article / 15 Nov 2018
Joint ownership could block use of research results
Joint research generally leads to joint ownership of the developed research results. If the joint owners do not enter into an agreement, Swedish legislation requires almost every use of the results to be subject to mutual consent by all the owners. In cases where the parties have differing opinions, the lack of a comprehensive contract could therefore prevent life science operators from using research results as background information for new projects, patenting their inventions and even using their findings in their own activities.
Inventions are increasingly the result of teamwork between different companies and organisations. Life science operators form project consortiums in which researchers from separate entities cooperate in producing valuable research results with the potential to receive patent protection. In many cases, each researcher’s individual contribution to a specific invention cannot be separated from that of others, leading to a situation in which several companies, organisations and/or individual researchers are joint owners of intellectual property.
Joint owners are expected to regulate their mutual relations through an agreement. However, project agreements often lack provisions on how joint ownership should be handled, in part or completely, and separate agreements on joint ownership are rare. As a result, owners’ rights will be governed by outdated legislation not fit for intellectual property. In cases where the joint owners have differing opinions on the issues of protection, use and commercialisation, this could result in almost the complete blocking of the use of the asset.
Regulation of joint ownership
There are no explicit provisions regarding the joint ownership of inventions or patents in Swedish patent law, nor does clarifying case law exist. The legislator has expressed that joint ownership of a patent should be regarded in connection with rights under joint ownership in general. However, since intellectual property differs clearly from tangible assets, it is still uncertain how these general rules should be applied to research results, inventions and patents.
Prevailing opinion is that the Swedish Act on Joint Ownership (1904:48), although not directly applicable to the right to a patent or invention, may be used analogously to solve questions related to joint ownership in the absence of express regulation through an agreement. However, if the joint owners have agreed to jointly conduct activities with the invention, joint ownership may, in the eyes of the law, automatically become a non-registered partnership, according to the Partnership and Non-registered Partnership Act (1980:1102). In such a case, the Act on Joint Ownership would not apply.
A joint ownership is considered a non-registered partnership if the joint owners i) have an agreement between them (although an agreement in writing is not required); ii) have a common purpose for the partnership (e.g. to make a profit); and iii) are obliged to act in accordance with such purpose. An implied agreement may even be enough to establish a non-registered partnership. This means that the mere joint registration of a patent may be sufficient for the Partnership and Non-registered Partnership Act to become applicable.
In most uses, joint ownership will be handled the same way, regardless of whether ownership is governed by the Act on Joint Ownership or the Partnership and Non-registered Partnership Act. However, the acts will have different outcomes in some essential regards. It is therefore important to establish whether ownership is performed in community of interests, as with a non-registered partnership, or whether joint ownership means nothing more than sharing an object.
General main rule
According to the general main rule in Nordic law for jointly owned intellectual property, the joint owners must agree on all essential use if they have not regulated their mutual relations through an agreement. This rule can be found in both the Act on Joint Ownership and the Partnership and Non-registered Partnership Act. However, patent law says nothing about this topic, leading to some uncertainty as to whether all uses require agreement, as described below.
It is a generally accepted principle of Nordic patent law that the original right to an invention is held by its inventor (although a company or a legal person can acquire the right and become the inventor’s successor). Accordingly, joint creation of an invention results in joint ownership.
The nature and degree of each inventor’s intellectual contribution shall determine the share of each owner. If appropriate, each of the joint owners shall have a right to their own limited and specific portion of the invention. In other cases, each of the joint owners will have an abstract share in the patent, and in the event of conflict it is for a court to decide what fraction each person or company has the right to. If it is not possible to determine the contribution of each inventor, the joint owners have equal shares in the invention.
A prominent legal problem with joint inventions relates to patenting. According to the general main rule, the joint owners must agree whether or not to apply for a patent for an invention. Only in emergent situations, e.g. when the application risks being rejected due to delay, can a joint owner make an application on their own.
In practice, a joint owner could of course submit an application for patent protection on their own, without recognising joint inventorship, but this would not necessarily be problem. The other joint owners still have the opportunity to claim their right to parts of the application or the registered right and become recognised as inventors on the patent documents.
