Who Owns What: Assignment and Ownership of Patents and Applications

Why does ownership of a patent/patent application matter?

A patent is a government-granted property right that can be used to exclude others from making, using, selling, offering to sell or importing an invention for a specified time. Patents provide important commercial benefits – discussed in detail in our companion piece, What You Need To Know About Patents) – but only for patent owners.

So, who owns a patent/patent application?

In the US, the inventor is presumed to be the initial owner of a patent or patent application. If there is more than one inventor, there may be more than one owner. Ownership can be transferred or reassigned. If your company values intellectual property (IP) and has employees who are encouraged to innovate, here are a few important strategies to ensure that your company can benefit from patents generated through employee inventions.

• Agreements with employees and service providers(automatic assignment): Companies should have all employees sign confidential information and inventions assignment agreements before employees start generating IP. Having employees sign these agreements at the beginning of their employment – before any work is done – is the best course of action. Likewise, failure to correctly structure IP provisions in agreements with third parties, such as service providers and consultants, prior to the execution of any work has caused serious issues for many companies. Two examples of these kinds of agreements are included below:

• • A form of confidential information and inventions assignment agreement for California employees
  • A form of consulting agreement for US consultants (which contains IP assignment provisions)

• Obligation to assign: In some situations, even if your employees have not signed an agreement, they may still be obligated, either by contract or local law, to assign patent/patent application ownership to your company. For example, this could occur if the invention was developed on the job, the employee was hired specifically to invent for the company and/or the inventor is an officer of the company.
• Explicit assignments: Even when employees have signed appropriate agreements, your company should execute new patent-specific assignments whenever patent applications are filed. These assignments name the specific invention, patent and/or patent application and can have additional legal weight if the ownership of a patent is disputed. There also are advantages to recording patent assignments, including to provide notice, and having an explicit assignment available on record allows the company to obtain those advantages without recording an underlying agreement, which may contain other confidential information you would rather not have recorded and available to the public.

Joint ownership of patent/patent application rights can be complicated. As with any property right, multiple owners can make for multiple legal scenarios. For example, co-owners would have to join together to bring a patent infringement lawsuit. By contrast, the opposite is true for licensing: A co-owner can license its patent/patent application rights to a third party, independent of the other co-owner(s), unless they have an agreement otherwise. Co-owners also can independently sell, mortgage, transfer and will their rights to a patent/patent application. To avoid these kinds of issues, most lawyers recommend that a single entity be the patent/patent application owner, whenever possible. If this is not possible, then it is important to correctly structure IP provisions in an agreement – ideally, for example, where one party exclusively licenses back all rights in the co-owned patent/patent application. This is especially important for IP that is material to a company’s business.

How do I make sure my company owns these patents/patent applications? 

For any patents for which valid ownership is important to the business, it is essential that the company has valid and enforceable assignments. Among other things, patent ownership – and the underlying agreements that give rise to such ownership – will be reviewed during future transaction diligence by prospective investors, partners and underwriters to ensure that the parties are getting what they believe they should be getting in the transaction.

Well-structured ownership assignments are legally binding, but what does “well-structured” mean? Patent/patent application assignments have several formal requirements to be considered valid. Assignments must:

1. Be in writing: Unlike some other contracts, oral assignments or oral agreements to assign patent/patent application rights are rarely enforceable.
2. Clearly identify all parties: Recite names, addresses and relationship of both the assignor(s) and assignee.
3. Identify the property clearly: Include the patent/patent application number, title, inventors and filing date.
4. Recite exchange of consideration: This is standard for almost any contract, and here even nominal consideration (e.g., $1) is sufficient.
5. Be notarized or attested to by one – and preferably two – non-inventor witnesses: Notarization or witnessing serves as evidence that the signatures (and, thus, the assignment) are valid. There is a lot of interest in utilizing an e-signature platform, such as DocuSign, for execution of assignments. However, this is still a developing area, and the rules differ significantly around the world. If use of e-signatures is an important consideration for your company – e.g., your employees are geographically diversified – you should consult with your IP counsel to understand the local laws and potential ramifications in countries that are important to your business.

Following these rules is good practice and is an essential starting place to ensure the validity and enforceability of your assignment. However, validity does not end here. As with any contract, the legal language is key to eliminating ambiguity in your agreements.

Finally, make sure that any assignment in a patent/patent application is recorded with the US Patent and Trademark Office (USPTO) as soon as possible after execution. If an assignment is not recorded with USPTO within three months from its effective date, the assignee’s claim to ownership could be at risk. For example, if an assignor were to subsequently improperly assign to another purchaser that was not aware of the previous assignment, and the previous assignment had not been recorded with the USPTO, the subsequent purchaser may be able to successfully claim ownership.

You’re the new owner!

A patent is only as valuable as it is enforceable, and ownership is a key element of enforceability. Licensing, manufacturing, distributing or otherwise making exclusive use of your invention can only be ensured if the patent is both valid and enforceable. Having ownership protection in place before the development of your IP, as well as the correct legal ownership assignment documents executed afterward, can help ensure that you can make the most of your company’s ingenuity.