IP Ownership for SMEs: Are You Sure You Own Your Intellectual Property?

For many small and medium-sized enterprises (SMEs), intellectual property (IP) is one of the most valuable business assets — yet it’s also one of the most misunderstood. Many SME owners assume that because they came up with the idea, paid for development, or set up the business, they automatically own all associated IP.

Unfortunately, that’s not always true. A surprising number of SMEs discover — often when seeking investors, partners, or funding — that they don’t fully own the IP behind their products or services. This can stop deals in their tracks and cause major legal and financial complications.

If you’re running a growing business, it’s crucial to understand IP ownership for SMEs — who actually owns your IP, how to secure it, and how to avoid costly ownership disputes.

Who Owns IP in Your SME?

When IP is created, the first owner is usually the individual or organisation that creates it. However, there are key exceptions that SME owners need to understand:

Employees: If an employee creates IP as part of their normal job duties, the IP typically belongs to the employer — your company.
Directors: For non-employed directors, ownership can be a little grey. However, IP developed as part of their official duties will usually belong to the company.
External Consultants: Here’s where many SMEs get caught out. When you hire a contractor — such as a web developer, product designer, or marketing agency — the IP they create is legally theirs, unless you have a written agreement that transfers ownership to your business.

👉 Tip for SMEs: Always use a formal written contract that clearly states your company owns any IP created by external consultants. Without it, you may end up paying for work that you can’t legally use or protect.

IP Ownership and Collaboration Agreements for SMEs

Collaboration can be powerful for SMEs — helping you share knowledge, reduce costs, and accelerate innovation. But without clear IP clauses, collaboration can become a legal minefield.

Most collaboration agreements distinguish between:

Background IP – existing IP that each party brings into the project.
Foreground IP – new IP created as a result of the collaboration.

Problems arise when the agreement doesn’t clearly specify who owns the foreground IP. In some cases, one partner owns it but grants rights of use to the others. In others, the IP is jointly owned, which might sound fair but can cause major problems later.

Under shared ownership, both parties can use the IP independently, potentially becoming competitors. Worse still, one owner can’t license or sell their share without the other’s consent, which can seriously limit your business flexibility and funding options.

👉 Best practice for SMEs: Seek legal advice when entering collaborations and make sure ownership and usage rights are clearly defined.

The Risks of Shared IP Ownership for SMEs

It’s not uncommon for SME founders, friends, or business partners to co-develop a product or service and agree to “share” the IP. While this can work initially, it often leads to disputes if relationships sour or if one of the parties leaves or passes away.

To protect your business:

Have a clear written agreement outlining each party’s rights and responsibilities.
Define market or sector boundaries to prevent direct competition.
Include succession clauses covering what happens if one owner dies or becomes incapacitated.

Properly structured agreements ensure that your IP remains an asset, not a liability.

Why IP Ownership Matters for SMEs

For SMEs, IP isn’t just about protecting ideas — it’s about securing the foundation of your business. Investors, lenders, and funding bodies will often require proof that your company owns its IP before moving forward.

Without clear ownership:

You might lose the right to use your own creations.
You could face legal challenges from former partners or contractors.
You may miss out on funding or growth opportunities.

Taking the time to verify and formalize IP ownership can save your SME significant time, money, and stress down the line.

Don’t Leave IP Ownership to Chance

Every SME should make IP ownership a key part of its business strategy. Whether you’re developing software, launching a product, or collaborating with partners, ensure that your contracts and agreements are airtight.

If you’re uncertain about your current IP position, seek professional legal advice to audit your ownership status and fill any gaps. The sooner you act, the easier it is to secure your IP and protect your business’s future.