Patent Assignment

A patent assignment and a patent license are both ways to convey patent rights, but they are fundamentally different: ASSIGNMENT — TRANSFER OF OWNERSHIP: an assignment conveys ALL RIGHT, TITLE, AND INTEREST in a patent or patent application from the assignor (seller/transferor) to the assignee (buyer/transferee); after a complete assignment, the assignor has NO remaining ownership interest; the assignee becomes the new patent OWNER with the right to: exclude others from practicing the patent; sue for infringement (past and future); license the patent to others; assign the patent to a third party; PARTIAL ASSIGNMENT: a partial assignment conveys less than 100% ownership; common in joint ventures, where one party transfers a 50% interest to another; co-owners of a patent have equal rights to practice the patent independently (35 U.S.C. § 262) but cannot grant exclusive licenses without the other co-owner's consent; all co-owners must JOIN IN A SUIT for patent infringement; LICENSE — PERMISSION TO PRACTICE: a license grants permission to practice the patent but does NOT transfer ownership; the licensor remains the patent owner; EXCLUSIVE LICENSE: grants one party (the exclusive licensee) the exclusive right to practice the patent; the patent owner cannot grant another license to a third party in the same field and territory; STANDING TO SUE: an exclusive licensee MAY have standing to sue for infringement if the license conveys all substantial rights (including the right to sue); this requires analysis of what 'substantial rights' have been transferred; NON-EXCLUSIVE LICENSE: grants permission to practice without exclusivity; the patent owner can grant the same license to many parties; non-exclusive licensees generally CANNOT sue for infringement without joining the patent owner; WHY THE DISTINCTION MATTERS: ACCOUNTING AND TAXES: assignment = sale proceeds (capital gain or ordinary income depending on circumstances); license = royalty income; CO-OWNERSHIP: assignment creates co-ownership issues (all must join in suits); exclusive license with right to sue avoids co-ownership complications while still giving enforcement rights.

A patent assignment must meet specific legal requirements to be effective and enforceable: WRITING REQUIREMENT (35 U.S.C. § 261): an assignment of a patent or patent application MUST be in writing; oral assignments of patents are not enforceable; this is a statutory requirement; WHAT THE WRITING MUST CONTAIN: identification of the assignor (the current owner); identification of the assignee (the new owner); a description of the patent or application being assigned (patent number or application serial number); a clear expression of intent to transfer ALL right, title, and interest (or the specific partial interest being conveyed); the assignor's SIGNATURE; consideration (recited consideration is typically sufficient — e.g., 'for valuable consideration, the receipt of which is hereby acknowledged'); NOTARIZATION: not required under US patent law, but recommended for international use and to facilitate registration in other countries; COMPLETENESS OF THE ASSIGNMENT: the assignment should clearly identify whether it covers: the specific patent(s) and/or application(s) (by number); any and all continuations, continuations-in-part, divisionals, and foreign counterparts; the right to sue for past infringement (should be explicitly stated if intended); improvements and future patents based on the assigned technology (if intended); ASSIGNMENT OF PATENT APPLICATION (BEFORE ISSUANCE): patent applications can be assigned before the patent issues; the assignment must identify the application by serial number or the technology described; PROSPECTIVE ASSIGNMENT: an assignment can convey patents that have not yet been applied for (prospective assignment); this is used in employment agreements: 'employee hereby assigns to employer all inventions made during employment relating to the company's business'; prospective assignments ARE enforceable under Filmtec Corp. v. Allied-Signal (Fed. Cir. 1991) — the assignment automatically takes effect when the invention comes into existence; SECURITY INTERESTS IN PATENTS: patents can be used as collateral; a security interest (lien) on a patent should be recorded at both the USPTO (for patent law purposes) and filed as a UCC-1 financing statement at the state level (for Article 9 purposes); the interplay between USPTO recording and UCC filing has been the subject of litigation (In re Cybernetic Servs.).

Recording a patent assignment at the USPTO is legally significant and practically important: STATUTORY BASIS (35 U.S.C. § 261): 'An assignment, grant, or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage'; EFFECT OF RECORDING: recording provides CONSTRUCTIVE NOTICE to the world that the assignment has occurred; anyone who purchases the patent AFTER the assignment is recorded is deemed to have notice of the prior assignment; EFFECT OF FAILURE TO RECORD WITHIN 3 MONTHS: if an assignment is NOT recorded within 3 months of its execution: a SUBSEQUENT BONA FIDE PURCHASER who pays value WITHOUT actual notice of the prior assignment takes the patent FREE of the prior assignment; the first assignee (who failed to record) LOSES the patent to the subsequent purchaser; this is the same concept as a 'race-notice' recording act in real property law; PRACTICAL IMPLICATION: ALWAYS record assignments at the USPTO promptly — within 3 months; in patent acquisitions, always SEARCH the USPTO assignment database before closing to identify recorded liens or prior assignments; HOW TO RECORD: submit the assignment document (in electronic or paper form) to the USPTO Assignment Division; include a cover sheet (Form PTO/SB/41) identifying: the serial number or patent number; the assignor and assignee names and addresses; the nature of the conveyance (assignment; license; security interest); the USPTO charges a recording fee ($40 per patent/application electronically); RECORDING DOES NOT AFFECT VALIDITY: recording confirms the transfer but does NOT guarantee the validity of the assignment or the underlying patent; it does not confirm that the assignor had valid title to transfer; CHAIN OF TITLE SEARCH: before any patent litigation or major acquisition, always conduct a chain of title search in the USPTO assignment database; look for: all recorded assignments from each inventor; continuations and related cases; recorded security interests (liens).

