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Friday, 28 October 2011

The Murky World of the IP Assignment


From my IP perspective, there are two kinds of contract categories that I encounter in provding transaction support. The first is your basic, non-IP focused contract, such as a share purchase agreement, in which an IP person may be called in to give advice on specific sections, most typically IP representations and warranties. The second is to provide IP-related documents that support the main agreement, most frequently in the form of assignment of IP rights.

But sometimes these two contact categories overlap in a way that creates contractual uncertainty. Perhaps the most recurrent example involves an IP assignment document that is attached as an exhibit to the main agreement which provides for an assignment of IP rights. The main agreement may provide something like this: "The Seller undertakes to assign and does hereby assign the IP Rights". Let's assume that "IP Rights" is a defined term that itself is defined something like the following--"IP Rights shall mean all Patent, Copyright, Trademarks and Know-How, as those terms are defined in the contract."

Now comes my question (actually, questions). What is the legal force of such a clause? Does it merely constitute an undertaking to assign the IP rights whereby, despite the declaration--"and does hereby assign", no actual assignment is effected? Or does the provision constitute both an undertaking to assign and, in addition, the actual assignment of such IP rights?

If the first alternative is the case, then the provision is either legally ineffective as an assignment of IP rights or, at best, it constitutes an equitable assignment in those jursdictions that recognize equitable rights in property. At stake is the validity of the purported assignment of IP rights. If the second alternative is the better position, then there still remains the evidentiary question of what IP rights have been assigned.

One way to solve this problem is to provide an exhibit to each of the defined IP Rights that describes with particularity the IP rights of the assignor that are being assigned. But it is not always the case that the definitions provide such specification of IP rights. Instead, the agreement goes on to provide that the parties will execute the attached form of IP assignment and transfer document.

In that event, unless a fully executed IP assignment document is attached to the main agreement, the attachment of a mere form of IP assignment would seem to have the legal effect of rendering the assignment clause in the main agreement--"The Seller undertakes to assign and does hereby assign the IP Rights", solely an undertaking to assign the IP rights, irrespective of the language that purports to assign these IP rights. Or maybe not. Perhaps the legal effect of the form of IP assignment in such a situation is merely evidentiary, such that the main agreement does constitutes a valid assigmnment of IP rights. Or maybe not.

The best way to handle this is to provide only for the undertaking of the assignment in the main agreement, subject to the execution of the assignment document pursuant to an attached form of assignment. In that case, however, care needs to be taken with respect to the IP assignment document so that it is consistent with the main agreement. In particular, the IP assignment document can incorporate by reference from the main agreement all the relevant definitions. However, not infrequently, the assignment document is based on whatever is the form assignment used by the attorneys involved (usually the assignor's attorneys) and care is not always taken to make the assignment conform with the provisions of the main agreement. In such a situation, the subject-matter of the IP assignment may not be consistent with the IP provisions of the main agreement.

It is roughly at this point that the transaction and IP lawyers go, hand in hand, to their litigation partner down the corridor for urgent advice.

3 comments:

Anonymous said...

Under IP laws the assignment has not taken place. The equitable assignment has value under contract law and may give valid claims to royalties for example. There have been a few cases covering these issues, though I can't think of specifics right now, partly because it has been a long day.

Such contracts MUST be avoided and usually exist because patent attorneys have not been involved in the writing of the contract. IP rights are frequently a vague add-on rather than being covered by the essential clear and well-defined clauses. Not only must all assignments of existing IP be clear (as to their scope) and specifically made, but so too must all future IP. I have had to deal with vague open-ended assignments of future IP, which leave one side in a very difficult position.

Pamela Chestek said...

Let's hear it for more IP lawyer involvement in transactional work --

I would say that the main agreement is the assignment of the rights. Without the exhibits I don't think that there's any argument, under U.S. law anyway, that there was not a present assignment of rights with your sample language. The scope of the rights would be construed based on the four corners of the main agreement, although it then gets sticky when, as you point out happens, the IP assignments, which are exhibits, aren't consistent with the main agreement. I find it happens most often with unregistered trademarks - the main agreement may say just "trademarks," or perhaps even mention unregistered trademarks specifically, but those are NEVER listed on the schedules or assignment exhibits. Perhaps the answer is not to have exhibits? Or to state that the exhibits are sample agreements only?

Anonymous said...

The following arrangement works well for registered IP rights. Draft the main agreement so that it is clearly just an agreement to assign and clearly not an assignment. Then draw up one short form assignment for each right type (patents/trademarks/design) for each official register. The latter usually means per country but, for example EP patent applications go on the EPO assignment whereas the national parts of a granted EP go on the assignments for the DE,FR,GB,IT... national registers.

If you have time ahead of execution send the wording of the short form assignments to local patent attorneys, who as necessary will suggest that both parties should sign, make remarks about stamp duty, notarisation, legalisation, translations requirements (or even translate your text so that the signed assignment will be in the local language) and so on.

This arrangement avoids having to provide to the patent office extracts of the main agreement having to be provided to the local offices (which costs since the whole agreement may have to be read to do that in a non-distoring way and sensitivities of the parties to clauses appearing on the register may have to be discovered), some costs of translation, and allows the separate short form assignments to proceed along their sometimes tortuous paths (e.g. notarisation, legalisation, making certified copies subission and return from the patent office) in parallel rather than in series.

When there is the chance I always suggest this approach, but it is not as common as it might be given its efficiency - so is there anything wrong with it apart from not being familiar?

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