20 October 2014

Six top tips on how to avoid and resolve disputes as to who is entitled to a patent

A fair proportion of the disputes that the Comptroller (or chief executive officer) of the Intellectual Property Office has been asked to resolve since 1998 are entitlement disputes. 

What are "entitlement disputes?"
These are disputes over who is entitled to apply for a patent for an invention or who is entitled to a patent that has already been granted. These disputes can arise in a number of ways.  Folk who have collaborated in creating the invention may fall out over which of them of any is the real inventor of the invention or they may disagree as to the terms of their agreement to work together. The Intellectual Property Office offers a mediation service to resolve all kinds of intellectual property disputes but if the parties choose not to use it or if mediation fails then the Comptroller has a team of officials known as hearing officers who decide the dispute on his behalf in accordance with the Patents Act 1977 and the general law.

The Comptroller's Powers
The Comptroller can decide:
  • who is entitled to apply for a British patent for an invention under s.8 of the Act;
  • who is entitled to apply for a patent other that a British patent under s.12; and
  • who is entitled to a British patent that has already been granted under s.37.
If he decides that a patent has been granted to, or applied for by, the wrong person he has a wide range of powers for putting things right.

Who can apply for a Patent?
Anyone can apply for a patent but s.7 (2) (a) provides that a patent shall be granted primarily to the inventor or joint inventors. However, that paragraph is subject to s.7 (2) (b):
"in preference to the foregoing, to any person or persons who, by virtue of any enactment or rule of law, or any foreign law or treaty or international convention, or by virtue of an enforceable term of any agreement entered into with the inventor before the making of the invention, was or were at the time of the making of the invention entitled to the whole of the property in it (other than equitable interests) in the United Kingdom."
Most entitlement disputes turn on who was the  inventor and whether there is a contract term or other rule of law that entitles someone other than the inventor to apply for a patent.

Who is the Inventor?
The first step is to determine who is the inventor.

S.7 (3) of the Act provides that an “inventor” in relation to an invention means the actual deviser of the invention.  That prompts the question "what is the invention?"  Although for most purposes that question can be answered by looking at the numbered paragraphs at the end of a patent specification known as "the claims" (see "How to read a Patent" 2 Aug 2013 IP London) that cannot apply to a patent application where there have been no claims or indeed where there is not yet even an application. In Markem Corporation and Another v Zipher Ltd. [2005] RPC 31, [2005] EWCA Civ 267 the Court of Appeal decided that the invention is the inventive concept and the inventor is the person who came up with that concept.  As Lord Justice Jacob put it at paragraph 101:
"It would be handy if one could go by the claims, but one cannot. s. 8 calls for identification of information and the rights in it. Who contributed what and what rights if any they had in it lies at the heart of the inquiry, not what monopolies were actually claimed."
The starting point may be the specification and the circumstances in which the invention was created. The inventor is the person who identified the problem and came up with a solution.

Is there any relevant Contract or Rule of Law?
The next step is to determine whether there is any contract or rule of law that entitles someone other than the inventor to apply for or be granted the patent.

The most common reason why someone else might be entitled to an invention is that the inventor was employed. S.39 (1) of the Patents Act 1977 provides that if the inventor was employed in a capacity in which he might reasonably be expected to invent something or if he was an executive director or had some other special obligation to further his employer's business then the invention and the right to apply for a patent for the invention  would belong to the inventor's employer. In all other cases the invention will belong to the employee.  However, that is subject to the terms of employment that the inventor and his employer have actually negotiated though it has to be said that most contracts of employment provide for the employer to take his employee's invention.

As that may be a little unfair where the employee is modestly paid and the employer earns a lot of money from the invention s.40 provides for employee to be compensated over and above his pay and perks where the invention is of outstanding benefit to the employer but that is a topic for another discussion.

It is important to note that self-employed contractors and consultants are not "employees" for the purpose of s.39 and there is no presumption that the person who commissions product design or development work gets the right to apply for a patent for an invention that may result from the work. If that is what the parties' wish they should set that out in their commissioning agreement. Many product design consultancies but nor all have terms and conditions that set out who is to own the intellectual property in their design and development work.