However, things could become difficult if a joint owner were to oppose the patent application. If the owner were to object to the patent authorities, demanding the withdrawal of the application, the patent office would need to consider rejecting the application. This principle has been applied by the patent authorities in the past, and is in line with the rules of the Swedish Code of Procedure (1942:740), which can be applied analogously to patent registrations. Nevertheless, it is not at all certain that the patent authorities would come to the same conclusion now. Patent protection is usually in the interests of all rights holders, which is why some experts claim that it would be unfair to consider only one of the rights holders’ wish to avoid protection. If, however, the general principle were upheld, this would mean that an inventor who wanted to patent their invention but was hindered from doing so, could have a right to claim compensation for their financial losses caused by the lost opportunity for patent protection.
The general main rule would also mean that in a situation where the joint owners collectively apply for patent protection, but one of the owners files a request to the patent office regarding the withdrawal of the application, the patent would still be granted. Since joint holders of a right can only make use of such right together, one of them cannot decide to withdraw independently. This has also been confirmed by case law from the Supreme Administrative Court in the past. Still, it is uncertain whether a court would apply the main rule in the same situation today.
On the contrary, Swedish case law shows that in an issue regarding application for patent protection, one joint owner may appeal against the registration office’s decision of dismissal even if the other joint owners do not consent to such appeal. Such deviation from the main rule has clearly been viewed as appropriate by the courts. This does not, however, mean that non-performance after an application for a patent should be considered a waiver of such joint owner’s right to the patent.
In any case, a joint owner cannot have a granted patent declared invalid on the grounds that such joint owner did not approve of the application in the first place. This principle is laid down in the Patents Act.
The consequences of disagreements when it comes to applying for patent protection for an invention are not crystal clear, but there is much to indicate that a majority decision between the owners on whether or not to apply for a patent is insufficient. All joint owners must agree to the application, no matter how small a fraction of the invention they own.
Of relevance in this context is the fact that researchers at Swedish universities receive ownership of research results created in consortiums to which their university is a party. In practice, this could mean that a large life science company shares the rights to an invention with a single researcher with limited funds, and who therefore opposes application. Another situation to consider is where one joint owner prefers keeping the invention secret to pursuing intellectual property protection, and does therefore not give their consent to a patent application. These are just two examples of how difficulties may arise in cases where the rules of the ownership have not been agreed in advance.
When it comes to maintenance of a registered patent, all costs related to the administration of the joint property shall be divided between the joint owners. This does not mean that each joint owner must give consent before every payment. Instead, a single joint owner can pay the annual patent fees, and then claim reimbursement from the other joint owners for their shares.
It is not entirely certain what would happen should one of the joint owners refuse to pay its share. Refusal could possibly be considered a waiver of such joint owner’s rights. A waiver of rights could also be combined with a simple licence to use the patent for oneself as long as the patent is maintained in force.
Due to the importance of paying patent maintenance fees to avoid the patent lapsing, joint patent holders should be aware of their right to individually pay the fees, even if the other joint owners refuse. However, the uncertainty over the consequences for an owner refusing to reimburse the costs is yet another reason to ensure that such potential situations are regulated in a written agreement between the owners.
One of the most important aspects of joint ownership is the right to use the invention. When it comes to use, a joint owner of an invention or a patent has a lot in the asset that it is free to use in its own activities without the consent of the other joint owners, even if such use of the invention were in competition with the other joint owners. What constitutes use in own activities is not always easy to determine, but this should include use, production, sale, etc. in the joint owners’ respective business activities. However, it is unclear whether a joint owner could use third parties when exploiting the invention.
What the joint owners may not consider, however, is that a joint owner’s profits relating to the exploitation of a joint patent must be divided between the joint owners. In practice, this means that a joint owner can make a claim for compensation against another joint owner after such owner’s successful exploitation in their own business. The extent of the compensation shall be in proportion to the joint owners’ abstract shares in the patent.
Additionally, and of significant importance, the right to use the invention only applies where the joint ownership does not constitute a non-registered partnership. If so, the rule is instead agreement between the partners on every use. Verbal agreement or an implied act may of course be considered consent, but if the owners are in disagreement, non-registered partnership ownership could render the joint property completely unusable.
