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?
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:
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.
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!
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