February 4, 2016

Share and Share Alike? Not so fast.

By Bryan K. Wheelock, Principal

The joint ownership of patents is governed by 35 USC 262:

In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.

What this means, contrary to the likely expectations of the joint owners, is that any co-owner can do whatever he or she pleases with the patent, without accounting to the others.  The carefully crafted percentages that the owners allot themselves make no difference — a 1% owner can do whatever a 99% can do.

The solution to this potential problem is found in the first line of the statute: “in the absence of any agreement to the contrary.”  The peculiar effect of 35 USC 262 can be avoided by simply entering into an agreement, which the parties should consider recording to give public notice to the restrictions it places on the sale or license of patent rights.

What should be in a co-owners agreement depends upon the parties particular circumstances, but they should at least consider a provision governing the prosecution and maintenance of the patent applications and patents:

  • PARTY 1 and PARTY 2 agree to cooperate in the prosecution of any patent applications comprising the PATENT RIGHTS, and maintenance of any patents comprising the PATENT RIGHTS.

a provision regarding sharing the costs:

  • PARTY 1 and PARTY 2 agree to share equally all costs of prosecuting any patent applications comprising the PATENT RIGHTS, and maintaining any patents comprising the PATENT RIGHTS.

a provision restricting the individual exploitation of the patent applications and patents:

  • PARTY 1 and PARTY 2 agree to only exploit or license the PATENT RIGHTS jointly, and each agrees not exploit or license the PATENT RIGHTS without the agreement of, and participation of, the other, and further that any attempt by one of them to do so without the agreement of and participation of the other is void ab initio. PARTY 1 and PARTY 2 agree to share equally the costs of and proceeds from the joint exploitation and licensing of the PATENT RIGHTS.

and because such agreements can result in deadline, some provision addressing what happens if one party is unwilling or unable to pay its share of the costs:

  • In the event that one of the parties is unwilling and unable to pay his share of the costs of prosecuting a particular patent application comprising the PATENT RIGHTS, or maintaining a particular patent comprising the PATENT RIGHTS, and the other party is willing to and able to pay that share, then the party shall, promptly and without further consideration, assign all of its right, title, and interest in and to the particular patent application or particular patent to the other party in sufficient time to prosecute the application or maintain the patent, it being agreed that once a patent application or patent is owned by one person, it is no longer subject to this Agreement.

or if one of the parties wants to transfer its rights:

  • In the event that one of the parties (or their successor in interest) desires to sell all or part of its interest in the PATENT RIGHTS, that party shall first offer to sell that interest to the other party on the same terms and conditions, and hold such offer open for at least ten (10) business days.

Finally, because Federal Circuit has held that all owners are necessary parties, but an owner cannot be compelled to joint a suit, some provision regarding enforcement:

  • The parties agree to cooperate in the enforcement of the patent rights, including being named as a party in any agreed enforcement action, and sharing the costs and proceeds from any agreed enforcement action equally.