Licensing is not the only way to share one’s patent rights. As with other forms of property, patents may be jointly owned by multiple parties. This can arise in a number of typical circumstances including when an invention has multiple inventors, or where parties are working together to develop technologies and may be co-assignees of resultant patents.
Patent co-ownership can have a significant impact on an owner’s ability to exercise his or her patent rights, or (where the co-owners are really co-applicants) on how patent applications are handled. The specific effects of patent co-ownership can vary dramatically between jurisdictions, and (in most jurisdictions, including Canada, the United States and Europe) they can be changed by the parties through mutual agreement in contract. In the absence of a contract, however, the each jurisdiction provides default rules for the rights of co-owners.
In Canada, the prevailing judicial theory is that co-owners of a patent cannot dilute other owners’ interests in the patent. What this means in practice is that actions that require the consent of any one owner generally require the consent of all owners.
For instance, no one applicant can withdraw a patent application without the consent of his or her co-applicants. Nor, once the patent is granted, can he or she license the patent rights to a third party without the co-owners’ consent. As a consequence, it is wise for prospective licensees of Canadian patents to check a patent’s ownership before purchasing a license. Further, it is wise for parties to properly consider the impact of agreeing to co-own patents resulting from joint technology development efforts.
This only reinforces the importance of correctly naming all of the inventors in a patent application. If one of the inventors is omitted initially, it is possible that he or she could later appear and claim an interest as co-owner in the patent. But since none of that patent’s existing licenses were obtained with the consent of the unknown co-owner, they are all invalid! In addition to having paid for null rights, the “licensee” may also be liable for patent infringement.
In contrast, a co-owner may assign his or her interest in a patent without the other owners’ consent, unless that assignment would dilute the other owners’ rights. For instance, disposing of only a partial interest or assigning to multiple assignees is likely to dilute other owners’ rights, as the number of parties holding rights in the patented invention has been increased.
In the United States, dilution is not the key concern. Co-owners are burdened with fewer restrictions, and consequently they must be more vigilant in protecting their rights from dilution by co-owners. For instance, a co-owner may unilaterally (i.e. without consent of the other owners) grant a license to any number of third parties unless he or she has entered an agreement prohibiting this.
For an example of how this freedom might harm the interests of other co-owners, consider the case of Ethicon. In that case a patent was obtained with only one listed inventor, Dr. Yoon, who granted Ethicon an exclusive license in the patented technology. Ethicon then sued United States Surgical Corporation (USSC) for infringement. USSC discovered that there was a second, unlisted inventor : Young Jae Choi. USSC located Mr. Choi, successfully listed him as an inventor on the patent, and then obtained a retroactive license from him. Not only did this cause Ethicon’s case against USSC to fail, but it also diluted its licensed right to exclusive use of the patent.
In addition to demonstrating the importance of correctly listing the inventors of a patent, Ethicon shows that, in the absence of an agreement, US co-owners can seriously hamper the business dealings of other co-owners or their licensees.
As in Canada, co-owners of US patents are free to assign their interests without the consent of the other co-owners.
European nations vary in their treatment of co-ownership rules, although they tend to lean away from the unrestricted US style and can be substantially more complex than the Canadian approach. Contact us for details on specific countries if you have questions regarding patent co-ownership in any European jurisdictions.
Co-ownership of patents raises complex legal and strategic issues that can vary substantially on a case-by-case basis. We strongly recommend contacting an intellectual property attorney if you are considering issues relating to co-ownership or are considering entering into a contract that specifies co-ownership of patent rights.
By Christopher C. Scott