How to Handle Intellectual Property Rights in a Business Partnership in Texas

Forming a business partnership means carefully managing intellectual property (IP) rights to protect everyone’s interests. Getting advice from a business attorney in Austin early on will allow you to create clear terms and prevent disputes down the line.

Drafting Your Partnership Agreement to Address IP

Under the Texas Business Organizations Code, your partnership agreement governs both the relations among the partners and between the partners and the partnership itself. If you don’t use specific language in your partnership to address IP, then the default rules will apply, and those defaults may not match what you and your partners intend.

The code treats property that’s acquired in the partnership’s name or with any partnership funds as partnership property. Intellectual property developed during the partnership usually falls into that category unless your agreement says otherwise. Sit down with your partners and a lawyer and decide upfront what should belong to the partnership and what should remain the property of the individuals, and be sure to decide whether new inventions or creative work will be owned by the partnership, assigned to one partner, or shared in some other way.

Remember that partners are not employees, so the “work made for hire” concept that automatically gives employers ownership of employee-created IP would not apply here.

Contributing Pre-Existing IP to a Partnership

When you contribute existing intellectual property, document it carefully. List each piece of IP that’s being contributed in a schedule attached to the agreement. State clearly whether you are assigning full ownership to the partnership or granting a license for its use, and be sure to define the terms of that license, including how long it lasts, the scope, what to do if the license ends or the partnership dissolves, and what to do with any royalties.

IP Created During the Partnership

You might agree that anything one partner develops while working on partnership business belongs to the partnership, or you could let the creating partner keep ownership but require a license back to the partnership on favorable terms.

For patents, federal law lets joint owners exploit the invention independently without accounting to the others in a partnership, unless you specifically contract around that rule. The same holds for copyrights. Your partnership agreement can override these defaults with buyout provisions, exclusivity requirements, or profit-sharing formulas.

Protecting Trade Secrets

Texas has adopted the Uniform Trade Secrets Act, which defines a trade secret as information that derives independent economic value from not being generally known and that the owner has taken reasonable measures to keep secret.

Build protection into your agreement with confidentiality clauses and nondisclosure requirements that apply to all partners, employees, and contractors. Keep access to sensitive information on a need-to-know basis, and require partners to return or destroy materials containing trade secrets when they leave or when the partnership ends.

Talk With a Business Attorney in Austin

If you’re building a business, take steps now to protect your intellectual property, your rights, and your company. Call the Artie Pennington Law Offices in Kyle, TX at 512-596-0534 now for a free 15-minute consultation. 

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