Friday, March 27, 2009


ASSIGNMENT of Patents - Should I Assign my Patent?

One of the first questions your Attorney will ask you when you file a Patent Application is whether or not you want to Assign your Patent Application and if so, to what entity. What is a Patent Assignment? How is it created? How do you File it? When do I file it? Do I need to file one? Am I required to file one? The present article attempts to answer all of these questions.

What is a Patent Assignment?

An Assignment, in legal terms is the name for the transfer of ownership of some defined piece of existing property. Any type of property or interest can be assigned (and often is), so the term is not unique to the Patent business. In Patent Law, this can be Intellectual Property - a pending Patent Application or issued Patent, for example.

When you Assign your Patent rights, the ownership of the pending application or Patent is transferred from you (the assignor) to the new owner (the assignee). If you have any trouble remembering which term is which, remember this simple jingle a law professor told me many years ago: "Assignee, that's not me!". Usually as the inventor, you are the assignor of Patent rights.

Note that under the law, it is generally impossible to Assign a future interest. Thus, for example, you cannot sign an Assignment document assigning "all your future lottery winnings" as this is not an actual property right - it is something that does not exist yet.

Thus, in the Patent Law arena, we cannot assign "all my future inventions" in an assignment document. For this reason, employers use an employment agreement which is a contract obligating you to assign the inventions developed during the course of your employment. If you get into a dispute with your employer and refuse to assign your invention to them, they do not "own" the invention by virtue of the employment agreement, however they have a contract cause of action against you and can go to court to have you assign the Patent to them under the contract.

So an employment agreement is a contract to assign, but an assignment is the actual transfer of ownership interest.

Note that an Assignment is not a license agreement either. A license agreement licenses a licensee ("that's not me", again) from the licensor (you) to use the Patent, either on an exclusive or non-exclusive basis, usually with a stated royalty payment involved. In a license agreement, ownership of the Patent remains with the licensor, while the licensee merely has a right to make, use, or sell the invention.

Whether an agreement is a license or an assignment is sometimes difficult to tell. Even though an agreement says "license" or "assignment" on it, such titles are not necessarily determinative. If the agreement gives over all rights to the licensee for a fixed fee, then it may be construed as an assignment. Similarly, if an Assignment has royalty payments, a termination or breach clause, and a reversion back to the patentee, then it may be viewed as a license, even if it is titled "assignment".

How is it created?

The Assignment document is generally created by your attorney and there are a number of forms out there used by different attorneys. The USPTO does not provide assignment forms (the USPTO had sample forms at one time, but these were deleted as of 2005, as the Patent Office is not in the business of giving legal advice).

The Assignment generally lists the name of the application (or patent) and identifies it by serial number, filing date, and other indicia, and also lists the names of the assignor(s) and assignee(s) and usually has something called a "granting clause".

There is a space for your signature and date. The document may be notarized, although notarization is not required for an Assignment to be effective.

How do you File it?

We record Assignments with the USPTO's office of Finance, online, using the website. As a .pdf copy is uploaded to the USPTO, no physical copy is required for recordation. The original copy should be kept by the new Patent owner with their valuable papers to prove ownership of the application or patent later on. There is a $40 recordation fee per assignment.

Recordation puts the world on notice that the assignee is the new owner of the Patent. State law varies as to whether assignments are valid based on "first to sign" or "first to record". However, it is a good idea to record assignments to perfect your interest in the application or patent.

Once filed, the ownership record is available online for anyone to see. Note that the assignment information published on the face of a patent is for informational purposes only and does not accurately reflect the actual ownership of the patent. The assignment information on the face of the patent is taken from the issue fee transmittal form, and is not legally binding. It may be left blank, or be incorrect. If the attorney writes down "Mickey Mouse" on the issue fee form, Mickey Mouse will appear in the "assignee" field on the face of the Patent. It means nothing, however, in legal terms. So never use the assignee data on the face of the patent as a source of hard data.

When do I file the Assigment?

As noted above, you cannot assign a future interest. So the Assignment cannot be filed until at least a Patent Application (even a provisional) has been filed. Before then, there is nothing really to assign.

