Patents: Licensee Assignability

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 Can a Patent Licensee Freely Assign Their License to Others?

Under both federal law and the law in most states, a person who makes use of a patent under a license cannot freely assign the patent license to others. Patent licenses are personal to the licensee, that is, the person allowed to use the patent under the license. The licensee is not legally empowered to freely assign it to others. If a patent owner gives another person a license to make use of their patent, that person cannot sell or transfer that license to anyone else without the patent holder’s consent.

It is important to differentiate assignment of a patent license and assignment of a patent itself.

In legal terminology, the word “assignment” is transferring to another person or entity the ownership of one’s property. According to the U.S. Patent and Trademark Office (USPTO) the assignment of a patent is a contract that is governed by the relevant state law.

Federal patent law and the USPTO define the assignment of a patent as “the transfer to another of a party’s entire ownership interest or a percentage of that party’s entire ownership interest in the patent or application.” In order for the assignment of a patent to be effective, the transfer must include the whole of the bundle of rights that is associated with the ownership interest in the patent.

That would be all of the rights that are inherent in the ownership of a patent, or the rights, title and interests in a patent or patent application. Federal patent law also requires that the transfer of ownership of a patent or patent application by assignment be in writing.

In contrast to the assignment of patent rights, the licensing of a patent transfers a bundle of rights which is less than the entire ownership interest. The rights transferred might be limited in some ways, e.g. as to the time period in which the use can be made, the geographical area in which the use can be made or the field of use.

Essentially a patent license is a contract in which the patent owner promises not to sue the licensee for patent infringement if the licensee makes the claimed invention, offers it for sale, sells it, uses it or imports the claimed invention. The licensee promises to fulfill its obligations and operate within the bounds of the license agreement. Of course, if the licensee were to disrespect the license assignment agreement in some manner, then the patent license owner could sue for patent infringement.

A patent owner may convey an exclusive license to a licensee. The exclusive license prevents the patent owner or anyone else to whom the patent owner might want to sell a license, from competing with the exclusive licensee in the same geographic region, or for the same length of time, and/or in the same field of use, whatever is provided in the license agreement.

A license is not the same as an assignment of a patent. Even if the license is an exclusive license, it does not equal an assignment of rights in the patent or the patent application. In addition, the license itself can be assigned by the licensee to another entity only with the agreement of the patent owner.

Are There Any Exceptions to This Rule?

The most important exception is if an assignment is written into a patent licensing contract. This is usually indicated by “assigns” or any other language that explicitly extends the license to a licensee’s successors. A court may also allow assignment of a license if both the licensor and the licensee clearly express an intent to make the license assignable in the language of the license agreement.

However, assignment of a patent license can also be implied by a court from circumstances in some cases. For example, suppose patent holder A enters into a patent licensing contract with company B. The licensing contract does not include an assignment provision. Company B is then bought out by Company C. A, however, does nothing when Company C starts using the patent. Some courts may imply an assignment of Company B’s license to Company C, based on A’s failure to take action.

In most cases, courts will look into individual circumstances to determine whether or not assignment is implied by facts other than an assignment provision in a patent licensing contract.

An assignment can be recorded in the USPTO in two ways for two different purposes. The differences are important. An assignment can be made of record in the assignment records of the USPTO as provided for by federal patent law. Recording an assignment gives legal notice to the public that the patent has been assigned.

Recording a patent assignment does not in itself mean that the assignment is legally valid. It does not have any significance for the effect of the assignment document on the ownership of the patent property.

However, if a patent is going to be issued to an assignee, the assignment must have been recorded or filed for recordation.

In addition, an assignment can be recorded in the file of a patent application, the file of a patent, or the file of any other patent proceeding, such as a reexamination proceeding. Recordation may be helpful because it is necessary to permit the assignee to “take action” with respect to the application, patent, or other patent proceeding under certain conditions. However, recordation of an assignment in the USPTO assignment records does not give permission to the assignee to take action in any patent proceeding.

What Kinds of Circumstances Affect the Implied Assignment of a Patent License?

When determining whether to allow assignment of a patent license, a court may give weight to the following factors:

  • The nature and uniqueness of the patent itself;
  • The relationship between the licensee and the patent holder, for example, whether the licensee is a manufacturer and the patent holder a developer, or whether the licensee is a seller and the assignee of the license a reseller;
  • The history of dealings between the licensor and the patent holder;
  • Licensee’s obligations under the patent license;
  • The nature of the assignment, for example, whether the assignment was sold, passed down, or acquired through a merger;
  • Whether harm may result to the patent holder if the patent license is allowed to be assigned.

How Can a Lawyer Help Me?

If you have a patent license that you would like to sell or otherwise transfer to another person or entity, you should contact a patent attorney to learn about the options that are available to you. A lawyer can draft a patent licensing contract that meets your requirements and allows assignment as you wish. Your lawyer can help determine whether a court is likely to allow assignment of your license. Or negotiations with the patent holder may be able to resolve any issues and your lawyer can represent you in those negotiations.

If you are a patent holder whose patent license to a third party has been assigned without your consent, an attorney can help you obtain an injunction and prevent the unauthorized transfer of any licensing of your patent and the unauthorized use of your patent.

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