What is Intellectual Property?
Intellectual property (IP) may include copyrights, patents, original databases, trademarks, designs, know-how, trade secrets, inventions, business and domain names, patents, and original designs. A company’s exclusive right to utilize IP developed by itself is protected under the federal laws of the UAE:
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Federal Decree-Law No. 36 of 2021 on Trademarks defines a trademark as a sign that helps distinguish one business’s products or services from another’s. Names, words, logos, letters, numbers, signatures, packaging, images, symbols, 3D shapes, holograms, and colours or colour combinations may all be protected as trademarks if combined to form a brand name or brand logo.
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Federal Decree-Law No. 38 of 2021 on Copyrights and Neighbouring Rights offers protection to original written texts (both physical and electronic), software, mobile apps, databases, speeches, stage and musical shows, videos, architecture, paintings, photography, applied arts, maps, and all subsequent works. Such protection also extends to new concepts and entertainment shows on television, provided they are creative and original.
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Federal Law No. 11 of 2021 on the Regulation and Protection of Industrial Property Rights offers protection to industrial designs created in any form, shape, line, colour, or pattern used for decoration in two or three dimensions that distinguish such designs and may appear on items produced using industrial or artisan methods. This type of protection is considered part of industrial property, including patents, utility certificates, integrated circuits, and undisclosed information.
The federal decrees set out above provide standard guidelines, regulations, and penalties to ensure enforcement of IP rights in the UAE. These decrees also protect the IP rights of companies established in most of the UAE free zones. Additionally, the DIFC has enacted Law No. 4 of 2019, which recognises the federal decrees and supports the enforcement of such IP rights within the DIFC as well.
What Does Protecting Your IP Entail?
Protecting any company’s IP requires comprehensive strategies, policies, and day-to-day actions to safeguard every aspect and every kind of IP the company owns from misuse, misrepresentation, and dilution by third-party use and infringement. Effective IP protection usually necessitates:
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Timely registration of IP under applicable laws
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Monitoring the use of such IP by third parties
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Deploying cease and desist notices and blocking tools in case of infringement
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Initiating litigation if necessary
Companies must also ensure that only authorised third parties and users can use the IP to prevent deviation and imitation.
What Does Holding IP in a Single Entity Mean?
IP can be owned by an operating company that uses the IP locally where its products are traded or services offered. Alternatively, a dedicated company can be incorporated solely for owning and holding the IP, which is then licensed to its other group companies or third parties for a fee or royalty. Another option is for the top parent company to hold all IP assets of the group companies to achieve better management and control, then license them down to subsidiaries for limited purposes for a fee or royalty.
Why Should We Consolidate IP Ownership in a Single Company (Either in a Separate Subsidiary or at the Parent Level)?
Consolidating IP ownership in a single company is practical and offers several advantages:
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Control and Management – Central ownership ensures consistent standards and usage across all subsidiaries and licensees. This lowers unit economics for compliance and enforcement, even in cases of cross-jurisdictional licensing and enforcement.
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Insulation and Enforcement – IP can be ring-fenced from risks if owned by a holding company separate from any operating subsidiaries. If an operating subsidiary becomes insolvent, undergoes bankruptcy, or is sued for operational breaches or mismanagement, the IP assets are protected from attachment or loss during such proceedings. Additionally, a single IP owner can enforce legal actions efficiently, saving both time and costs.
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Licensing and Revenue Collection – The holding company can license IP for royalties and co-branded projects with its own operating subsidiaries, group companies, or third parties. This enables revenue generation and consistent licensing terms for effective IP management.
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Deal Flexibility – Spinning off business divisions or operating subsidiaries becomes easier while retaining IP at the parent level, as the parent retains full oversight over all IP assets.
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Valuation – IP is a valuable intangible asset. Streamlined, single ownership tends to increase valuation and reduce indemnity insurance costs.
Conclusion:
In today’s economy, where knowledge is key, IP forms the foundation of a company’s competitive edge and future success. Companies should establish distinct legal entities to own, manage, and utilise their IP effectively. When IP ownership is separated from business operations, companies better protect their key intangible assets, maximise commercial flexibility, and ultimately preserve the long-term value of the entire group.
Disclaimer
This publication does not provide any legal advice, and it is for information purposes only. You should not rely upon the material or information in this publication as a basis for making any business, legal, or other decisions. Therefore, any reliance on such material is strictly at your own risk.
Author: Samar El Haddadi (Paralegal)
