Co-ownership of IP: complex and obscure

A reader has contacted IP Draughts from New Zealand, asking some questions about co-ownership of IP.

[Idle thought: why do we hear so little about (old) Zeeland – apparently the country is named after the Dutch province, rather than the Danish island(?) (Old) South Wales is familar to IP Draughts – the UK Intellectual Property Office is based there. (Old) York is a beautiful city in the north of England. IP Draughts grew up in the old, rather than the Nova, Scotia (Scotland).]

Anyway, enough of that. Lawyers and patent attorneys are often, rightly, cautious about agreeing that the output of collaborations will be jointly owned. That subject has been discussed before on this blog.

Where IP is jointly owned, what exactly is the nature of each owner’s legal interest in the IP? Most readers will be aware that the rules on what you can do with joint IP differ acccording to jurisdiction – the USA being an outlier and allowing each owner to license or assign its interest without the consent of the other owner(s), whereas most jurisdictions require such consent. Those rules tend to be set out in the relevant IP legislation.

This article is about something more fundamental. UK patent law says that each co-owner has an “equal, undivided share” in the patent. What, exactly, does this mean, and what are its implications?

Undivided share

It is necessary to go beyond the statutory provisions of patent law to understand this legal concept, and delve into the general law of property. IP Draughts doesn’t claim to be an expert on this subject, which seems to have acquired centuries of patina, grime, half-baked legal principles and obscure exceptions. Land law can be learnt by rote, but appears to have little logic to it. He does briefly consider the effect of real property law on IP transactions in chapter 9 of his book, Technology Transfer (4th edition, Bloomsbury, 2020).

The phrase undivided interest seems to mean that each co-owner has rights to the entire property. There is no geographical or other division of the property. In the context of patents, there is no split of field, territory etc., and all the claims “belong” to all the co-owners, irrespective of who might be considered the primary inventor in respect of each claim.

A related question is whether the multiple owners of the IP are co-owners or joint owners. Readers in the UK may be aware that when spouses buy a house together, they typically declare whether they are to be tenants in common (co-owners) or joint tenants (joint owners). If they elect for joint tenancy, on the death of one of them the house automatically becomes the sole property of the other. If they elect for tenancy in common, when one dies, their share passes under their will.

Another name for “tenancy” in this context is beneficial ownership. English law distinguishes between legal ownership and beneficial ownership.

The default for collective IP ownership is likely to be beneficial co-ownership, though IP Draughts prefers to state this explicitly (e.g. in co-ownership agreements where the parties agree on how the IP is to be managed and commercialised). It is noteworthy that the heading to section 36 of the Patents Act 1977 is “co-ownership”. Co-ownership also seems to be implied by the fact that the collective owners can agree different (unequal) shares of the IP, as to which, see below.

These might be considered to be clues to the nature of collective ownership of IP. It would be much better if these and other aspects of IP ownership were spelt out explicitly in the IP legislation. IP Draughts would love to be in charge of a project to modernise the ownership and transactional aspects of IP legislation.

As a UK government website notes:

Joint tenants

As joint tenants (sometimes called ‘beneficial joint tenants’):

  • you have equal rights to the whole property
  • the property automatically goes to the other owners if you die
  • you cannot pass on your ownership of the property in your will

Tenants in common

As tenants in common:

  • you can own different shares of the property
  • the property does not automatically go to the other owners if you die
  • you can pass on your share of the property in your will

The following notes from a website for law students echo this point:

Where there is a tenancy in common, each co-owner will own a share of the property eg 50% or 80%. The share is undivided meaning that they are entitled to occupy the whole of the property even if their share is small. There is still unity of possession and no physical division of the land. The relevance of the shareholding is evident on sale, death or distribution of income from the property.

Equal shares

Separate from the question of undivided shares is the question of equal shares. Section 36(1) of the UK Patents Act 1977 provides:

Where a patent is granted to two or more persons, each of them shall, subject to any agreement to the contrary, be entitled to an equal undivided share in the patent.

