It is sometimes tempting when entering into a joint research agreement to agree that both parties will jointly own any patent rights arising from the collaboration. However, unless the rights of each party are clearly set out in the agreement, this can lead to complications and may be dangerous.
In the United States, 35 USC 262 provides that in the absence of an agreement to the contrary, each joint owner of a patent may make, use and sell the patented invention without the permission of or the need to account to the other joint owners.1 Case law has extended this provision so that each co-owner may also license the invention without recourse to the others, thereby effectively precluding the grant of an exclusive license in cases of joint ownership unless all the joint owners agree not to grant any further licenses or to work the invention themselves.2 Similarly, “one co-owner has the right to impede the other co-owner’s ability to sue infringers by refusing to voluntarily join in such a suit.”3 Indeed, refusal to join in suit against an infringer can result in the de facto grant of a license even without positive action.4
In this context, it should be noted that the co-inventor of a single claim has in the absence of having assigned his or her rights to someone else been held to be the co-owner of the entire patent.5
It should be noted that in states such as California and Texas where community property laws apply, there may be joint ownership of an invention made during the marriage and any patent arising from it even if only one spouse is in fact an inventor.6 Where an inventor may be subject to such a law, it is therefore a good idea to make sure that the non-inventing spouse agrees that the patent should not be regarded as community property or agrees to any transfer of rights that may occur.
Co-ownership applies to the whole patent so that it is not possible for one to divide ownership between different claims.7 Consequently if some subject matter of a patent is invented within the terms of a collaboration agreement but some is invented by only one party, in the absence of an agreement to the contrary, the entire patent will be jointly owned, even though the subject matter of some of the claims could have formed the subject matter of a separate patent to which one party was entitled to exclusive ownership.8
Outside the United States
Few, if any, countries follow the practice in the United States of allowing joint owners to license their patents without the consent or need to split income from a license with the other co-owner of the patent being licensed.
Many countries, such as Australia, China, France, India, Japan, Korea, Netherlands, Spain and the United Kingdom have specific provisions in their patent laws dealing with this issue. In others such as Canada and Germany, the issue is addressed as part of the general law.
The most common position in other countries having specific provisions in their patent laws on licensing by co-owners is that this is permitted only with the consent of the co-owner.
United Kingdom, Australia, India
In all three of these countries, the law derives from the same common law tradition as exists in Canada and is discussed below, but has been subject to legislative codification which began with Section 37 of the UK Patents and Designs Act 1907 which simply provided that where a patent was granted to two or more persons, “each of such persons shall be entitled to use the invention for his own profit without accounting to the others, but shall not be entitled to grant a licence without their consent,”.
In the United Kingdom, the rights of co-owners are now governed by Sections 36, 37 and 66 of the Patents Act 1977. Section 36(3) provides that in the absence of an agreement to the contrary, where two or more persons are proprietors of a patent one of them shall not without the consent of the other or others –
(a) amend the specification of the patent or apply for such an amendment to be allowed or for the patent to be revoked, or
(b) grant a licence under the patent or assign or mortgage a share in the patent or in Scotland cause or permit security to be granted over it.
Section 37 permits the comptroller to order the grant of a license upon request by any proprietor of a patent if he sees fit to do so. This provision does not, however, seem to have been used.
Section 66(2) provides:
One of two or more joint proprietors of a patent may without the concurrence of the others bring proceedings in respect of an act alleged to infringe the patent, but shall not do so unless the others are made parties to the proceedings; but any of the others made a defendant or defender shall not be liable for any costs or expenses unless he enters an appearance and takes part in the proceedings.
In Australia, Section 16 of the Patents Act provides
(1) Subject to any agreement to the contrary, where there are 2 or more patentees:
(a) each of them is entitled to an equal undivided share in the patent; and
(b) each of them is entitled to exercise the exclusive rights given by the patent for his or her own benefit without accounting to the others; and
(c) none of them can grant a licence under the patent, or assign an interest in it, without the consent of the others.
Section 17 permits co-owners to seek a direction from the Controller on a variety of matters, including possible grant of a license, which he may decide as he sees fit.
A consequence of co-owners having an undivided share of the patent is that enforcement requires agreement by all of them.
In India, when a patent is owned jointly by more than one owner, each co-owner has the right to make, use, offer for sale, sell or import anything that would otherwise be a patent infringement. However, joint owners may not, unless an appropriate direction has been given by the controller, grant any license under the patent or assign its share in the patent without the consent of the other co-owner or co-owners.9 In cases where one co-owner wishes to grant a license or assign its share in the patent but has not been able to obtain consent from the other co-owner or co-owners, it may request the Controller to issue a direction to the other party or parties to do so. Before issuing any such direction, the Controller must give the other parties the opportunity of a hearing to explain why such a direction should not be made.10
Essentially similar provisions are found in Article 66(2) of the Dutch Patent Act 11 and Article 72(3) of the Spanish Patent Law 12.
Japan and Korea
Article 73 (1), (2) and (3) of the Japanese Patent Law reads as follows:
- Where a patent right is jointly owned, no joint owner may assign or establish a right of pledge on the said joint owner’s own share without the consent of all the other joint owners.
- Where a patent right is jointly owned, unless otherwise agreed upon by contract, each of the joint owners of the patent right may work the patented invention without the consent of the other joint owners.
- Where a patent right is jointly owned, no joint owner may grant an exclusive license or non-exclusive license with regard to the patent right to any third party without the consent of all the other joint owners.
Article 99(2), (3) and (4) of the Korean law, which was in part modeled on the Japanese law, contains the same language. It should be noted that the provision in the first of these sub-clauses in each country goes beyond what is normal in many countries in limiting the co-owners right to dispose of his share without consent.
