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Monday, 10 September 2012

When Partial IP Assignments Become Murky

We like to speak of IP as a form of property and, in case one seeks to deviate from this proposition, there always lurks in the background Judge (and Professor) Frank Easterbrook's article with the iconic title of two decades ago, "Intellectual Property Is Still Property" (13 Harv. J. L. & Pub. Pol'y 108 (1990)). For better or worse, till death do us part, those of us engaged in IP will likely continue to approach the disposition of IP rights as something to akin the disposition of full-fledged property. Just how fully-fledged is the question. For instance, what happens when one seeks to assign less his full ownership in an IP right? To be clear, we do not refer to the situation in which the owner of the IP disposes of a portion of his entire interest in the IP, with the result that there are now two owners of the IP, each with its proportional interest. Rather, we refer to a situation where the assignee receives “ownership” of a specific permitted act under the patent ( e.g., the right to use the patent for a defined field of use) or less than the entire statutory territory in which the patent applies.

It is difficult to find commentary that sheds light on the legal metes and bounds of such a partial assignment, but this Kat was directed to a brief treatment of the topic in an unexpected place, namely an article on "Structuring Grants of Intellectual Property Rights in Cross-Border Transactions to Avoid Loss of Rights in the Event of Bankruptcy". Written in 2010 for Bloomberg Finance by Allen J. Klein and Kieran Dickinson of the well-known law firm of Latham & Watkins, the authors make the following observations:
"In some cases ... the owner of the IPR may be persuaded to assign a partial interest in the IPR even if it is unwilling to assign its entire interest. Many countries (e.g., Canada) recognize assignments of certain IPR that are limited to a specific field of use or territory. Accordingly, in place of a field of use-limited exclusive license (e.g., an exclusive license in the optical networking field), the parties could agree that the owner of the IPR will assign all IPR within a particular field, while retaining all other rights (e.g., an assignment of all rights in the IPR in the optical networking field only). Note, however, that not all countries recognize field of use-limited assignments with respect to each of the major categories of IPR (e.g., patents, copyrights, and trade secrets). For example, Canada recognizes such partial assignments of patents, but not trade secrets; in such case this approach would work for the patents, but another approach would be necessary for the trade secrets.”
Unfortunately, there are no citations or other references to enable an interested reader to further pursue the observations made in the article. Still, based on the conclusions presented, this Kat feels a sense of unease in trying to formulate the metes and bounds of a permissible partial assignment. Why stop with the assignment of a designated field of use or an assignment of less than the whole territory? How about the assignment of all the independent claims and related dependent claims in the patent, or maybe just one independent claim and related dependent claims? Is there any principled way of making these distinctions? The upshot of the foregoing is that any such contemplated partial assignment of patent rights needs to be carefully scrutinized in light of the provisions of the relevant jurisdiction. The wide differences in treatment argue in favor of exercising particular care whenever such a partial assignment is contemplated in multiple jurisdictions. As a guiding principle, this Kat would be very wary of allowing clients to enter in such arrangements unless there is a compelling business justification and the legal position has been carefully vetted.

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