Since the possibility of using a jointly owned invention is probably essential to each owner, an agreement ensuring that this possibility is not limited (and, if appropriate, that profits related to such use are solely awarded to the owner generating the profit) is strongly recommended.
When it comes to licensing, a joint owner who uses a patent for their own benefit may be compared to a holder of a simple licence. Without a separate agreement, the holder of a simple licence is not entitled to transfer the licence to another party. Consequently, a joint owner is not allowed to grant a licence for an invention (either exclusive nor non-exclusive) to a third party without the consent of all other joint owners.
Research companies often use results from previous research projects as background information in new research consortiums. In general, other parties to the consortium receive a licence to use the background information in, and for the purposes of, the project, and in many cases also for other purposes after the project is concluded, e.g. if needed for the use of their own results. Given the restriction of the right to issue licences in regard to joint inventions, it would not be possible to include results jointly generated in a previous project as background information in new research projects without the consent of the other owners.
To sum up, it is essential for companies to ensure that they have a right to license jointly owned intellectual property by managing the property through a joint ownership agreement.
Transfer and pledge
Regarding the transfer of a joint owner’s share in a patent to a third party, each joint owner may independently transfer its abstract share in the intellectual property right without the prior consent of the other joint owners. This principle is also probably applicable if such joint ownership is considered a non-registered partnership.
In contrast, when the entire right to the patent is transferred, or pledged as security, the holders of the joint rights must agree on use according to the general main rule. A joint invention cannot be pledged only to the extent of each owner’s abstract share. Pledging must always relate to the whole asset.
A procedural consequence of the main rule of joint use is that the joint owners must act together before a court in connection with a dispute regarding the invention. If a single owner has brought the action, the court shall give the other joint owners the opportunity to join before the action is dismissed, but will dismiss the case if even one of the other joint owners refuses to participate in the proceedings.
However, when it comes to potential patent infringement in specific, the main rule is applied differently for joint ownerships and partnerships. According to the Act on Joint Ownership, everyone who holds a share in a patent may enforce their right and prevent those unlawfully using the invention from continuing or repeating their actions by bringing an infringement action against a third party. According to the Partnership and Non-registered Partnership Act, the partners must agree on the use and management of the invention. This difference shows how important it is for joint owners to establish the nature of their relationship before any conflicts arise.
Damages awarded to the joint owners shall be divided between them, even if only one of the joint owners participates in the proceedings. On the contrary, if a single joint owner brings an action against a potential infringer and the court rules against the patent holder, the opposite principle would probably apply. If the other owners have opposed the action, the claimant risks bearing the costs on their own.
In the event of permanent disagreement between the joint owners, the issue must ultimately be resolved on the basis of the principles in the Act on Joint Ownership or Partnership and Non-registered Partnership Act, depending on which is applicable.
According to the Act on Joint Ownership, a court may, at the request of any joint owner, appoint a trustee to take care of the invention or patent. The joint owners will then only receive their shares of the annual earnings that may be left after administrative costs (e.g. the fee for the trustee) have been paid. If the owners cannot agree, they may be forced to sell the invention at public auction.
The Partnership and Non-registered Partnership Act prescribes another solution. A partner may terminate the partnership at any time, leading to liquidation within six months. At liquidation, the property shall be sold at public auction. However, if all other partners agree, they may instead expel the partner who wants to leave the partnership and pay such partner their share of the partnership.
Whichever of the rules apply, permanent disagreement could result in making the patent available for purchase by any third party. If the joint owners want to avoid such a situation, regulating the consequences of disagreement before it arises is essential.
Cessation of patent
The patent authority may only declare a patent void if all of the joint owners request this in writing. If cancelling a patent could result in benefits, this is also something the owners need to consider.
Joint research results will in many cases be handled in accordance with norms for the joint use of intellectual property. As shown above, these principles sometimes have unpredictable or inappropriate consequences for joint proprietorship of inventions.
The lack of a joint ownership agreement may limit or completely block an owner’s ability to patent an invention, use it in their own activities or new research projects, or take legal action against a potential infringement. Due to these limitations on use, joint ownership of inventions and patents is not recommended under Swedish law without an express agreement regulating the rights and obligations of the parties.