France and China differ from the above group of countries in that licensing by one co-owner is permitted, even if there is no agreement to that effect, but the proceeds of the license must be shared.
In China Article 15 of the Patent Law provides:
Where the co-owners of a patent application or patent have concluded an agreement on exercising of the right, the agreement shall apply. In the absence of such agreement, any co-owner may independently exploit the patent or license another party to exploit the patent through non-exclusive license; any fee for the exploitation obtained from licensing others to exploit the patent shall be distributed among the co-owners. Except for the circumstances as provided in the preceding paragraph, a jointly owned patent application or patent shall be exercised with the consent of all co-owners.
Article L613-29 of the Intellectual Property Code sets out a comprehensive scheme for addressing rights of co-owners of a patent if they have not made their own agreement, including provisions that joint ownership of a patent application or of a patent shall be governed by the following provisions:
a) although co-owners may use the invention themselves, such use may be subject to making some recompense to other co-owners.
b) as long as the other co-owners are notified, each co-owner may enforce the patent by itself;
c) Each joint owner may grant to a third party a non-exclusive license for his own benefit subject to making equitable compensation to the other joint owners who do not personally work the invention or who have not granted a license. Failing amicable agreement, such compensation shall be laid down by the First Instance Court. It is, however, necessary to provide advance notification of the intention to grant a license to the other co-owners accompanied by an offer for transfer of the share at a specified price. In the case of dispute, the District Court will fix the price
d) although each co-owner is entitled to assign its share of the patent, this is subject to a right of preemption by the other co-owners
As noted above, neither Germany nor Canada has any specific legislation relating to rights of co-owners in patents.
Section 743(2) of the German Civil Code provides that when dealing with co-ownership of things in general,
Each part owner is authorized to use the joint object to the extent that joint use by other part owners is not impaired.
Since licensing of a patent by one co-owner can reduce the benefit of the patent to other co-owners, grant of such a license can have the effect of impairing the rights of other co-owners and so requires their consent. Section 745(2) however permits a court to intervene if refusal to grant such consent unreasonably affects the rights of all co-owners.
In Canada, the question is governed by common law. In Forget v. Specialty Tools of Canada Inc, Wood JA in the British Columbia Court of Appeal13 looked back to pre-1907 English case law to hold that any partial disposition of the rights of one co-owner, which included the granting of a license, had the effect of diluting the rights of the other co-owners because a greater number of persons would now be entitled to share in the benefits of the exclusive rights granted by the patent. Consequently consent of all other co-owners was needed before such dilution should be permitted.
As can be seen from the above, there is still substantial variety in the ways in which countries treat the rights of co-owners when they have not agreed to these among themselves in advance and detailed thinking about what is desired is important before entering into a joint ownership agreement.
This article first appeared in Offshore Investment, July/August 2014.
1 It seems that an “agreement to the contrary” need not be in writing and that this provision does not preempt state law claims for unjust enrichment in appropriate circumstances. Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics Inc. 75 USPQ2d 1225 *1st Cir. 2005). Another example of an agreement to the contrary is found in Wisconsin Alumni Research Foundation v. Xenon Pharma Inc., 93 USPQ2d 1361 (7th Cir 2010).
2 See for example Willingham v. Star Cutter Co., 194 USPQ 249 (6th Cir 1977).
3 Schering Corp v. Roussel-UCLAF SA, 104 F3d 341, 41 USPQ2d 1359 (Fed Cir 1997). See also Israel Bioengineering Project v. Amgen Inc., 81 USPQ2d 1558 (Fed. Cir. 2007).
4 This is what occurred in the recent case of STC.UNM v. Intel Corporation where a complex background had led to a finding that the patent in question was jointly owned by two co-owners and one of them did not wish to participate in an infringement suit. The party pursuing the suit sought to use Rule 19 of the Federal Rules of Civil Procedure to compel participation by its reluctant co-proprietor. Rule 19 provides that certain parties having an interest in a law suit must be parties to the suit and gives the court power to join them as a defendant or an involuntary plaintiff. However in its decision of June 6, 2014 (case 2013-1241), the majority of the Federal Circuit held that Rule 19 was a procedural rule and that “Rules of procedure, such as that in Rule 19(a), must give way to substantive patent rights.” The Court went on to hold:
To remove any doubt, this court holds that the right of a patent co-owner to impede an infringement suit brought by another co-owner is a substantive right
that trumps the procedural rule for involuntary joinder under Rule 19(a).
5 Ethicon Inc v. United States Surgical Corp, 45 USPQ2d 1545 (Fed Cir. 1998). See, however, the strongly worded dissent to this view by Judge Newman who took the view that the law change on joint inventorship in 1984 had rendered older cases moot.
6 Enovsys LLC v. Nextel Communs. Inc., 614 F.3d 1333 (Fed. Cir. 2010)., although in that case, the effect of the community property right was negated by the terms of the couple’s divorce.
7 Pope Mfg Co. v. Gormully & Jeffrey Mfg. Co., 144 US 248 (1892).
8 Lucent Technologies Inc. v. Gateway Inc., 88 USPQ2d 1481 (Fed. Cir. 2008).
9 Patents Act Section 50.
10 Patents Act Section 51.
11 Which also specifically provides that a single co-owner can enforce the patent.
12 This section also specifically provides that a judge may authorize a single co-owner to grant a license for reasons of equity in particular circumstances. Article 72(2) permits a single co-owner to enforce the patent without consent of the other co-owners.
13 62 CPR(3d) 537 (1995)