Working together – who owns the patents?

The automotive sector has recently been awash with large-scale infrastructure investment news as companies look to ready roads and networks for the exciting future of transport. Consider, for example, BMW Group, Daimler AG, Ford Motor Company, Volkswagen, Audi and Porsche’s joint venture — Ionity — with its aim to build a pan-European electric vehicle charging network. Or that Panasonic and Toyota are coming together to form a town development business, merging Toyota’s expertise in mobility with Panasonic’s knowledge of lifestyle products.

When multiple companies join forces to develop technology, it’s important to ensure that the ownership of any IP is clearly set out in agreements — a theme I’ve previously discussed in-depth. Big problems can arise down the line if no such formal agreement is in place, or if a clear assignment of IP is missing altogether. So what happens in such circumstances and what should you be aware of when partnering with other companies?

When two parties disagree — a case in point

In BDI Holding GmbH vs Argent Energy Limited & Argent Energy (UK) Limited [2019] EWHC 765, the issue of patent entitlement was considered. While this case didn’t focus on the presence of an agreement, it did provide neat guidance as to how the issue of entitlement would be addressed by the Court in the absence of any formal assignment.

In 2004, Argent Energy Limited & Argent Energy (UK) Limited (hereinafter ‘Argent’) commissioned BDI Holding GmbH (hereinafter ‘BDI’) to design and oversee the construction of a plant for Argent in Motherwell. The plant makes biodiesel from fats, oils, and greases recovered from sewers and grease traps.

In 2014, Argent filed two European patent applications (EPA 3 011 041 and EPA 3 078 724). In August 2017, BDI challenged the entitlement of Argent to the patents — causing the European Patent Office (EPO) to stay the prosecution of the patent applications.

The claim in respect of EPA 3078 724 settled and the trial related only to EPA 3 011 041, centring on the identification of the inventive concept. BDI and Argent each argued that the inventive concept was different and that one of their employees was responsible for it, which would give the respective party the right to the respective patent application. Ultimately, the outcome of the case rested on the cross-examination of witnesses.

However, the lack of discussion of any clauses assigning IP in the initial commissioning agreement is a clear indication that such a clause didn’t exist, or was unclear if it did. This gave the Court the opportunity to remind us of how to assess the entitlement of a patent application.

What the law states

The judge summarised the two key questions to answer in respect of a patent entitlement dispute, enabling us to establish who the inventor is:

• What is the inventive concept?
• Who devised the inventive concept?

Section 7 of the UK Patents Act then sets out how to determine who’s entitled to a patent for the invention.

Section 7(2) states: “A patent for an invention may be granted (a) primarily to the inventor or joint inventors; (b) in preference to the foregoing to any person or persons who, …. by virtue of an enforceable term of an agreement entered into with the inventor before the making of the invention, was or were at the time of the making of the invention entitled to the whole of the property in it…; in any event, to the successor or successors in title of any person or persons mentioned in paragraph (a) or (b) above or any person so mentioned and the successor or successors in title of another person so mentioned.”

In summary, this means that a patent for an invention should be granted to the inventor unless there’s a term in an agreement which assigns that right elsewhere. The inventor can be determined using the two-step test set out above.

In the case above, Argent and BDI both argued that their employees contributed the inventive concept, i.e. they identified what they deemed to be the inventive concept and submitted that their employee was the inventor. The patent for the inventive concept would then, by virtue of the employment contract, be owned by the respective party. Using this logic, the judge decided that it was the employee of Argent who devised the inventive concept and therefore Argent was entitled to the patent applications (and the subsequent grant of a European patent) for the invention, which related to a method of processing high-impurity feedstock.

Pre-emptive agreements

At the risk of sounding high-minded, it seems that the court proceedings could have been avoided if an agreement had been in place beforehand which contained a term clearly assigning the patents one way or the other. However, the fact that this came to the court has shone light on how entitlement will be assessed in the absence of such a term.

It isn’t always apparent that technology will be developed when a commercial relationship starts. Indeed, it may not even be the intention of the parties to develop technology together, but it may happen nonetheless. Often, it’s only at this time that the parties realise their interest.

Even if the development of technology isn’t envisaged, it’s always advisable to clearly assign the ownership of any resulting IP one way or the other in an agreement before a relationship begins. The absence of clear assignment will mean that the ownership of the patents defaults to the position under the law — which, in the case described above, meant the patents were owned by the employer of the person who devised the inventive concept.

If the development of technology is envisaged, it’s advisable to agree from the start a clear framework not only for the ownership of the technology (even if it’s owned by all of the parties) but also who’ll pay for the IP, make decisions about it and take care of the other consents required to exploit it.

No agreement

Parties very often end up working together on a project without the formalism of an agreement at all. This may leave them as a hostage to fortune if technology is developed and the issue of entitlement to the resulting patents comes before the courts.

For this reason, it’s advisable to:

• keep all correspondence between parties
• record all details of meetings
• keep any notes from those working on the respective project

This information should be treated as highly valuable and kept securely. Not only will this help to clarify how the technology was devised and who devised the inventive concept, it may also enable you to argue whether or not an assignment of the patents existed.

Take note of the default position

The Court assessed inventorship in respect of a European patent and assessed entitlement to that patent based on the determined inventorship. The outcome of the case didn’t rest on the interpretation of any contractual terms assigning ownership one way or the other, but rather on the assessment of witnesses and the content of the patent application. This gives us insight into both the importance of clear assignment terms and the English Courts’ default approach to entitlement in the absence of such clauses.

In the absence of an agreement containing a term which clearly assigns the patents one way or the other, a default position is adopted where the person who devised the inventive concept is determined. The entitlement is then determined relative to that person, i.e. do they have an agreement such as an employment contract which assigns the ownership of the patent elsewhere?

A key consideration when working with others

Clear assignment of IP generated as the result of work undertaken by two or more parties can save a lot of time and money by removing the need to go to court in order to determine which party owns what. If you’re looking to work with another organisation to develop technology, the importance of setting out agreements with clear and explicit assignment clauses from the start can’t be understated.

These agreements can be costly, so if there’s no chance of drawing up such an agreement, it’s imperative that you ensure all correspondence between parties is kept and organised so that any conversations regarding ownership can be traced. Additionally, be sure to keep any notes from individuals working on the project so that, if required, they can be used to determine who devised the inventive concept.

Entitlement to patents can be a tricky matter to address. If you need help, feel free to get in touch with us.