Securing Ownership Rights in Patents in the Real World

“It isn’t easy being a brilliant inventor, always alone. Always misunderstood. Easy to turn bitter, make horrible mistakes. People are more difficult to work with than machines. And when you break a person, he can’t be fixed.”

Hephaestus

~ Rick Riordan, The Battle of the Labyrinth

In the modern age, we cling to mythology – including the mythology of invention. In our minds eye, we see the inventor in the basement struggling by the sweat of the brow and candlelight until the eureka moment when the light bulb goes on over their head.

The basement inventor is increasingly rare, although I am old enough (and lucky enough) to know several. Invention in the “real world” is often a messy, team effort of multiple inventors, employers, contracts, research agreements, and funding agreements. As the complexity of invention multiplies, so do opportunities for unintentionally losing or jeopardizing intellectual property rights.

Whether you are creating or valuing IP, keep the following in mind as you look beyond the myth of invention to how the story unfolds in the real world.

Employment Agreements

In the U.S., inventors are the default owners of patent rights. If a company employs an inventor, they need to secure ownership of patent rights through an employment or consulting agreement. However, securing ownership is not enough. Cooperative inventors may be needed after a patent application is filed to provide technical input, and assist in reviewing and responding to office actions from the patent office. This is true even if the inventor leaves the company.

Thus, it is important to have a provision in the employment or consulting agreement requiring that the inventor continue to cooperate with patent prosecution after the inventor is no longer employed or under contract to the company.

Typically, the company will agree to cover reasonable expenses associated with providing this assistance. Although, there are mechanisms to proceed with patent prosecution when inventors are not cooperative, it is far easier to obtain an agreement up front maintain a cordial relationship with inventors during and after their employment than to proceed without their assistance. Maintaining cordial relationships with inventors is not only good business advice, it could be very important to obtaining a valuable patent family.

Material Transfer and R&D Agreements

In the world of academia, sharing materials and results with others is part of the culture. Open collaboration has many benefits including avoiding “recreating the wheel” or going down fruitless avenues of research. However, there are pitfalls to avoid if you want to preserve patent rights.

For example, it is critical that any transfer of materials be governed by a material transfer agreement or MTA. Important issues governed by an MTA include the scope of the agreement (i.e., what is the recipient permitted to do with the materials?) and whether one or both parties will own inventions that may arise under the agreement.

The scope of the “Research Plan” of the MTA is often overlooked, at the peril of the provider. Often, recipients of materials want to keep their options open, so they will suggest a research plan along the lines of “Conduct in vitro studies.” However, the provider may want restrict the ability of the recipient to modify the materials and avoid a situation where modified materials become the property of the recipient.

R&D Agreements raise similar issues. The parties need to decide how ownership will be allocated, how patent prosecution and enforcement will be managed, what happens in the event one of the parties declares bankruptcy, and how disputes will be managed. The Research Plan of an R&D Agreement is usually more extensive and should spell out what each party will do. The Research Plan is often used to determine whether a party is considered an inventor of patent rights that arise under the R&D Agreement. For example, if the first party is merely following the direction of the second party, according to the Research Plan, the second party could end up being the sole owner of the patent rights invented by their employees.

To avoid “mission creep,” research plans should be as specific as possible, and the agreement should provide a relatively simple way for the parties to suggest and approve amendments to the research plan.

Funding Agreements

Much of scientific work at Universities is supported by funding, often from the U.S. Government, in the form of grants. Grants are typically highly competitive, and serve as the lifeblood of biomedical research in the U.S.A. Funding may also be provided through foundations or companies to support research for particular diseases. Sponsored research by companies is another mechanism for private companies to leverage the expertise and intellectual property of Government and University scientists.

However, outside funding may come with strings attached. U.S. Government funding agreement, for example, require reporting inventions resulting from the research and a mandatory “grant back” of a paid-up, worldwide, perpetual, non-exclusive license for “Government purposes.”

For example, if a company develops software with Government funding and then they wish to sell the software back to the Government, they may be surprised to discover that the Government already has a license to the software.

Likewise, a University scientist who develops a diagnostic test under a U.S. Government grant may be surprised to find a competing laboratory using their test under a contract with the Federal Government.

Conclusion

There is often more than meets the eye when it comes to ownership of inventions. The benefits of collaboration far outweigh the disadvantages. However, you can take steps to ensure a smooth collaboration by keeping the following principles in mind:

(1) Use employment and consulting agreements that vest rights in the company/institution;

(2) Use material transfer and R&D agreements that secures ownership of rights before, not after they arise;

(3) Pay careful attention to the scope of agreements to avoid “mission creep” and unintentionally vesting ownership of derivatives and downstream rights to recipients and collaborators;

(4) Consider sources of funding and any associated rights owned by the Government or third parties when evaluating IP rights.