In this next instalment of our series of articles discussing what’s new, unusual or otherwise important to know about the new Unitary Patent (UP) from an IP transactions point of view, we focus on co-ownership.
Like most other forms of intellectual property, UPs are an object of property that can be co-owned (also known as jointly owned) by more than one person at the same time. Whilst co-ownership might seem fair and reasonable where IP rights arise out of some form of collaboration, property laws vary enormously between jurisdictions and, in the absence of an express agreement between the co-owners, co-ownership of IP rights across multiple jurisdictions is fraught with complexity.
Due to its unitary nature, the UP potentially simplifies co-ownership for patent owners as, instead of a basket of national European patents each governed by its own national law (as is the case with the traditional European patent), patent owners can have one UP covering all participating Member States of the European Union. However, a degree of complexity remains because whilst a UP will only be governed by one national legal system, that could be the national law of any one of the countries where the UP has effect.
Accordingly, when considering a co-owned UP as an object of property (i.e. property that can be bought, sold, licensed, given as security, etc.), it is important to understand what national law governs that UP and what legal and practical implications that might have for the co-owners.
What national law applies to a UP?
As discussed in our previous articles, the national law that applies to a UP as an object of property is determined by reference to the residence or place of business of the applicant as at the filing date of the European patent application (defaulting to German law if the applicant does not have a place of business in one of the participating Member States). This means that if the applicant’s place of business is in France, for example, the resulting UP will be governed by French law.
If a UP is co-owned, the place of business of the first named co-applicant will determine the governing law of that UP. If, however, that is not in a participating Member State, the place of business of the next named co-applicant will determine the national law, and so on down the list of co-applicants (defaulting to German law where none of the co-applicants have a place of business in a participating Member State).
For example, if a French company and an Italian company apply for a UP, the resulting UP will be governed by French law if the French co-owner was listed first on the application, or Italian law if the Italian co-owner was listed first on the application. If two US companies apply for a UP and neither of them has a place of business in a participating Member State, German law will apply.
Once set, the applicable national law will remain the same throughout the term of the UP regardless of any subsequent dealings in the UP. This choice of law could make a significant difference when it comes to the default rights of co-owners.
What difference does it make?
The default position on rights and obligations of co-owners varies between jurisdictions and this may have significant implications for how the UP can be exploited. For example, in France we understand that a co-owner can license the patent (non-exclusively) without the other co-owner’s consent, provided that the non-exploiting co-owner is notified and paid fair compensation. (The consent of all owners is needed for an exclusive licence to be granted.) This contrasts with the position in Germany where the consent of all co-owners is required for both non-exclusive and exclusive licences to be granted.
Positions might also vary across jurisdictions regarding: (i) whether co-owners are permitted to practise the invention without the agreement of the other co-owner; (ii) whether one co-owner can assign its share of the patent without the other co-owner’s agreement; and (iii) whether one co-owner can sue for infringement without the agreement of the other co-owners.
How can co-owners mitigate this risk?
Assuming that at least one of the co-owners resides in or has a place of business in a participating Member State, the co-owners should consider which applicant is to be listed first on the patent application based on whether there is a preference for a particular governing law.
It is also strongly recommended that co-owners be proactive and remove any uncertainty as to what default provisions of national law may apply by putting a co-ownership agreement in place to cover the parties’ key rights and obligations. Issues to consider include the following:
- Have the co-owners agreed on a “common representative” for the patent prosecution? Further, have the co-owners agreed on the scope and authority to be granted to one co-owner to make decisions on behalf of all co-owners during prosecution?
- What should the process be between the parties for deciding whether to request a UP or keep any co-owned European patent application as a “classic” European patent?
- What licensing rights should each co-owner have without requiring the consent of the other co-owners and should any co-owner of a UP be entitled to file statement on a licence of right under Article 8 UPR?
- Should licensees be allowed to bring infringement claims? With any claim made, there is a risk of a counter claim being made for invalidity which would harm the other co-owner’s interest.
- What steps should be followed in order for a co-owner to assign its interest (e.g., consent of the other co-owners, right of first refusal)?
- What law should govern the contractual relationship between the co-owners and how should disputes be resolved?
Please let our Transactions Team know if you need any advice on the co-ownership of UPs and/or assistance preparing a co-ownership agreement.
 Article 8 UPR states that the proprietor of a European patent with unitary effect may file a statement with the EPO to the effect that the proprietor is prepared to allow any person to use the invention as a licensee in return for appropriate consideration and that such a licence is to be treated as a contractual licence.