A recent Intellectual Property Enterprise Court (IPEC) patent judgment, Jones v Irmac Roads,(1) has scrutinised the law on patent entitlement and ownership, in circumstances where there was a defective assignment of an invention by the inventor to a third party.
Entitlement to a patent has recently made the news as a result of the high-profile Thaler/Dabus case, in which the Court of Appeal found that an artificial intelligence machine cannot be an inventor of a patent.(2) This recent IPEC decision is less high profile, but nevertheless provides a reminder of the importance of properly complying with the formalities for legal instruments relating to the transfer of ownership.
Mark Richard Jones developed an infrared heater for application in the repair of road surfaces around 2009 (the 2009 heater). Jones commercialised the 2009 heater in collaboration with another company at premises leased from Ben and Terry Gedroge. In 2010, Jones and his commercial partner faced financial difficulty, and Jones was approached by the Gedroges with a proposal to assist in the commercialisation of the 2009 heater, for which Jones was working on improvements.
The Gedroges established a limited company, Irmac Limited (IL), in which they agreed to grant Jones a 45% share option at a meeting on 18 October 2011. Under the arrangements, Jones orally agreed to assign his IP rights to IL at the meeting, including the rights to apply for a patent for the improvements, subject to the execution of further documents, including a patent option agreement. The patent option agreement was agreed in principle in these discussions, under which intellectual property would be reassigned to Jones if IL "had not commenced active trading within six months from the patent application registration confirmation".
IL applied for a patent for the improvements in its own name, with Jones named as the sole inventor, around 25 November 2011 (the application), with the share and patent options agreements being formally executed on 22 December 2011.
Exercising patent option agreement
On 12 June 2012, Jones served notice with the stated consideration of £1 under the patent option agreement on IL. On Jones's understanding, "completion" (as defined in the patent option agreement) would result in IL providing a written assignment of the application and other IP rights back to Jones within between seven and 21 days.
However, following receipt of the notice, Ben Gedroge withdrew the application. IL orally assigned the rights in the invention to a new company, the defendant in this action (IRL), and filed a new application in its name two days later (the second application), the only material difference being the proprietor, and that Ben Gedroge was also listed as an inventor. This second application resulted in the grant of the patent in dispute.
Before considering the parties' arguments, it is necessary to consider two key provisions of the Patents Act 1977, the meaning of which were disputed in this case:
- Section 30(6)(a) of the Patents Act 1977 provides that any assignment or mortgage of a patent or any such application, or any right in a patent or any such application will be void unless in writing and signed on behalf of the assignor.
- Section 130(1) defines the meaning of a "right" as being "in relation to any patent or application, includes an interest in the patent or application and, without prejudice to the foregoing, any reference to a right in a patent includes a reference to a share in the patent".
The parties disputed whether the right to apply for a patent was included in the definition of section 130(1), as opposed to a patent or patent application, and therefore whether an assignment of such right needed to be in writing.
Jones argued that, as he was the inventor, he was therefore the true proprietor of the patent.(3) He argued that he only equitably assigned the right to apply for a patent in the improvements to IL at the 18 October 2011 meeting, which led to the application, and he retained the legal right. Jones argued that a written assignment of the right to apply for a patent was required. As there was no such written assignment, the formalities of section 30(6) had not been satisfied, and therefore legal title had not passed. He argued that the service of the patent option notice assigned the equitable interest in the right to apply for a patent in the improvements back to him, giving him full legal title of those rights.
Jones therefore argued that he was the only party entitled to apply for the second application.
On the other hand, IRL argued that the legal and equitable title had passed to IRL under an oral agreement, as the right to apply for a patent was not caught by the provisions of section 30(6). It argued that service of the option notice assigned no equitable title to Jones, and that, in any event, it had been incorrectly served. IRL argued that the withdrawal of the application extinguished legal and equitable title in the application, but that the legal and equitable rights to apply for a patent remained with IL, which was subsequently orally assigned to IRL. IRL's position was therefore that it had the full right to apply for the patent and was the true proprietor.
His Honour Justice (HHJ) Hacon referred to Lord Walker's comments in Yeda v Rhone-Poulenc,(4) where the right to apply for a patent was viewed as distinct from the right in a subsequent application or patent, described as an "inchoate property". He found that the right to apply for a patent therefore vested in the inventor or a party who was a successor in title to the inventor.(5)
HHJ Hacon was referred to Hartington Conways Ltd's Patent Application,(6) where the UK Intellectual Property Office came to the decision that the language of section 130(1) was broad and would encompass the right to apply for a patent. On appeal in that case, Pumfrey J approached the question in a different way but came to the same conclusion and found that the right to apply for a patent is also caught under section 30(6) and therefore any assignment must be in writing.
HHJ Hacon concluded that the transfer of a right to apply for a patent must satisfy the formalities of section 30(6). Jones' case was therefore made out on this point: as there was no legal assignment, his legal right was never assigned. However, the question remained: was the equitable right assigned back to him?
Construing patent option agreement
IRL had argued that serving notice under the patent option agreement could not have assigned equitable title back to Jones. Alternatively, it argued that the service of notice under the agreement was defective.
In considering the terms of the agreement, HHJ Hacon referred to a recent decision, ABC Electrification Ltd v Network Rail Infrastructure Ltd,(7) which helpfully outlined several factors the courts should consider when reviewing the terms of a contract. He used this guidance in coming to his decision that service of the options notice was not defective, and that equitable title in the right to apply for the invention had passed back to Jones.
It therefore followed that Jones was the true owner of the second application.
This judgment provides clear authority that the provisions of section 30(6) apply to rights in inventions and the right to apply for a patent, as they would to applications and patents themselves, and therefore instruments dealing in them should be in writing.
Businesses dealing in the transfer of patents, including the right to apply for a patent, should always ensure that the underlying documents are in writing. While it has always been best practice to ensure that any assignment of intellectual property is executed through a formal written assignment, this judgment provides clear reasoning as to the potential consequences of title not being assigned correctly.
Further, the decision emphasises the importance of ensuring that underlying agreements properly reflect the intentions of the parties, and ensuring that appropriate professional advice is sought in a timely manner. This may help to avoid incurring costs to remedy any defects, unravel any issues relating to chains of title and address any future disputes.
The application of the tests in ABC Electrification was also a useful reminder for those drafting and litigating contracts, and while it should not be used a checklist, it provides useful guidance as to how the courts will currently interpret contracts.
For further information on this topic please contact Aidan Southall at Pinsent Masons by telephone (+44 121 200 1050) or email ([email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
(2) Thaler v Comptroller  EWCA Civ 1374.
(3) Section 7(2)(a) of the Patents Act 1977.
(4) Yeda Research and Development Co Ltd v Rhone-Poulenc Rorer International Holdings Inc  UKHL 43.
(5) Section 7(2)(a) and 7(2)(b) of the Patents Act 1977.