Therefore, the owners can agree that they will not have “equal” shares but will have some other split, e.g. 80:20. As noted above, this “bites” on the question of revenue-sharing, e.g. on sale of the property.

Having reflected on this subject for some years, IP Draughts has come to the provisional conclusion that the respective shares of ownership are a bit of a red herring under UK IP laws, but may be more important under other countries’ laws.

Under UK IP laws, as IP Draughts understands the position:

  • each co-owner can use the IP (e.g. “work the invention”) themself, without compensating the other co-owner(s)
  • but if they want to license or assign the IP, they must get the consent of the other co-owner(s)

The other co-owner(s) can impose conditions on giving consent, e.g. as to revenue share.

Therefore, there seems to be little for a default ownership share to bite on. Perhaps it comes up more in litigation, where a party has done something outside their rights as co-owner?

Under some countries’ laws (e.g. in some civil-law jurisdictions), IP Draughts understands that any use of co-owned IP, including internal use, may be subject to obligations to account to the other co-owner(s), e.g. by sharing revenues. In such circumstances, a percentage ownership share may more frequently have legal significance.

Having said all this, IP Draughts is very conscious that he is dealing with an obscure subject that seems to attract very little case law, at least in the English courts. If you know better, IP Draughts would be delighted to hear from you!

 

 

6 Comments

Filed under Intellectual Property

6 responses to “Co-ownership of IP: complex and obscure

  1. Like “let’s enter a joint venture”, or have a partnership arrangement, joint ownership (actually usually co-ownership) is usually proposed because parties think it is a substitute for agreeing what their mutual arrangements are, when actually precisely the reverse is the case – they need to spell out what it means to avoid subsequent arguments. Incidentally, in case IP Draughts brief comment might be misconstrued, more confusingly, English law differs on the co-owner’s rights in patents and, for example, copyright. For that latter all co-owners must consent to any otherwise infringing act.

  2. vrkoven

    The justification for the US’s “outlier” status is the public policy, embedded in the constitutional IP provisions, favoring the broad dissemination of knowledge in exchange for the temporal monopoly (which was a contentious issue in the drafting of the constitution in 1787). The default provision (which can of course be modified by contract, which is something I always advise clients to do) is that co-inventors or authors are able to deal with their undivided interests independently (obviously, they can’t disenfranchise the other party by issuing an exclusive license or assigning the IP in total). That way it’s much easier, as Matt Ridley puts it, to turn an invention into an innovation. At the same time, the US default rule requires each co-owner to account to the other for their share of the profits.

    If I understand the UK default position, in a situation where one co-owner intends to practice the invention, while the other doesn’t, the non-practicing party can’t derive revenue from licensing without the other’s consent, while the practicing one has every incentive not to agree to allow licensing, while at the same time having no obligation to account for the profits from practicing it.

    On the other hand, I have had issues come up between the authors of the music and the libretto of an opera–the concern there is nearly the opposite: each party wants the liberty to exploit their particular contribution without accounting but wants controls and accounting for dealing in the joint effort, so I clearly specified in the contract what rights each had to particular uses, and modifying the accounting requirements accordingly.

    • Thanks, Vance. I hadn’t before considered the obligation of a US co-owner to account to the other for a share of profits. I wonder how often it gets overlooked. In research collaboration agreements I sometimes state that neither party may use the Joint IP until the parties have entered into a further agreement on commercialisation.

  3. Agreed. Transferring your interests to a company, and presumably getting shares in the company, has the advantage that ownership rights become a question of company law rather than patent law. Company law is much more mainstream than patent law.

  4. I have never felt comfortable when multiple inventors decided that they will all “own” a patented invention together, mainly because of the many unanswered questions that this raises. Therefore, I prefer that either the patent is owned (i.e. the Assignee) by a company however small and/or that if there are multiple inventors they enter into a contract specifying who will have what rights from the very beginning.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.