Services: Intellectual Property & Technology

What you need to know

  • A recent decision of the Federal Court has highlighted the importance of creating appropriate legal documentation when independent contractors are engaged to do work.
  • Equally important is the need for such documentation to be retained, since the entitlement to an invention may depend on being able to demonstrate the assignment of rights from an inventor to the applicant for the patent.
  • Given the long time periods involved in patent litigation, these contracts may need to be retained for decades.

When independent contractors are engaged to perform work, there are many reasons why their contracts should be carefully prepared.

One of those reasons has been highlighted by a recent Federal Court of Australia decision on the subject of entitlement to a patent. The case of Merial, Inc. v Intervet International B.V. (No 3) [2017] FCA 21 demonstrates the importance of creating and retaining appropriate legal documentation for independent contractors who are involved in the creation of patented technology. The case also serves as a reminder that independent contractor agreements may need to be retained for several decades, given that patent disputes can often be lengthy ordeals that develop after a patent has been granted.

Background

Intervet filed a patent application which became the subject of an unsuccessful opposition in the Australian Patent Office by Merial.

On appeal to the Federal Court, Merial alleged (among other things) that Intervet was not a person to whom the patent could be granted.1 This allegation was made on the basis that Intervet did not derive title to the claimed invention from one of the named inventors, Mr Pieloch.

Intervet argued that there was a written agreement between Pharma Chemie (Mr Pieloch's company) and Intervet that assigned to Intervet the relevant rights to inventions arising from two projects. Pharma Chemie was presumed, for the purpose of this decision, to be entitled to assign any rights of Mr Pieloch.

However, this agreement between Intervet and Pharma Chemie was not in evidence and, during its discovery searches, Intervet was able to find only limited documentation in respect of the two projects. This wasn't surprising, given that:

  • over 10 years had passed since that work was done
  • several acquisitions involving the Intervet group had occurred in that time (involving the transfer and loss of many files, including those of one of the named inventors)
  • key personnel had departed.

Although Intervet was unable to find a copy of the relevant contract, it argued that the agreement would have been similar to others that had been made with Pharma Chemie in relation to other projects. An example was a 2004 contract which included a clause in the following terms:

All inventions, improvements, discoveries and innovations (whether or not patentable) conceived or first actually reduced to practice in the performance of services under this Agreement shall be deemed to be, and shall be, the property of Intervet, and Consultant shall ... cooperate with Intervet in the preparation, prosecution and enforcement of such patents and patent applications... .2

Merial's position was that there was no such agreement covering the claimed invention. It relied on, among other things, a 2003 letter from Pharma Chemie's United States lawyer which asserted that no such assignment existed, and Mr Pieloch gave oral testimony to the same effect. The 2003 correspondence concerned a related US patent application and an attempt by Intervet to have Mr Pieloch assign to it the invention that was the subject of that US application.

Findings

Moshinsky J found that there had been no express assignment from Pharma Chemie to Intervet of the rights to the invention claimed in the patent application in suit. This was partly on the basis that if there had been an agreement assigning the invention between Intervet and Pharma Chemie, as Intervet sought to argue, it would have been produced in response to the 2003 correspondence from Pharma Chemie's lawyer. No such responses were in evidence, and ultimately a notice of abandonment was issued in relation to the US patent application.

A certain 'Manufacturing and Supply Agreement', referred to in the 2003 correspondence, was also not in evidence. Moshinsky J found that this agreement did not include an express assignment of rights, since the relevant correspondence stated that there was no such assignment.

Because the relevant law was that of the United States, both parties adduced expert evidence on the position under US law with respect to the assignment. Although Moshinsky J preferred the evidence of Intervet's expert to that of Merial's, his Honour found that an express assignment in writing was required under US law.[3] Although there are exceptions to that requirement under US law, these were not held to apply.

Key takeaways

The case highlights the importance of ensuring that appropriate agreements with independent contractors, including intellectual property assignment provisions, are documented. Equally important is the need for such documentation to be retained. Given the long time periods involved in patent litigation, these contracts may need to be retained for more than 20 years.

Footnotes

1 See section 15(1)(c) of the Patents Act 1990 which refers to a person who "derives title to the invention from the inventor".
2 Ibid at [90].
3 35 USC §261.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories