Co-ownership of intellectual property rights is increasingly common as technology makes it ever easier for innovators to collaborate across different sectors and geographic locations. While co-ownership may appear the simplest way to apportion IP rights arising from collaborative efforts, it is not without its complexities, particularly given the varying legal approaches to co-owned rights in different jurisdictions.
In this article we look at the rights of co-owners of patents with a focus on the UK, Germany and France, the latter two being the largest patent-filing European states in the EPO. We consider what co-owners need to bear in mind when utilising their IP, and the consequences for prosecuting and benefiting from co-owned patents.
When does co-ownership arise?
Patent co-ownership may involve two or more parties and can arise via grant or subsequent assignment of a patent to joint owners. By default in the UK, the inventor is the person who is entitled to be granted a patent in respect of an invention (although if they devised the invention in the course of their employment, ownership will, in general, pass to their employer). Where the invention is the product of collaboration between two or more institutions or companies, the situation becomes more complex and depends on who contributed to the underlying inventive concept as well as the contractual relationships between inventors and employers. Collaborations between universities and companies also pose challenges – for example, where some of the inventors are visiting academics or students it may not be clear who owns their inventions.
In the cautionary tale of Yeda v Rhone-Poulenc Rorer [2007] UKHL 43 the House of Lords re-affirmed the wording of the Patents Act 1977 in respect of the requirement for an individual to be entitled to be named as an inventor of a patent (and as a result, to have an ownership share in that invention) that, in the absence of any agreement to the contrary, the parties who were responsible for the formulation of the inventive concept will own equal shares in the patent, regardless of the size of their respective contributions. For this reason, particular care should be taken where resources are informally shared between institutions/companies without discussing whether any potential patent applications might arise from the arrangement. A recent Court of Appeal judgment on co-authorship and copyright in Kogan v Martin [2019] EWCA Civ 1645 confirmed that this is the position in respect of jointly owned IP more widely.
What are the benefits of co-ownership?
Co-ownership may be seen as a “fair” way of holding IP developed as a result of a collaboration as it explicitly recognises the contributions of two or more parties to the invention. Depending on the jurisdiction, it may allow co-owners to work and enforce the patent without a need for either to account to the other for any profits made. However, it can be fraught with problems, particularly where due consideration is not given to how decisions are to be made as between the parties.
Rights of co-owners of patents in the UK
Section 36 of the Patents Act 1977 sets out co-owners’ rights. Each co-owner can exploit the patent for their own gain and without any obligation to account to other co-owners for profit generated. However, subject to any agreement to the contrary, the consent of all the co-owners is required to grant a licence under the patent or to assign or mortgage a share. Any such consent must be evidenced in writing if the licence, assignment or mortgage is to be registered on the UK patent register.
For co-owners with differing interests or capabilities there are obvious issues. A co-owner who wishes to use the rights by licensing them to a third party would not be able to do so without the approval of the other co-owner, as confirmed in the Court of Appeal (Hughes v Paxman [2006] EWCA Civ 818). Such a disagreement can lead to a deadlock, where neither party can exploit the patent at all, and where the UKIPO may be called upon to determine whether a licence should be granted to resolve the dispute.
Co-ownership in Germany and France
As intellectual property rights are territorial, further problems may arise where the co-owners are not based in the same jurisdiction. In the UK, Germany and France, a co-owner will generally be able to work the patent itself and bring infringement proceedings alone, providing there is no agreement stating otherwise. In the UK, if a single co-owner chooses to enforce a patent, the co-owner that does not want to sue becomes a “nominal” party and bears no liability for the costs resulting from the litigation unless they acknowledge service and take part in the proceedings.
For institutions/companies who are collaborating with parties in Germany and France, there are additional requirements to consider:
- Germany: Profits must be shared between co-owners in proportion to their shares in the patent (which may not be equal); consent for another co-owner to license must not be unreasonably withheld.
- France: A co-owner must be equitably compensated if the other co-owner works the invention or grants licences.
To avoid a conflict of laws, any contractual agreement between collaborators should include a clause stating the applicable law and jurisdiction as agreed between the parties.
Prosecuting co-owned patent applications at the EPO
The EPO typically avoids matters of national law. Co-applicants who want to prosecute co-owned IP at the EPO are treated with the same procedural status as a single applicant and are required to act in common in proceedings. Because of this, a lot depends on who is deemed to be the “common representative”. In the absence of an agreement, the common representative is generally deemed to be the representative of the first named party in the request for grant.
The EPO may act on requests from the common representative without seeking approval from the other co-applicant (for example, the common representative may make a unilateral request to withdraw a co-owned patent application). Contrast this to the UK where the consent of all co-owners is needed to withdraw or amend an application. Although the EPO is unlikely to act if it becomes aware of a dispute between the co-owners, this possibility demonstrates the need for co-owners to agree between themselves how a co-owned patent application will be prosecuted.
Which national law applies to a co-owned UP?
While the future of the Unitary Patent Court (“UPC”) is uncertain and progress towards its implementation has been slow, Unitary Patents (“UPs”) may be attractive to patentees if/when they are introduced.
The national law that applies to a UP in its capacity as an object of property (i.e. as an asset that can be bought, sold or used as security) is determined by the applicant’s place of business (defaulting to German law if the applicant does not have a place of business in one of the UP participating member states). This means that if the applicant is based in France, the resulting UP will be governed by French law.
If a UP is co-owned, the place of business of the first named applicant will determine the applicable law for the UP, only moving on to the other co-applicants if the first named applicant does not have a place of business in participating member state. For example, if a UP is co-owned by a French company and a German company (and assuming both of those countries are participating member states), the UP will be governed by French law if the French co-owner was listed first on the application, or German law if the German co-owner was listed first on the application. Once set, the applicable law will continue to apply to that UP throughout its life. This choice of law could make a significant difference when it comes to the default rights of co-owners.
Conclusions
It is advisable for innovators to establish agreements concerning IP ownership and dispute resolution at the very outset of a collaboration, even if it is not certain that any patent applications are likely to be filed. This provides a solid framework for the future management and exploitation of the IP and will help mitigate the risk of issues further down the line. Similarly, the relationship between co-owners and their representatives in the EPO should be clarified at the start of the project. As an alternative to co-ownership, collaborators might consider a licensing agreement which reflects the contributions of the parties to the development of the invention and sets out clearly the process for prosecution and maintenance of any resulting patents and the rights of a licensee to grant sub-licences.
We routinely advise clients on all aspects of intellectual property ownership, including existing and potential collaborations/co-ownership. We draw on our expertise across IP transactions, prosecution and dispute resolution to create pragmatic, thoughtful solutions to potentially thorny issues.
