Why does patent ownership matter?
A patent is a government-granted property right that can be used to exclude others from making, using or selling an invention for a specified time (how long depends on the type of patent). Patents can 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?
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 and has employees that are encouraged to innovate, here are a few smart strategies to ensure that your company can benefit from patents generated through employee inventions.
- Agreements with service providers (Automatic Assignment): Companies should have all employees sign confidentiality and invention assignment agreements (discussed in detail here) before employees start generating intellectual property. Having employees sign these agreements at the beginning of their employment, before any work is done, is the best course of action. Failure to structure IP-related agreements with your services providers correctly has caused serious issues for many companies.
- Obligation to Assign: Even if your employees haven’t signed an agreement, they may still be obligated, either by contract or local law, to assign patent ownership to your company. Relevant instances include if the invention was developed on the job, the employee was hired specifically to invent for the company, or the inventor is an officer of the company. Other situations could apply.
- 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 and can have additional legal weight whenever ownership of a patent is disputed.
Joint ownership of patent rights can be complicated. As with any property right, multiple owners make for multiple legal scenarios. For example, co-owners 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 rights to a third party, independent of the other co-owner(s), unless they have an agreement otherwise. Co-owners can independently sell, mortgage, transfer, and will their rights to a patent. To avoid these kinds of issues, most attorneys recommend that a single entity be the patent owner.
How do I make sure my company owns these patents?
Well-executed ownership assignments are legally binding, but what does “well-executed” mean? Patent ownership assignments have several formal requirements to be considered valid. Assignments must:
- Be in writing – unlike some other contracts, oral assignments or oral agreements to assign patent rights are rarely enforceable;
- Clearly identify all parties – recite names, addresses, and relationship of the assignor(s) and assignee;
- Identify the property clearly – state patent or patent application number, title, inventors, and filing date;
- Recite exchange of consideration – this is a standard for almost any contract, and here, even nominal consideration (e.g., $1) is sufficient;
- Be notarized – notarization serves as prima facie evidence the signatures (and thus the assignment) is valid, but if notarization isn’t possible, the signatures should be attested to by two witnesses.
These rules are good practice and are an essential starting place to ensure the validity and enforceability of your patent assignments, but validity doesn’t end here. As with any quality contract, the legal language is key to eliminating ambiguity in your agreements.
Finally, make sure any assignment or other interest in a patent is recorded with the US Patent and Trademark Office (USPTO) as soon as possible after execution. If an assignment or other interest isn’t recorded with the 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 is unaware of the previous assignment and the prior 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 has legal standing in court. If you are not the lawful owner of a patent, making use of the legal protections for your invention will be difficult, if not impossible. Having thorough ownership protection in place prior to the development of your intellectual property, and the correct legal ownership assignments afterward, will ensure that you can make the most of your company’s ingenuity.