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Patent Ownership Basics

Ownership of a patent is important because the owner of the patent enjoys all of the rights, title and interest granted by the patent.  Normally patent rights are held by the inventors until those rights are assigned in a written Patent Assignment agreement, even if the employee created the invention within the scope of employment (with a few exceptions such as the "hired-to-invent doctrine").  It is important to establish ownership of a patent before filing a patent application to avoid future problems.

The owner of a patent can do the following with their patent rights:

  • License the patent rights to one or more third-parties to collect royalties;
  • Sell the patent rights;
  • Sue a patent infringer; or
  • Manufacture, offer for sale, sell or use a product covered by the patent without infringing the patent.

If an inventor is not the owner of the patent, the inventor will have none of these rights.
 

What Law Determines Patent Ownership?

Even though a United States patent is a federal legal right, ownership of the patent is determined under the relevant state law.  However, changes in patent ownership are recorded with the U.S. Patent & Trademark Office to place the public on notice of ownership interests in the patent.
 

Patent Inventorship vs. Patent Ownership

Many people get confused between patent inventorship and patent ownership.  An individual can be an inventor but not an owner of the patent rights (e.g. where they assigned their patent rights to a third-party).  In addition, an individual or company may be an owner of the patent rights but not an inventor where they were assigned the patent rights by the inventor.  It should be noted that a company can never be an inventor.
 

Joint Inventorship Usually Means Joint Ownership

If two or more inventors are named on a patent application, the patent rights most likely are jointly owned by the joint inventors unless a written Patent Assignment agreement has been executed by the joint inventors assigning their ownership rights to another individual or company.  If the joint inventors are part of unrelated entities (e.g. a consultant working for a company), the patent rights will be jointly owned unless there is a written agreement indicating otherwise.
 

Problems with Joint Ownership

Patent ownership by more than one individual or entity is typically not recommended because of the following potential problems:

  • Co-Owner Independently Licenses.  A co-owner could license the patent rights to a third-party without paying any of the other co-owners any of the monies received.
     
  • Co-Owner Starts Competing Company.  A co-owner could form a competing company and sell a competing product without infringing upon the patent because they are a co-owner of the patent.
     
  • All Co-Owners Must Sue Infringer.  If a patent is jointly owned by two or more individuals/entities, then a patent infringement lawsuit against an infringer can only be filed if all of the co-owners jointly file the infringement lawsuit.
     

Solutions to Joint Inventorship

Below are some potential solutions to joint inventorship to avoid the above indicated problems of co-ownership:

  • Form a Company.  The most common solution to resolving the ownership problems with joint inventorship is to form a new company owned by the joint inventors (and possibly any investors) and then have a Patent Assignment signed by the joint inventors assigning their ownership rights in the patent to the company.  You can do this after filing a patent application, but it is recommended that you form your company before filing the patent application if possible to efficiently handle the patent application filing.  Forming a company has the following benefits:
     
    • Patent Infringement.  The company will then be the sole owner of the patent resulting in the ability to bring a patent infringement lawsuit without including any other co-owners. 
       
    • Licensing Royalties.  The company will also be able to license the patent rights to a third-party and all of the revenues received will be distributed to the owners of the company (i.e. joint inventors) pursuant to the rules set by the company.
       
    • Problems.  If there are problems in the future between the owners of the company, the rules of the company typically have standard buy out provisions to compensate a co-owner that decides to leave (or that is forced out by the other co-owner).
       
  • Contract Between Joint Inventors.  If forming a company is not desirable, another possible solution is to have a contract signed by all of the joint inventors indicating their respective rights.  For example, the parties could agree that none of the co-owners are able to license the patent rights.  The contract could also specify that if a license by one of the joint inventors occurs that the other joint inventors would receive a percentage of the royalties paid under the license.  Please keep in mind that this is not recommended because of the difficulties associated with drafting such an agreement.  If you decide to use a contract instead of a company, you should retain a qualified corporate attorney to assist you in the preparation of the contract to cover your future relationship.
     
  • Consulting Agreements.  If you are a company hiring an independent contractor to consult on a new project and the consultant could potentially develop inventive subject matter resulting in them becoming a joint inventor, a provision should be added to the consulting agreement identifying who will be the owner of the inventive subject matter developed by the consultant and the company.  It is typical to have a provision in the consulting agreement that specifies that the company hiring the consultant will be the sole owner of the patent rights regardless of who invents the same and that the consultant agrees to execute a patent assignment agreement officially transferring any patent rights they jointly invented.
     

Can a Patent Assignment be Filed After a Patent Application is Filed?

A Patent Assignment agreement can be executed and recorded with the USPTO any time after a patent application is filed including after a patent is granted.  Hence, you can file a patent application in the name of the individual joint inventors initially, form a company a few months later and then have the joint inventors assign their ownership rights to the company then.  However, it is generally recommended to have a Patent Assignment executed simultaneously with the patent application to avoid issues where one of the co-inventors decides later to not assign their ownership rights.

 

Michael Neustel is the founder of the National Inventor Fraud Center, Inc.