When you create intellectual property subject to patent, trademark, or copyright law, you need to decide who should own it: you as an individual or your business.
Today, we’ll break down the pros and cons of business ownership vs. individual ownership, and how you can properly transfer IP rights between the two.
👩🏻 / 💼 Individual vs. Business Ownership – The Key Difference
First, let’s define the difference. If you personally own intellectual property, you have full control, and it remains with you regardless of changes in your business. However, if your business owns the IP, it’s considered a company asset, just like real estate or equipment.
👩🏻 ✅ Pros of Individual Ownership:
- Flexibility: You can license or assign the IP to different businesses.
- Retention of Control: If the business dissolves, you still own the IP.
- Personal Asset: You can sell or license the IP, or pass it to your heirs through your estate, separately from the business.
👩🏻 🛑 Cons of Individual Ownership:
- Liability Risks: If the business is sued regarding its use of the intellectual property, you will likely get added to the lawsuit as the owner of the IP, and your personal assets may not be protected from any judgment.
- Licensing Required: The business must have a license to use the IP legally, which the individual owner can rescind, not renew, or keep raising the price of renewal.
- Risk of Loss of Rights: If the individual owner fails to renew rights or doesn’t do their duty to enforce them, some of the rights can become meaningless or cease to exist.
- Reduced Business Value. As I’ll explain next, the business is worth much more when it owns the IP.
💼 ✅ Pros of Business Ownership:
- Business Value: Strong IP ownership increases the company’s value. When the business itself owns the IP rights outright, it is easier to transfer them as an asset of the business during a sale and to attract investors who know the business is in control of the IP. Otherwise, the individual owner could:
- throw a wrench in a deal by refusing to license the IP to a new owner;
- refuse to renew a license for the business to use the IP;
- fail to renew registration for the IP, thus losing the value of the registration; or
- not do a proper job enforcing against infringement, rendering a registration nearly useless by becoming generic.
For those reasons, investors and entities interested in buying the business usually prefer to have the business own the IP rights.
- Liability Protection: An individual who has assigned all their rights to the IP to the business is shielded from personal legal risks relating to the IP. Having the business own the IP keeps liability within the company, not with you personally. If you find out the IP is infringing on someone else’s, or has otherwise caused harm to someone, you’ll want the business’ assets to be at risk for any financial judgment for infringement insurance doesn’t cover rather than your personal assets.
- Simplicity: No need for licensing agreements between you and your business.
💼 🛑 Cons of Business Ownership:
- Loss of Personal Control: If you leave the business, you almost certainly will not retain any rights to the IP. However, careful agreements can require the business to return control to you if the business ceases to exist.
- Loss of a Personal Asset: You won’t be able to pass the IP rights down to your heirs or anyone else.
📃 How to Transfer IP Between You and Your Business
If you start by owning IP individually but later want your business to own it—or vice versa—you need a formal transfer. Here are two ways to do that.
1. Assignment:
- This is a legal document that permanently transfers ownership from you to the business.
- It should be in writing and clearly outline the rights being assigned.
- It is often filed with the U.S. Patent and Trademark Office or U.S. Copyright Office to maintain a record.
2. Licensing:
- This is a formal agreement in which you, as the owner, grant the business the right to use the IP.
- A license can be exclusive (only your business can use it) or non-exclusive (you can license it to others).
- It should specify terms, duration, and compensation (if any).
🤔 Choosing the Right Strategy
Should you own the IP personally or assign it to your business? It depends on your long-term goals. If you want maximum control and flexibility, individual ownership with a licensing agreement may be best. But if your business is your primary focus and you want strong legal protection, business ownership is often the smarter move. If you’re not the only owner of the business, the other owners will want to weigh in as well.
🗝 Key Takeaway:
Deciding who owns your intellectual property is a crucial business decision. If you start as an individual owner of IP rights and assign or license your IP to the business, make sure you document everything properly. If you need guidance, consult an intellectual property attorney to ensure your rights are protected.
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