Closing down: What to do if you have intellectual property

Your organisation may hold or own a wide range of intellectual property. Intellectual property are creations recorded in a permanent format. Intellectual property may include:

• text
• software
• graphics
• drawings
• music
• designs
• trademarks.

Typically, organisations hold intellectual property which they have produced or used through their work.

Under charity law, intellectual property should be treated in the same way as any other financial or physical property. Intellectual property rights are charitable assets that should be managed and protected. Their value should also be maximised. Trustees are responsible for intellectual property.

When closing an organisation, you’ll need to demonstrate appropriate disposal in line with your governing document. For example, this may mean:

• transferring the intellectual property (IP) to a third party that will continue to use it for your closed charity’s purposes
• selling the IP and using the proceeds to further your closed charity’s purposes.

Copyright, patents, designs and trademarks are all types of intellectual property. Some types of intellectual property protection are applied automatically. Other types of protection you need to apply for.

If you’ve valued your organisation’s intellectual property in your annual accounts you’ll need to account for the loss of this value when the organisation closes.

It’s important to remember that just because your organisation holds intellectual property (IP), it doesn’t mean it’s the owner.

IP created by an employee

Usually, IP created by an employee on your payroll will automatically be owned by the employer organisation.

IP created by a third party

It’s likely you won’t own IP created by third parties such as freelancers or service providers, even if your organisation paid for it. You won’t own the IP unless a legal assignment of the rights has taken place, usually via a contract.

IP created by volunteers

There can be issues with IP produced by volunteers. Volunteers aren’t employees on your payroll and often don’t have a contract. This means volunteers need to formally assign the IP rights to your organisation under an agreement.

IP licenses

If you don’t own all the IP you hold, you may still have rights to use that IP. This is often called a 'licence'. These rights may continue after closing your organisation if you’re able to transfer them to a third party.

If you’re unsure about the IP your organisation owns, it is worth doing an IP audit as part of the closure process.

Before closing, you may want to transfer the IP you own to another organisation. This could include trademarks, patents or copyright. This transfer will typically be either:

• an arm’s length transaction for a commercial fee. An arm's length transaction is an agreement between parties who have no significant relationship with each other. No party has influence or control over another.
• a transfer where the recipient agrees to hold and use the IP to further your organisation’s purposes.

Before completing the transfer you’ll need an IP assignment agreement. This details the transfer of intellectual property rights to any recipient. It provides clarity on the rights and remedies of the old and new organisation.

For example, you may specify that the IP can only be used for your organisation’s charitable purposes or non-profit purposes.

The transfer of IP sometimes exists in a wider transfer agreement for other rights and liabilities. For example funding commitments, staff or contracts.

Existing grant agreements or contracts which are still attached to your organisation may include specific requirements around IP. For example, your organisation may have assigned the ownership of any materials produced under that grant to a funder or third party.

Alternatively, your organisation may own the IP but may need to seek a funder or third party’s agreement if it’s transferred to another organisation.

It’s important to check the IP clauses in existing grant agreements and contracts to see if these affect how you deal with the rights on closure.