Contractual Agreements to Maximize Gains - Joint Ventures Agreements
Nowadays, even the largest companies don’t do everything by themselves. Partnering with other companies is not only a necessity in many cases, but it is also an excellent way to save time and money. When two or more partners come together to take up a new project with specific shared goals, in legal terms this is called “Joint Venture” (JV). Joint Ventures are often formed by creating a new and separate entity. Other times, they are simply established by way of a contract, whereby parties agree to work together and allocate roles and responsibilities.
In some countries that limit the possibility for foreigners to independently carry out business, entering into a JV with a local business actor is the only possibility. In other cases, this is not a legal requirement. However, Joint Ventures present significant advantages, including:
- Acquiring capitals or access to specific technologies;
- Enhancing the capacity to source raw materials or to use the best distribution systems in the new market;
- Capitalizing on local knowledge and network to foster acceptability.
In any event, a sound contractual agreement has to be established, providing for clear rules relating to management and decision-making responsibilities. When entering into a Joint Venture, partners start sharing risks, profits, assets, results etc. Their initial contributions may take the form of tangible and intangible assets, and many times, they also create new (tangible and intangible) assets in the process.
In this context, it is imperative to have a well-crafted contract with your partners, particularly with regard to:
- The contributions that each party is expected to make in terms of tangible properties, as well as in terms of IPRs (often referred to as IP BACKGROUND);
- The ownership, management and commercialisation, etc. of new intangible assets created by the Joint Venture (this is called IP FOREGROUND).
For more information about Joint Ventures, including the IP issues that have to be taken into consideration before entering in a JV agreement and during its implementation, please refer to the Handbook on IP Commercialisation (Section C.4).
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