If you are the sole owner of a limited company, you may still want to own the intellectual property personally. Grid Law founder David Walker guides a Business Advice reader through the process of transferring intellectual property rights from their business back to them personally.
I have been reading your article online from 18 September 2017 on intellectual property (IP) ownership — I must say I found it extremely useful and put together very concisely.
I have one question that you may be able to help me with.
I am the single owner/director of a limited company — I personally own the IP on a bunch of designs (logotypes, brand marks, website design, corporate identity etc.) that were created for the business prior to its incorporation. There is then a whole load of designs (product designs and additional brand assets) that were created after incorporation that are technically owned by the business as you very clearly point out, as they were designed and developed whilst I was a director and employee of the business.
I am currently in a situation in which I want to be able to protect these design assets from somebody who is making an aggressive claim on the business.
Is there a way that I can transfer the ownership of all of this IP back to being owned personally? Transfer (with a simple written document)? Sell (peppercorn rate)? — so that I own it outright until which point I could return back to the business if required.
And, as I am continuing to produce work that is owned by the business is there a way that it is understood that this IP is automatically in effect transferred to me personally?
I hope this makes sense David and would be very very grateful for any thoughts, ideas or guidance.
Thanks for your question and I completely understand your concerns here.
Transferring the intellectual property rights from the company back to you is a relatively straightforward exercise. All you need is a simple assignment agreement.
To be legally binding, the assignment must clearly identify the IP being assigned, be in writing and be signed by the assignor (the company). There must also be some consideration for the assignment. This could be £1.00 or it could be the full value of the rights.
After the intellectual property has been assigned back to you, the company will still need to use it. Therefore, you will need to grant the company a licence to use it. This licence could be granted in the same agreement.
However, just because the rights can be assigned to you, you need to think carefully about whether you should do this. This is because assigning the rights back to you is unlikely to give you the protection you are looking for.
If the claim against your business is successful and your company cannot afford to pay any damages that are awarded by the court, it could be forced into liquidation.
A liquidator would then be appointed to wind up the company and deal with its affairs. Part of the liquidator’s role during this process is to investigate the conduct of the directors and also to sell the assets of the company. The proceeds of the sale will then be used to pay off as many of the debts of the company as possible.
If, during the liquidator’s investigations, it appears that the main purpose of transferring the assets (in this case the intellectual property) out of the company was to avoid the legitimate interests of a creditor, the liquidator has the power to undo the transaction. The liquidator has this power even in relation to actions that were taken prior to legal action being started.
If the liquidator exercises this power it means that the intellectual property rights will be transferred back to the company and are then available to be sold.
So, as you can see, transferring the intellectual property out of the company may not protect them in the way that you had hoped.
However, all is not lost if the company is liquidated. It is likely that you would be able to purchase the IP from the liquidator and then start a new company.
Therefore, rather than trying to move the intellectual property out of the company, your efforts should be focused on defending the claim or reaching a settlement with the claimant that preserves the rights and enables you to continue trading.
Once the company is no longer at risk of being wound up, we could then look at putting some protection in place in case this ever happened again in the future.
If you need any help with this, or would like me to explain any of this advice further, please feel free to email me at firstname.lastname@example.org.
Read more of David’s intellectual property articles:
- How intellectual property can give your small business the competitive edge
- How to protect your intellectual property when pitching to a national retailer
- Creating an app with a freelance developer? How to retain intellectual property rights
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