Who owns your intellectual property?

Often, it’s only when buying or selling a business that directors realise that they don't own what they think they do and various issues come to light. The sale itself might be straightforward, but the process leading up to a sale can highlight many issues that have the potential to materially impact on the value of your operation. 

One area that is commonly overlooked is the field of intellectual property and the rights associated to the business. So whether you are thinking of selling, buying or simply running a business you need to know the following:

1. Do a domain check

?It is usual for small and medium sized businesses to ask a director, employee, or their website developer to register the domain names used to access the company website. Legally this can create an issue as the domain name may be registered in the name of the director, employee or third party contractor and a company may have to have the domain name transferred to the company’s name before the business is sold. This can be made more complicated if the individual concerned has left the company. If they are unwilling to transfer the domain name the company may have to resort to using a domain dispute resolution process, court proceedings or paying a sum of money to the current registrant in order to get the domain name back.

You can find out who the registrant of your business domain name is from a WHOIS database – a public database that accredited registrars are obliged to maintain.

Any entity holding a domain name can voluntarily transfer it to another entity, but there are conditions. You can either enter into a domain name transfer agreement; supply details about the new domain holder-to-be for the WHOIS record; and confirm with the relevant domain name registry operator that the new domain holder-to-be accepts the domain name (and will pay the fee) and that the existing domain holder consents to the transfer.

2. Be firm about software licence restrictions

Apart from domain names, you also need to check the type of restrictions found in software licences if you are planning on selling your business. For example, is the use of the software restricted to the business with which the supplier is contracting? Suppliers typically achieve this by prohibiting sub- licensing and assignments, so if you are planning to sell your business assets, and the licence prohibits sub-licensing and assignments, an attempt to sell the licence as part of the business sale may be in breach of your licence.

3. Does your software licence permit multiple users?

?If your business is part of a group, and licensed software is uploaded to a network which is used or accessed by any of the businesses within the group, then you should check that the licence permits use of the software in this way. Make sure that the software licence extends to all businesses within the group and multiple users to avoid a licence breach.

Using software without licence or in breach of your licence could entitle the licensor to terminate the software licence, claim damages or seek an injunction preventing use.

4. Make sure your licence includes outsourcing partners

?In the case of outsourcing services, is your licensed software being used by the outsourcing service provider? It is important to ensure that the terms of your software licence permit use by such third party suppliers. The software licensor may charge a fee for agreeing a change of use.

5. Register your trademarks 

stablished trademarks can add significant value to your business and increase its saleability. Whilst unregistered trademarks are protected in the UK under the legal wrong of passing off, establishing passing off in a court case can be hard to prove.

You should not underestimate the value of your trademarks and the importance of registering them. If you fail to protect your trading name you could risk the loss of a potential purchaser or being offered a reduced sale price.

You can register a trademark by filing an application to the registry in the relevant jurisdiction (for example the UK Intellectual Property Office or the EU’s Office for Harmonisation in the Internal Market).

6. Set up a watching service

You can arrange to set up a watching service to look out for and report on the advertisement of later filed trade marks which are the same as, or similar to, your mark.

7. Secure your copyright

Owning or having the exclusive right to use copyright work is also important if you are planning to sell your business.?If you have engaged a third party to develop software for your business, to design your logo or your website, the copyright in the software and designs may be owned by the third party.

If you have agreed with the third party developer or designer that your business will own the copyright and other intellectual property rights in these works or that such works will be exclusively licensed to your business then you should make sure that such agreement is in writing and signed by the third party.

8. Have your patents assigned to the business?

A purchaser will want to ascertain if any patents have been applied for or granted to the company. They will want to know whether any patent applications have been filed, granted, whether they are still in force, who owns them, whether there are any registered licensees of the patent.

Anyone can file a patent application, but only someone who is entitled to the invention may be granted the patent. Therefore, before putting your business on the market for sale you should check whether any inventions that are the subject of patent applications made by your company are actually owned by your company.

If any patents have been previously assigned to the business, or if your pre-sale check identifies any patents or inventions which need to be assigned, the assignment must be in writing and signed by or on behalf of the assignor. In addition, the assignment must be registered at the UK Intellectual Property Office within six months so that third parties are given notice to claim priority over parties claiming rights under later transactions.

9. Make sure your design rights are registered

?Design rights, on the other hand, protect the appearance of a purely functional product. They can protect the whole or part of a product which is novel, has individual character and does not fall within the statutory exemptions.

Once registered they are protected for an initial period of five years from the date of filing and it is possible to extend the period, five years at a time, up to a maximum of 25 years.

Where an exclusive licence of registered/unregistered designs has been granted to your business, this must also be in writing and signed by the licensor. Whilst it is not a requirement for sole or non-exclusive licences to be in writing, to avoid any confusion it is a good idea to make sure that they are granted in writing and signed by both parties.

10. Seek legal advice

Selling your printing business can be a minefield. However, if you are aware of what rights you do or don’t have, it can simplify the process. We would always recommend that owners of any SME or ME seek legal advice before taking the step of putting their business on the market, so that they are not faced with extra costs or unnecessary disputes when it comes to intellectual property.