Do you have to pay the one dollar/pound consideration?

Today’s special is a lightly-grilled patent assignment. It only costs a dollar.

A recent case in London’s Intellectual Property Enterprise Court (a specialist IP court for smaller disputes) reminds us of some legal points concerning patent assignments.

The case is Dichand v Hydraredox Technologies Holdings Ltd [2018] EWHC 1142, and the judge was HHJ Hacon.

Most of the judgment is about who said what to whom – a typical, messy dispute over facts. Those facts relate to the signature of a patent assignment and whether the signature was procured by fraud. The judge said no – the assignment was legally binding.

But the facts remind us of some larger truths, under English law. Tongue slightly in cheek, IP Draughts summarises them as follows:

  1. If you are a sophisticated investor/businessman and are presented with a one-page patent assignment during dinner at the Four Seasons Hotel, Bangkok, the assignment clearly identifies the patent applications that are being assigned, and you spend a few minutes reading it before signing it, you can’t get out of it later on the grounds that you didn’t understand what you were signing. You didn’t have to sign it there and then, and you could have taken it away and sought advice from your lawyers.
  2. If the assignment provides for payment of one dollar in consideration, you can’t get out of the assignment on the grounds that the dollar was never paid. You have a separate action in debt.

The judgment mentions that other legal arguments were raised, or perhaps flung around in desparation might be more accurate. If you can’t persuade the judge on your fraud point, or on failure of consideration, try unilateral mistake, breach of trust, and unjust enrichment. One of them might stick. Or not, in this case.

On the consideration point, there is a respectable argument that, under English patent law, consideration is not required to make an assignment legally binding. See our earlier blog article here.

But sometimes the assignment document goes further than just a formal assignment, and includes contractual obligations, eg of “further assurances”. In many common law jurisdictions, for a contract to be binding, there must be consideration. English law accepts that consideration can be a nominal amount such as a pound, which may not be the case in some other jurisdictions – see Ken Adams’ article on the position under US laws here. And as HHJ Hacon briefly points out in the case cited above, under English law if it is not paid this is just a debt, and does not invalidate the transaction.

Of course, if it is paid, it may be subject to VAT, and should be recorded in the parties’ accounts – points that are also, often, overlooked. Some people take the view that paying the nominal amount is more trouble than it is worth. Others make a joke of it, and demand their pound.

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Filed under Contract drafting, Intellectual Property

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