Effects of Co-Ownership (Joint Possession) of US Patents
Q. What are the repercussions of co-ownership of U.S. patents?
A. Co-ownership has some negatives, which may perhaps be modified by effectively drafted agreements in between the co-house owners.
Company A and Company B are co-homeowners of a U.S. patent. One of the two inventors assigned his legal rights to Corporation B, although the other inventor afterwards assigned his rights to Corporation A. Both equally businesses disputed this latter assignment’s validity. The dispute led to equally companies executing many agreements pertaining to co-possession of the patent. One particular of the agreements tackled the challenge of 3rd-get together infringement:
On discovery by any social gathering of any infringement of the patent, these kinds of party shall notify the other diligently: if the parties concur to do so, acceptable legal action in link therewith shall be undertaken by the parties jointly. In the function that these kinds of action is taken, just about every social gathering shall add equally to the costs of any these kinds of motion. If any damages for infringement are awarded by a ultimate decree or judgment, then after deducting all expenditures arising from the litigation and reimbursing each occasion for its contributions, the remainder shall be divided similarly among the the contributing functions. If 1 get together shall not wish to sign up for or proceed in any this kind of motion, but the other bash shall desire to institute or continue this sort of motion, said just one celebration shall render all realistic support to claimed other get together in link therewith at said other party’s expenditure and mentioned other social gathering shall be entitled to retain all recoveries attained with regard to these motion.
Later on, Corporation Z approached B for a license to the patent. All-around the exact time, Company A approached B for an agreement to have all legal rights transferred to Corporation A. B did not notify both get together of their discussions with the other social gathering. Finally, B resolved to not offer the patent legal rights to Corporation A, but to negotiate a license to Corporation Z.
Before a license agreement was completed, Company Z commenced to market a product lined by the patent, before genuine sales. Soon after discovering of this, Corporation A wrote B and proposed suing Corporation Z for patent infringement, after Z commenced to perform sales. Later on, Company A attorneys referred to as B to seek out assistance in the impending lawsuit. The human being at B explained to the Corporation A attorneys that B was negotiating a license with Z. That very same day, Corporation A filed a match against Z. Nonetheless on the identical working day, Corporation A contacted B and invoked its legal rights below the quoted paragraph.
Two weeks later, B and Z signed a non-special license agreement. The agreement included a license to all people who bought or utilised the product presented by Z or licensed third functions.
In solution to Corporation A’s lawsuit, Z asserted a entire defense because of to the license agreement. The district court docket dominated in a summary judgment movement for Z.
Every co-operator of a U.S. patent is ordinarily absolutely free to exploit the patented invention regardless of the needs of any other co-operator. Just about every co-operator may well license to other people, without the need of a further co-owner’s consent. These standard concepts utilize unless the get-togethers have an agreement to the opposite. The Federal Circuit examined the quoted paragraph from the Company A-Company B agreement. Even with the paragraph’s provision for unilateral suits against infringers, B was not prohibited from granting licenses. Also, the paragraph’s requirement that Corporation B offer Corporation A with acceptable aid throughout the litigation did not prohibit Corporation B from granting Z a license. B’s license to Z did not preclude Company A from suing Z for infringement happening ahead of acquiring a license from B.
Without the need of an agreement to the contrary, a co-proprietor of a patent has the appropriate to prevent a lawsuit and may well not pressure the other co-owner to seem as an involuntary plaintiff below Rule 19 of the Federal Rules of Civil Method. If a co-owner waives his appropriate to stop a lawsuit (e.g. an agreement supplying unilateral lawsuit rights), then the other co-proprietor could power the 1st co-proprietor to show up as an involuntary plaintiff. Relating to “sensible assistance” this term implies providing litigation assistance, like copies of documents and witness testimony, not to issues these types of as the correct to license.
A single co-proprietor can cease an additional co-owner from suing infringers by refusing to voluntarily be a part of in the lawsuit. If the co-proprietor waived his appropriate to refuse to be a part of a accommodate, then the other co-entrepreneurs may force him to join a fit.
© Frederic M. Douglas, December 20, 2001. All Legal rights Reserved