Can you assign IP that doesn’t yet exist?

It’s that time of the year again, when IP Draughts starts to prepare for the 5-day course that he runs, with up to 30 volunteers, at the UCL Faculty of Laws: Intellectual Property Transactions: Law and Practice. If you haven’t yet booked but would like to, please complete the booking form at the end of the brochure, linked above.

This year, we plan to introduce a few new sessions, and retire some others, as part of our continual improvement plan.

IP Draughts is currently working on a new session, titled “What does this IP drafting mean, and what is its legal effect?” In it he explores the differences in meaning and legal effect between:

1. agreeing first ownership of future IP;
2. agreeing to assign future IP to one of the parties; and
3. assigning (now) future IP.

These issues might arise, for example, in the IP terms of a collaborative research agreement, or in an employment contract.

You might think this topic is rather theoretical, but the purpose of including it is to get the students to think carefully when engaged in the practical subject of drafting IP ownership provisions.

Declarations of ownership

Consider, for example, the following clause, taken from one of the standard, UK Lambert research agreements:

The Collaborator will own the Intellectual Property Rights in the Results, and may take such steps as it may decide from time to time, at its expense, to register and maintain any protection for the Intellectual Property Rights in the Results, including filing and prosecuting patent applications for any of the Results…

What is the legal effect of this clause? Will the (future) IPR automatically belong to the Collaborator without further formality or documentation?

In IP Draughts’ view, the answer to this question could be yes in the UK, but is likely to be no in the USA. Let us make the following factual assumptions:

1. An employee of the other party to the contract, defined in the Lambert agreements as the Institution, makes an invention when doing work under the contract.
2. A patent application is to be filed in respect of that invention.
3. As between the employee and the Institution, the employer owns the invention and patent application under section 39 of the Patents Act 1977, as it was an invention made in the course of specially assigned duties of the employee.

Relying on declaration of ownership in UK

Can the Collaborator file the patent application and be the first owner of the subsequent patent? In the UK the answer is yes. Under section 7 of the Patents Act 1977:

(1) Any person may make an application for a patent either alone or jointly with another.

(2) A patent for an invention may be granted—

(a) primarily to the inventor or joint inventors;

(b) in preference to the foregoing, to any person or persons who, …by virtue of an enforceable term of any agreement entered into with the inventor before the making of the invention, was or were at the time of the making of the invention entitled to the whole of the property in it…

(c) in any event, to the successor or successors in title of any person or persons mentioned in paragraph (a) or (b) …

Thus, someone other than the inventor can both apply for a UK patent and be “entitled to the whole of the property” in a UK patent and therefore be granted the patent as its first owner.

This entitlement could, in IP Draughts’ view, arise without the need for any separate, written assignment from the inventor or the Institution, and simply by virtue of the employment duties of the inventor, and the above clause in the research contract between the Institution and the Collaborator.

Need for assignment in the USA

This probably doesn’t work in the USA, in view of the different language of the patent legislation. Traditionally, the inventor was required to make a patent application in the USA. Under amendments to 35 USC 118 that were made by the America Invents Act:

A person to whom the inventor has assigned or is under an obligation to assign the invention may make an application for patent.

This wording refers to “assigning” the invention, rather than use the UK concept of the grant of a patent to someone who is entitled to it by virtue of an agreement.

Assignment language for future inventions

In the UK, in IP Draughts’ view, there doesn’t need to be an assignment (a formal transfer of title to property) in order for this entitlement to arise. Nevertheless, a prudent Collaborator might well want to have some “belt and braces” wording in the contract such as an obligation on the Institution to execute further assignment documents and to cause its employee to do so, and/or include assignment language in the contract.

What language should you use in the contract to assign future IP? Should you say “hereby assigns”? Will the law recognise a present assignment of IP that doesn’t (yet) exist? If you say “agrees to assign”, does this imply that a further assignment needs to be executed once the IP comes into existence?

UK copyright law recognises the possibility of assigning future IP. Section 91 of the Copyright, Designs and Patents Act 1988 provides:

Where by an agreement made in relation to future copyright, and signed by or on behalf of the prospective owner of the copyright, the prospective owner purports to assign the future copyright (wholly or partially) to another person, then if, on the copyright coming into existence, the assignee or another person claiming under him would be entitled as against all other persons to require the copyright to be vested in him, the copyright shall vest in the assignee or his successor in title by virtue of this subsection.

UK patent law has no equivalent provision, but arguably section 7 of the Patents Act 1977, quoted above, achieves a similar result, at least when the parties are at the stage of obtaining a patent. At least this was the view of Arnold J in the case of KCI v Smith & Nephew [2010] EWHC 1487. In that case he was concerned with an employment contract that included the following language:

I hereby assign and agree to assign to the Company all right, title and interest in all confidential information, inventions and improvements conceived or developed by me…

Referring to section 7, Arnold J said (obiter): “In my view, this [section] must mean that it is possible to assign the legal title (and not just the beneficial interest) in an invention before it is made”.

In IP Draughts’ view, the phrase “hereby assign and agree to assign” is a bit of a fudge, in that it is not entirely clear whether, for any particular item of IP, it is being “hereby” assigned or is merely the subject of an agreement to assign that must, at a later date, be perfected by a further assignment document. Nevertheless, given the complexity of the legal issues involved, and in the interests of brevity, IP Draughts is inclined to go along with the fudge.

In taking this approach, he draws some comfort from the US Supreme Court decision of Board of Trustees of the Leland Stanford Junior University v Roche Molecular Systems Inc, et al. (number 09-1159) June 6, 2011. In that case, an inventor had signed two documents that dealt with the question of ownership of an invention, one with his employer Stanford University, and the other with a predecessor of Roche, Cetus Corporation. Even though the Cetus document was executed at a later date than the Stanford document, the Supreme Court held that the later document prevailed. As Breyer J (dissenting) put it:

In the earlier agreement—that between Dr. Holodniy and Stanford University—Dr. Holodniy said, “I agree to assign . . . to Stanford . . . that right, title and interest in and to . . . such inventions as required by Contracts and Grants.” In the later agreement—that between Dr. Holodniy and the private research firm Cetus—Dr. Holodniy said, “I will assign and do hereby assign to Cetus, my right, title, and interest in” here relevant “ideas” and “inventions.”

The Lambert agreement from which the above-quoted clause was taken (Lambert 5) also includes the following clause, which takes a more rigorous and lengthy approach to this issue:

To the extent that any Intellectual Property Rights in the Results are capable of prospective assignment, the Institution now assigns those Intellectual Property Rights to the Collaborator; and to the extent any Intellectual Property Rights in the Results cannot prospectively be assigned, the Institution will assign those Intellectual Property Rights to the Collaborator as and when they are created, at the request of the Collaborator.

Conclusions

Contracting parties find it natural to state who will own future IP. A prudent drafter will go on to provide for assignment of IP. There are some technical issues with assigning future IP, which the drafter may wish to address in a number of ways, including having a “further assurances” clause to require further documents to be executed where necessary under national IP laws.