, a collaboration sees both parties bringing their own IP – “background IP” – to a project. It’s essential this is properly identified, defined and protected to avoid future disputes. During the course of the project, background IP is licensed to the other party for set purposes and a specific duration.

IP generated during the project – “foreground IP” – tends to be more broadly defined, making benchmarking the background all the more important. It’s crucial to have clarity on who will own and protect the foreground IP – one partner or both – and what each can do with it during the project and afterwards.

What do you own when the partnership ends?

Jointly owned IP arrangements may be good in theory but can be problematic in practice. Shared ownership seems fair when partners can’t distinguish their own outputs clearly. However, if they fail to plan how their jointly created IP will be owned, organised and used, they may run into legal pitfalls, practical difficulties and obstacles to full commercialisation of the IP. It is recommended to enter into an express agreement on joint ownership of IP.

Where co-owners don’t have an arrangement, local laws may apply. The UK, for example, has a default position that where a patent or registered trademark is granted to more than one applicant, each applicant (co-owner) has an equal undivided share in it. This means:

  • Each co-owner is entitled to use the rights without others’ consent. This can be particularly dangerous in the question of a trademark and may lead to invalidation of the trademark registration. Also, this provision doesn’t guarantee that use of the rights doesn’t infringe the rights of third parties.
  • No co-owner can grant a licence, or assign or mortgage their share of the rights without consent of all others. So if one co-owner wishes to use the rights by licensing a third party, an agreement should be made on this.
  • Where one or more of the co-owners are individuals, their share of the rights will devolve to his or her personal representatives on their death, not the other co-owners.

These points apply equally to patent applications, patents, trademark applications and registered trademarks. The law does not set out any default position for registered designs or other rights, so it is important that written agreement is reached in such cases. Even if the default arrangement is acceptable to all, co-owners should make a written agreement to avoid disputes.

Keep on top of your relationships 

While formal agreements help, it’s also wise to monitor a project partner’s behaviour – in terms of general contract governance and of it working within the contractual boundaries of the collaboration, particularly in respect of the IP. The ongoing legal action between Apple and Samsung and other notable technology brands – where two companies have reportedly collaborated – provide a cautionary tale about the pitfalls of contractual joint collaborations and the disputes that can arise between market rivals operating within a complex strategic context.

Outside of the IP implications of collaborative contracts, there can be negative effects on the market when considering procurement. Collaborative buying contracts can become unmanageable due to their size and complexity; deriving and agreeing common specifications can be a problem, and then the tendering process itself can be difficult because of the sheer size. Supply chain issues can impact one party more than another, creating a discrepancy with regard to the attitude of the parties as to whether to continue or seek appropriate redress.

To collaborate successfully, owners need the organisational capability to select, establish and administer suitable contracts. This needs the right skills, governance processes, partners, agreements – and, importantly, the right culture.


Laura Trapnell is an intellectual property specialist at Paris Smith solicitors

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