Okipa v Bionome Technology - illustrating the dangers of joint IP ownership

At the start of an exciting new joint venture project, the energy and optimism of collaborators, coupled with an understandable drive to start work on promising research as soon as possible, often leads to parties agreeing to jointly own the IP arising from the collaboration.

Whilst this is an easy agreement to reach when time is precious, it can lead to a raft of complications down the line if, for example, the collaborators’ interests are no longer fully aligned, the project unfortunately fails or there is unauthorised use by a third party of the IP. Some of these pitfalls were illustrated in a recent patent case.

Background

A collaboration agreement made between two inventors specified that a joint entity would be created to hold IP rights in a patent, with both inventors holding equal shares in this entity. In his decision, the IPO hearing officer found that the rights of the second inventor had not in fact been assigned to the joint entity under the agreement, which instead merely provided a framework for that assignment to happen at a future date. This article highlights some of the pitfalls arising in this case and how businesses considering joint patent ownership with collaborators can take steps to avoid them.

Key points from the decision

The hearing officer found that the collaboration agreement: (i) provided that the IP generated from the collaboration would remain in control of the parties either individually in some way, or within an equally-controlled entity, and (ii) signalled an intention to transfer the IP to a jointly held entity once established. Although one of the inventors did establish an entity for this purpose and filed patent applications on its behalf, the collaboration agreement did not actually assign the IP of the second inventor to such entity, and no legal agreement was made to progress the intention to assign his rights once discussions between the parties had broken down.

The hearing officer noted that the collaboration agreement showed the parties had intended to take specific action to make the assignment of their rights to the newly created entity in future, and the parties had otherwise committed themselves to the agreement’s terms. He concluded that the created entity was not solely entitled to the patent applications and ordered that the second inventor be added as a joint applicant.

Risks of joint IP ownership

As a monopoly right, a patent usually gives its owner exclusivity to use the corresponding invention. However, where a patent is jointly held, neither owner can claim exclusive ownership of the patent. If a third party infringed the patent, both owners would need to join in a claim as co-claimants for any enforcement to proceed, and neither owner can grant a third party an exclusive license to use the patent without consent of the other.

These restrictions naturally limit the freedoms of both parties to fully protect and exploit the patent independently, which becomes particularly problematic in cases where the relationship between co-owners has broken down.

A further pitfall to consider is that, unless there is an agreement to the contrary, the default position under section 36 of the Patents Act 1977 is that a co-owner can exploit the patented invention without consent from the other party, and without any obligation to share the resulting profits. This issue can easily arise if there is an imbalance of power and resources between the parties and a consequent failure to address such arrangements in a written contract at the outset.

To minimise these risks, before agreeing to the joint ownership of a UK patent, parties should consider their respective exploitation rights, responsibility for prosecution and maintenance (including how costs will be shared) and how any future infringement actions would be brought and/or defended.

Summary

Whilst it may initially seem convenient for IP to be jointly held following a collaboration, and it may be the quickest resolution to a difficult question at the outset of a project, the pitfalls described above outline why this should be carefully considered by both parties in advance. Even where joint ownership is the agreed outcome, the case of Okipa v Bionome Technology reminds us that the contractual documentation capturing the details and structure of the arrangement are critically important to ensure that both parties end up with the rights they intended.

At the outset of a collaboration, parties should work with their legal advisors to negotiate clear and binding agreements setting out how the IP rights that result from the collaboration will be owned, maintained, exploited, protected and enforced as well as what will happen to the IP should the project not reach the goal that the collaborators hope for. Our multi-disciplinary life sciences team has extensive experience advising on this area. If you have any questions on the above, please contact one of our team.