March 29, 2018

Joint Ventures: Should You Use an ‘Entity’ or ‘Contract’?

Joint ventures can be very complex enterprises with a host of legal & business issues to be sorted out.  But among the first decisions that must be made is whether the parties will conduct the venture through a new entity, or whether they’ll just rely on contractual arrangements.

This Gibson Dunn memo lays out some of the questions that parties need to ask when deciding how to structure the joint venture.  Here’s an excerpt discussing how the role of intellectual property in the joint venture might tip the scales:

Will the joint venture develop intellectual property to be used primarily in its business, such as new product designs or trademarks, and/or will the parties contribute certain existing intellectual property to the joint venture? If yes, the parties may wish to form a JV Company to control these intellectual property assets, maintain applicable intellectual property registrations and otherwise protect the joint venture’s intellectual property rights. However, a JV Company may not be required if new intellectual property is not needed for the joint venture business, or if the intellectual property to be used in the joint venture will be owned and controlled solely by one party.

The memo reviews a laundry list of other factors that should be considered, including the scope of the joint venture, the need for a dedicated management team and employee base, liability concerns, regulatory issues and strategic considerations.

John Jenkins