We not infrequently find during our early due diligence in bringing a middle market A&D company to market that there is some question as to who the owner of the Intellectual Property (IP) is. This is particularly a concern if a patent has been issued for a novel development such as, a new material, an improved process, or a unique solution or improvement to a difficult manufacturing problem. In general, large public companies address this issue both by stated policy and commonly in employment agreements. The issue of IP ownership is virtually 100% belonging to the company. The basis is that every fulltime employee of a company is expected to be fully committed to his or her company and IP developed is because of the resources and environment in which every employee is provided by the company. Therefore, any IP developed is as a result of the employee being fully committed to the improvement of his or her employer for the benefit of all.
Because middle market A&D companies frequently grow and develop over time and issues such as IP ownership are frequently overlooked or not addressed, patents may be issued, and the ownership of them have not been addressed either by policy or specific written agreement. The result is always a delay in the selling process timeline and frequently high emotion and costly resolution.
Our strong advice for those owners of middle market A&D companies is to review and put in place a company IP ownership policy clearly stated in Company HR Handbooks which every potential employee receives and must sign before becoming a fulltime employee. Furthermore, ownership of IP should be clearly stated in Employment Agreements with key staff and employees so that there is no question of ownership when due diligence is conducted during the sale of your company.
Have a great day!
Bruce Andrews
Partner