An Assignment can be filed at any time, however, once the application is on file and after it issues as a Patent. And a case can be assigned and re-assigned to different entities over and over again.

So there is no specific deadline to file the assignment. However, in most cases where there are multiple inventors, it is a good idea to file sooner, rather than later. Once an inventor leaves the company, it is much harder to get those signatures!

Do I need to file one?

That depends. As I set forth in my article "Who Owns Your Invention?" there is the two-inventor paradox. If two or more inventors are listed on a Patent, they each own all of the patent in the entirety. This means each can license separately and even grant "exclusive" licenses to others (exclusivity here meaning in the grantor, not grantee).

Also, inventors sometimes have a falling out over time, so it makes sense for one entity to own the Patent - preferably the entity that is paying all the bills. So two or more inventors can assign their rights to a partnership, a company, a subchapter-S corporation, an LLC, or single individual or a group of individuals - or any valid legal entity (or government).

Typically, a group of inventors may form a start-up company (subchapter-S) and assign the rights to the company. The inventors may then own stock in the company which in turn owns the Patent. This way, if there is a dispute later on between inventors, one cannot leave and take his patent rights with him.

Even if you are a solo inventor, sometimes you want to Assign your rights to your own company for financial reasons. If you are running a start-up company, and want to obtain venture capital financing, the money people usually want to see the applications and patents assigned to the company, or have their own lien on the appplications and patents - or both.

Am I required to file one?

If you are an employee of a company, and you have signed an employment agreement, you may be contractually obligated to assign your rights to the company.

Sometimes, former employees refuse to do this, on the premise that somehow their lack of signature will prevent the company from getting a Patent. The inventor may also refuse to sign the Declaration documents as well (see my article "inventor refuses to sign") From the Patent prosecution standpoint, this is not true at all. All the company need do is file a simple petition and they can proceed without your signature. From the Assignment standpoint, the company can take you to court and force you to assign your rights (specific performance) to the company.

So yes, there are situations where you may be required to Assign your patent rights.

Again, as noted above, there may be situations where venture capitalists, banks, or other money providers may require you to assign your rights to your own company, or may record a lien interest or security interest on your Patents.

Are there any Downsides to Filing an Assignment?

One downside to assigning your application or patent to another entity is that you may no longer own the invention. This may seem like an obvious statement in most cases, but consider the following scenario:

Joe starts a company to develop his invention (he is a solo inventor). He incorporates InventCo as a subchapter-S Corporation. He as three patents pending and assigns them to InventCo.

InventCo builds prototypes and starts selling the product. However, due to unforeseen circumstances, the company hits a snag, and starts losing money. Debtors clamor to be paid, and eventually, Joe has to lay everyone off and declare bankruptcy.

Since the Patents are now property of Inventco, they are sold off an the bankruptcy sale during bankruptcy proceedings (Note also that Bankruptcy Judges can reformulate license agreements on almost any terms as well, so licensing is not a safe harbor either). Joe's #1 competitor buys the patent rights at the bankruptcy sale, and not only is Joe broke, he can't even make, use, or sell his own invention without permission from his former foes.

This bankruptcy scenario seemed somewhat far-fetched even a few years ago. Today, however, it is becoming quite commonplace.

Arguably, if Joe did not Assign his Patent rights to InventCo, he would still own the Patents, and thus could start a new company and still make his inventions.

This latter scenario would be nice, if you can pull it off. In reality, as noted above, the financial people will demand that Joe assign his rights to Inventco, or at the very least, will record a lien or security interest on the Patents. Money people know all too well that the value in a business often is not in the desks, office supplies, leases, and machinery, but in the ideas and technology underlying the company.

Also, even if there were no such requirements by the banks, in most businesses, there are business partners or fellow shareholders who will insist on your assigning Patent rights to the company, in case you decide to split and leave them hanging.

So keeping the Patents as personal property is a neat concept in theory, but often not practical in application.

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Whether or not your should assign your Patent rights is a fact-specific question that depends on your actual circumstances. The above information is provided for education purposes and is not legal advice on whether or not you should or should not assign your rights. However, the information provided above should give you a good idea of the data your Attorney will need to help you decide which course of action is best for you.