Joint inventorship presents one of the most challenging situations within patent law. It allows the ownership of a patent to reside with more than one person; and, as a result, it can create uncertainties over the patent’s chain of title when the inventors’ interests diverge. To avoid such problems, it is preferable to address joint inventorship issues upfront—before any discussions with investors or collaborators takes place. The fact pattern below highlights situations that commonly arise with joint inventors and it then proposes some solutions.
Alice and Dwayne are friends in upstate New York. They are both interested in magnetic resonance imaging (“MRI”) machines and they are trying to come up with a process that speeds up the time it takes to effectively use an MRI machine. They believe that their research—if successful—presents a tremendous opportunity to improve rural medicine due to the scarcity of MRI machines in these areas. Additionally, because the average MRI scan takes between 15 to 90 minutes, queues often plague the speed of administration that rural community hospitals are capable of.
Alice and Dwayne successfully develop a software that decreases the time of an MRI scan by a factor of ten. Realizing the unique and transformative nature of the software, the two file a patent with the United States Patent and Trademark Office (“USPTO”) and list themselves as the inventors of the patent. They do not form a company, nor do they have any intellectual property (“IP”) agreements in place to determine how any IP developed by them would be handled. For all intents and purposes, Alice and Dwayne own the intellectual property jointly.
Shortly after filing, Alice mentions the software to her Aunt—a top executive at a leading medical device company. Alice’s Aunt tells her that the company would likely buy the rights to the patent for $10 million. Alice rushes to tell Dwayne who expresses discontent with the offer. Dwayne prefers to provide the software for free through an open-source license to improve rural communities’ healthcare systems.
This hypothetical illustrates a particularly nascent problem within the intellectual property space. Absent any agreements to the contrary, patent ownership resides with the inventor or inventors of the patent. Inventorship, in turn, is determined by whether the person contributed to the “conception” of the idea, or “the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention as it is thereafter to be applied in practice.” Assuming that both Alice and Dwayne contributed to the conception of the new software, then both Alice and Dwayne are inventors on the patent and therefore jointly own the patent.
Ownership of a patent comes with benefits, one of which is the right to sell or license out the patent. When there are multiple owners of a patent, each one of those owners may sell or license out the patent without the permission of the other owners. In our fact pattern above, Alice’s desire to sell the patent to her Aunt may be hindered by Dwayne’s desire not to do so. In fact, if Dwayne starts providing the software for free, Alice’s Aunt’s company may no longer be interested in buying the patent when they learn that it is being provided at no cost.
Nevertheless, mechanisms exist that can mitigate such joint inventor problems. One rather simple solution is for the inventors to agree upfront on a contract that would govern rights and responsibilities to jointly held inventions. This would provide some guidance for the inventors for when to sell the joint work, when to bring suit, and so on.
Another more robust solution is for the inventors to form a separate corporate entity to which the inventors will assign their intellectual property. For instance, Alice and Dwayne could have formed a c-corporation and assigned all intellectual property related to fast MRI scans to the corporation. This process provides better protection for inventors because it removes the concerns about joint inventorship by placing ownership of the invention into a company, which would have the sole power to sell or license the patents to a third party.
To bolster the protection offered by using a company to hold title for the intellectual property, the founders can carve out what IP the inventor retains based on specific uses. For instance, the parties can agree to divide the interest to arising intellectual property into distinct fields of use, and each party would retain rights within its pre-defined field of use. In our fact pattern, for example, Alice could retain rights over MRI uses for epilepsy while Dwayne could retain rights for stroke. This allows each party to maintain some exclusivity to the arising inventions, preventing one party from potentially sabotaging the other party’s interests.
Using either of these devices helps contemplate the problem that joint ownership can present. By negotiating each inventor’s rights ahead of time, inventors avoid—or at least mitigate—disputes that may arise as interests diverge.
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