IP Protection and data ownership with consortium members

Large, complex projects are usually not performed by a single company, but from a consortium, a time limited joint venture of two or more independently acting companies. Consortia have the flexibility of highly specialized companies but at the same time also the resources to fulfill e.g. large-scale public contracts. Joint forces are common in particular in innovative, large projects in the defense industry that requires special knowledge but with a broad industry focus.

However, such collaborations have some challenges on the legal side, in particular with projects that are more sophisticated. When complex Intellectual Property (IP) is a key or if data is processed on a large scale and provides valuable insights to its owners, the consortia approach requires some mandatory legal work in advance.

IP ownership and licensing in collaboration scenarios

During the project, the consortium members will develop new technologies, create sketches and probably even lunch a product under a joint brand. All these activities will produce IP, whether the consortium members will jointly file for patents, create copyright protected material or register trademarks (so-called foreground IP). Nevertheless, either party of the consortium might play a different part in contribution to the development of specific IP. Because of such unstructured contributions, the allocation of new developed IP rights to either party can be difficulty. It is therefore mandatory to draft mechanism to allocate ownership of IP already upfront in the consortium agreement.

However, IP rights are not only developed and created during the project term, but both parties will usually require already existing IP rights for the project (so-called background IP). The background IP relates for example to a patent from either party of the consortium. Thus, any of the consortium members might have to rely on the patent and therefore need a license to use the patent for the term of the project.

In addition to the project, usually new assignments for at least some of the consortium members might follow. It is very likely that the new assignments require again knowledge and IP from the project. If the IP has not been properly assigned to all parties of the consortium, it might be the case that some former consortium members are no longer able to participate in follow-up projects due to insufficient IP licenses in background IP from other consortium members.

Due to different regulations on IP rights, it is important to know how local laws deal with moral rights, employee inventions and the licensing and transfer of IP rights. Furthermore, it is crucial for the success of a consortium to draft a balanced but also appropriate license grant for background and foreground IP.

Shared data ownership between consortium members

Defense projects produce large amounts of data that provides insights for the development of new products or improvement of existing technologies. Similar to the challenges with IP rights, shared data ownership is more and more important for modern collaboration models. While know-how gained from such data sets might be licensable, the raw data usually is not. In contrast to the drafting of IP license grant clauses, data ownership is still not developed in many jurisdictions or does not allow full protection by the law.

For example, in Germany data ownership usually correlates to and is limited by the physical ownership and control over the data storage unit(s). Resulting from this, licensing of data is not enforceable under German law and leads to several issues with respect to shared data ownership within a consortium. Thus, the consortium will often bundle the physical ownership of data collection and processing units in a jointly owned company. The company builds data models and extracts other information from the collected data and licenses the know-how to the other consortium members. Hence, if the data is not limited to industrial data but includes also personal data, the rules of the General Data Protection Regulation (GDPR) might restrict the use of the data.

Contrary to projects outside the defense industry, restrictions due to export control regulations and confidentiality obligations can limit the ability to share raw data from a defense project with others. Therefore, sharing models to allow exploitation of raw data might not always serve for consortia in the defense sector and must be modified to work in such constellations properly.

Conclusion

Consortia improve usually the ability of companies in the defense industry to participate in more complex and large projects. However, proper license of IP and accurate legal frameworks are mandatory to ensure the consortium’s success and sustainability. With respect to projects that involve large-scale data processing and exploitation, the consortium members must be even more careful to avoid legal issues due to breaches of secrecy or unenforceable data licenses.