Essential Reading
The Intellectual Property Office has published a useful booklet entitled Patents Deciding Disputes which you should read before issuing proceedings.  You should also consult the Patents Act 1977, the Patents Rules 2007 and a series of directions on the conduct of proceedings known as Tribunal Practice Notices which are archived on the IPO's old website at the National Archives.

The person who seeks a decision from the Comptroller under s.8, s.12 or s.37 of the Act is known as "the claimant". He starts the procedure by filling in Patents Form 2 and setting out his case in a separate document known  as the "Statement of Grounds" which are filed with the Intellectual Property Office.  If the other side ("the defendant") wants to defend the proceedings, that party will file a document known as a "Counterstatement" setting out the terms that are admitted, those that are not admitted, those that are denied and any special defence that is relied upon. The Statement of Grounds and Counterstatement are known as statements of case and examples of both statements of case are provided in the Patents Deciding Disputes booklet.

After statements of case have been filed and exchanged a hearing officer may produce a preliminary evaluation setting out the issues and how he expects them to be determined. This is not an official decision and the parties are free to disregard it if they so choose though if they do so unreasonably they may increase their liability to costs. The purpose of the preliminary evaluation is to facilitate negotiation or mediation including mediation by the procedure mentioned above.

If the parties cannot settle their dispute on of them may request directions at a hearing before a hearing officer known as a "case management conference" or "CMC" which can usually be conducted by telephone. The hearing officer will set out a timetable for the filing and exchange of evidence and such other directions as the parties may require. Evidence is normally filed by witness statement an example of which appears in the booklet.

Many disputes can be decided on paper without the need for a hearing and that will reduce the costs that the unsuccessful party has to pay. However, if there is a dispute over the facts or there are complicated arguments over the construction of a contract or the law a hearing may be ordered.  These usually take place with the hearing officer sitting at the Intellectual Property Office main office in Newport and the parties addressing him or her by video link but if witnesses have to be cross-examined the hearing officer will travel up to London or some other venue to conduct the hearing. In recent years I have represented clients in Leeds and Manchester as well as Newport and London.

The hearing officer usually delivers judgment some 6 to 8 weeks after the hearing.

Costs are awarded on a fixed scale which covers a modest proportion of the successful party's costs unless the hearing officer believes that a party has behaved unreasonably in which case he or she may award the successful party more.

Appeals from the hearing officer lie to the Patents Court which is part of the Chancery Division of the High Court of Justice.

Practical Tips for avoiding and resolving Disputes
Although less stressful than High Court litigation it is obviously better to avoid going to the Comptroller at all if possible.
  1. Inventors should keep a notebook or other record in which they set out every step they take in identifying a technical problem and finding a solution. Ideally, the pages should be numbered consecutively and every entry dated, timed and signed. That helps the parties and, if necessary, the Comptroller and the courts to identify the invention and the person who should take the credit for it. It is a very useful discipline and it was a virtual requirement for an American patent when the US Patent and Trade Mark Office granted patents to the first to invent rather than the first to file.
  2. If 2 or more people agree to collaborate whether as a research and development team, consultants or contractors or as investors it is a good idea to set out who is to own any patents or other intellectual property that may result from the collaboration and in what shares. You can do it yourselves but it would be safer to get a patent attorney or specialist solicitor or barrister who can accept instructions under the Public Access Rules to draw one up for you.
  3. Product design and development consultants and companies that outsource a lot of their design and development work should provide for the ownership of any intellectual property that may result from such work in their terms and conditions of business or as the case may be terms and conditions of procurement. Such terms could also provide for cost effective dispute resolution procedures such as mediation and expert determination.  Again, that is something with which patent attorneys and other specialist lawyers including ourselves can help.
  4. If a dispute does arise take specialist legal advice as soon as possible. A good lawyer or patent attorney can advise you of the strength of your case and your options for resolving the dispute.
  5. As legal advice and representation can be expensive it often pays to get before the end legal indemnity insurance that covers intellectual property disputes. Most legal indemnity policies exclude such cover but there is a growing market for such insurance and premiums are beginning to fall.
  6. Make sure that you are fully aware of the law relating to your business so that you can take key decisions in good time.  We hold regular seminars and publish briefings on all aspects of IP for business owners and managers as well as legal professionals.
Further Information
If you want to discuss any of these issues you can  call me during office hours on 01484 599090 during normal business hours or message me through my contact form. You can also get in touch through Linkedin, Facebook or twitter.