Professional Documents
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Introduction
The term “Joint Venture” does not have any complex legal or technical meaning;
it is simply an arrangement between two or more organizations in furtherance of
a common objective. Joint Ventures can be structured in a number of ways to suit
the individual parties, but broadly, it can be classified as under:
Joint ventures are widely used across a range of industry sectors, particularly in
the pharmaceutical, biotechnology, information technology, and communications
sectors in which Intellectual Property rights are of huge importance.
One of the major issues faced by parties in a joint venture is the loss of rights in
Intellectual Property capital contributed by them for the development of the joint
venture (background IP).
• Stage 1: Pre-Contractual
• Stage 2: Contractual
• Stage 3: Implementation of JV obligations
• Stage 4: Termination of the JV
contribution.
It is to be noted that the above is true only if no agreement exists to the contrary.
It is advisable to provide clear definitions/provisions dealing with these complex
aspects of ad-hoc agreements to avoid disputes. A common practice is to assign
the entire foreground (IP) to the JV Company. If foreground IP is jointly owned,
a joint ownership agreement should be drafted, clearly identifying the proportion
and manner in which the rights are to be held by the respective parties.
The new entity formed as a result of the joint venture can itself exploit the IP
resulting from the JV through production, R&D, marketing, and
commercialization. However, parties can decide to individually exploit their
foreground IP. In other cases, they can assign the rights to exploit/utilize
foreground to other parties. To do so, venture partners may need to grant access
to their background for it to be used together with the foreground in the
exploitation phase.
Stage 4- Termination Stage: Although an outline of the exit plan should already
be drafted at the negotiation phase, the precise terms of which a joint venture
may come to an end are usually agreed on during the implementation phase or
when a termination event happens.
A termination on friendly terms will see venture partners negotiate the terms
related to the foreground repartition, normally based on the contribution of each
party, and arrange all the necessary licenses to terminate. It is common practice
that when termination is due to a breach of contract, the insolvent party will lose
all its rights that should be reverted to other parties of the joint venture.
Conclusion
• it must be in writing,
• it must be signed by both the parties
• it must specify the rights licensed,
• it must specify the royalty payable if any,
• the term of the license and the territory for the rights[1]
Similarly, while transmitting trademarks, the licensor must ensure that the
transmission does not create exclusive rights to use the mark in more than one
person, with respect to using the trademark for the same types of goods and
services or similar description of goods or services and such similarity should not
be likely to create any confusion or deception.[2]
Disputes involving the post-term use of the licensor’s mark by the joint venture
are potential litigious issues once the licensor has exited the joint venture, and
the term of the license has expired. Often, once the licensor has opted for an exit,
it may be possible that the joint venture entity continues to use the trademark
for reference purposes or as part of a corporate name.
Careful drafting of the joint venture agreement and the trademark license
agreement could minimize the risks arising from such litigation.