Standing to sue is one of the most practically significant aspects of patent assignment law: CONSTITUTIONAL STANDING: Article III of the Constitution requires that the plaintiff in a federal lawsuit have STANDING: injury-in-fact; traceability to defendant's conduct; redressability; in patent cases, standing requires that the plaintiff is the patent owner or an exclusive licensee with sufficient rights; PATENT OWNER STANDING: the recorded owner of a patent always has standing to sue for infringement; ALL CO-OWNERS MUST JOIN: if a patent has multiple co-owners (e.g., two companies each own 50%), ALL co-owners must be named as plaintiffs in an infringement suit; a co-owner who refuses to join cannot be forced to join; this means a single dissenting co-owner can effectively BLOCK infringement litigation; this is a critical issue in joint ventures and co-invention situations; EXCLUSIVE LICENSEE STANDING: an exclusive licensee has standing to sue IF the license conveys all 'substantial rights' to the patent (Propat Int'l Corp. v. Rpost); key factors courts look at: right to sue (must be exclusive licensee's right; not just licensor's consent); right to sublicense; field of use coverage; duration (full remaining term or limited?); right to enforce against infringers without licensor joining; if an exclusive license conveys all substantial rights, the licensee has 'independent standing' (can sue alone); if it does not, the exclusive licensee must join the patent owner in any suit; NON-EXCLUSIVE LICENSEE: a non-exclusive licensee CANNOT sue for infringement alone; a non-exclusive licensee must get the patent owner to sue (or to consent to joining); BROKEN CHAIN OF TITLE: if the chain of title from inventor to current plaintiff has a gap (e.g., one assignment was never recorded; one link in the chain was forged or improperly executed), the plaintiff may lack standing; DISMISSAL FOR LACK OF STANDING: if the court finds the plaintiff lacks standing, the case is DISMISSED WITHOUT PREJUDICE; but the plaintiff may be unable to refile if the statute of limitations has run; always verify chain of title BEFORE filing suit; CURE OF STANDING DEFECTS: in some cases, a standing defect can be cured by obtaining a nunc pro tunc assignment (retroactive assignment) from the party who should have assigned earlier; courts have disagreed on whether nunc pro tunc assignments cure standing defects (compare WiAV Networks v. 3Com Corp.).

Employee-inventor assignment obligations are a critical issue for startups and technology companies: STATUTORY FRAMEWORK: employees do not automatically lose patent rights by virtue of their employment; assignment obligations depend on: (1) express assignment agreements; (2) the 'employed to invent' doctrine; (3) the 'shop right' doctrine; EXPRESS ASSIGNMENT AGREEMENTS: most technology companies require employees to sign IP assignment agreements at the time of hiring; these agreements assign to the employer: all inventions made during the employment; all inventions made using company resources or relating to the company's field; often also assign future improvements and require disclosure of inventions; PROSPECTIVE ASSIGNMENTS: express prospective assignment agreements are enforceable under Filmtec (Fed. Cir. 1991); the assignment automatically becomes effective when the invention comes into existence; the company does not need a new signed document each time an invention is made; EMPLOYED TO INVENT DOCTRINE: even without an express agreement, if an employee is hired SPECIFICALLY TO INVENT (inventor, R&D engineer), their inventions generally belong to the employer; the scope of employment determines what falls under this doctrine; SHOP RIGHT: even if the employer does not own the patent outright, the employer may have a non-exclusive, royalty-free license (shop right) to practice an employee's invention if: the employee used company resources (time, facilities, materials) to develop the invention; the employee kept the invention within the scope of employment; a shop right cannot be assigned or transferred; STATE LAW LIMITS ON ASSIGNMENT: California Labor Code § 2870; Delaware Title 19 § 805; Minnesota Stat. § 181.78; Illinois 765 ILCS 1060/2 — these state laws limit assignment agreements; cannot require assignment of: inventions made entirely on the employee's own time; using the employee's own equipment; NOT related to the company's business; NOT resulting from the employee's work for the company; STARTUP CRITICAL PRACTICE: (1) all founders must sign IP assignment agreements BEFORE starting work; (2) prior to funding, investors require clean chain of title from each founder; (3) any outside work product (grad school research; prior employer inventions) must be identified and excluded from startup assignments; (4) if a founder used university resources, the university may claim ownership under Bayh-Dole or institutional IP policies.