Six key considerations for patent co-ownership agreements

Terence Broderick

Six key considerations for patent co ownership agreements

There have been many stories in the automotive sector recently about collaborations which span different technology sectors — one example being the tie-up between Jaguar Land Rover and Blackberry to develop “infotainment” technology for Jaguar Land Rover’s next generation of vehicles.

So-called ‘infotainment systems’ are set to develop at a rapid rate over the next ten years, as content delivery to vehicles — and the control of and interaction with that content from users of vehicles — becomes more involved with the development of the driverless and connected car.

If Jaguar Land Rover and Blackberry are developing technology together, as this would suggest, then the collaboration will likely generate intellectual property and the question of patent applications will no doubt arise. Co-ownership of patents can be a bit of a taboo subject as patents, by their definition, are defensive rights that are not typically shared with others.

However, UK law, as in many other territories, does enable patents to be co-owned and co-filed by more than a single party.

What is patent co-ownership?

The rights of co-owners of UK patents are set out in section 36 of the UK Patents Act. It states that, subject to an agreement between them, co-owners are entitled to an equal, undivided share in the patent and are entitled to perform acts which, under other circumstances, would infringe the patent. In short, both owners are entitled to use the invention without requiring permission from the other.

Co-owners can also enforce the patent against infringers without consent from the other co-owners – but the other co-owners will be joined into the proceedings as nominal defendants.

The sticking point is that co-owners cannot, without the consent of the other co-owners, amend the specification, grant a licence under the patent or assign or mortgage a share of the patent.

A word of caution

The rights of patent (or patent application) co-owners should be governed by written agreements between them, but very often, such agreements are not put in place. This can lead to trouble and is why co-ownership is so often fraught with anxiety for many parties.

One of the problems is that when parties come together with the intention of generating IP, everyone is friendly and the relationship is typically positive. Therefore, the subject of a legal framework (such as an agreement about how the IP will be managed and exploited) is only seen as a way of pouring cold water on what is otherwise a positive dialogue.

It’s exactly at this time that agreements should be established, to provide a solid framework for the management and exploitation of the patents generated as a result of the collaboration. This helps to avoid a falling out years down the line, when the lack of an agreement will make resolving the situation expensive and difficult to manage.

There’s nothing wrong with filing patent applications together to protect the technology developed by the collaboration. However, it’s essential that an agreement is reached about how the patents will be managed and exploited. This should be in place before a patent application is filed.

Six key patent co-ownership considerations

The agreement should be signed by all of the patent co-owners and should clearly set out a framework for how the patent applications (and respective patents) will be taken forward.

This should include:

  • clear assignment of responsibility for the cost of patent prosecution and the payment of annuities for the full life of the patents
  • full details of the decision-making process involved in the prosecution of the patent application
  • who’s responsible for enforcement of the patent and resisting third party attacks
  • clear clauses which set out the situations in which each of the co-owners is allowed to exploit the patent
  • the term, jurisdiction and forum in which disputes will be settled
  • clear clauses setting out the consent, if any, for individual co-owners to amend, license, assign or mortgage the patent, thereby generating income

Ensuring your agreement has considered everything above helps to prevent damaging disputes arising. As cynical as it sounds, anything that can enable a party to generate income can also draw that party into a dispute. Sorting out consent to generate income from the co-owned patent at an early stage mitigates against the impact such a dispute can have.

Is your licence worth the paper it’s written on?

At a time when so much collaboration is taking place, the possibility that a party would be required to take a licence on a co-owned patent becomes more likely. This brings the question of ‘consent’ into focus.

During any licensing negotiations, due diligence should be carried out to ensure the licensor has the right to license the patent. This becomes more complicated with co-owned patents, as the agreements mentioned above will often remain confidential.

If the licensor does not have consent, this could mean the licence isn’t worth the paper it’s written on. This, of course, will also expose the licensee to an infringement risk, as they could well be exploiting the patented invention without the valid consent of the patent owners.

Unless the licensee can determine with any certainty that the licensor does have the consent to license, the infringement risk needs to be addressed. This could be in the form of a warranty from the licensor to show they have consent and/or an indemnity from the licensor that they will meet the costs of the infringement action if they don’t have the consent to license.

Don’t be afraid

Collaboration could be an important step in taking your business further. Developing technology with a collaborator could be a turning point that helps you in achieving the growth you desire. This is what Jaguar Land Rover and Blackberry have done, and there’s no reason why any company could not follow this example. Companies should not fear developing technology with another party and should not be afraid of filing patent applications as a co-applicant.

Parties should be very positive about co-ownership, providing they are not blind to the problems which can arise. Disagreements between parties where patents are concerned can be expensive to resolve, so I recommend that a clear and thorough agreement, which provides a framework for the management and exploitation of the patents, is drafted and signed before any patent applications are filed.

An agreement between co-owners of a patent can’t guarantee that everything will always run smoothly, but it does provide a reference point if any disagreements arise, making disputes cheaper and easier to resolve.

Additionally, if a licence is taken on a patent which is owned by more than one party, thorough due diligence is advised. Licensees need to be certain that licensors have the consent to license the patent in question and if they cannot be certain, put appropriate measures in place to take care of the risks they’re incurring by entering into the license.

To find out more, feel free to get in touch with us.

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