One common strategy for Canadian businesses looking to develop
new products, services, or technologies is to partner with another
business that provides expertise not available in-house.
In the knowledge economy, many of these partnerships generate
new intellectual property, which may be commercialized around the
world. This raises the issue of how to apportion the rights to the
IP between the parties. Despite being advised of the risks, many
companies choose to jointly own the rights of this new IP. There
are many reasons for this. Joint ownership seems simple and fair,
while the risks seem hypothetical and remote. Other alternatives
for apportioning the rights to the IP involve having difficult and
potentially contentious conversations that risk jeopardizing the
momentum and enthusiasm that almost always exists at the start of
the relationship. However, there is good reason for companies to
listen to the concerns of their IP lawyers and consider the risks
of joint ownership. A recent case out of the United States
highlights the risks of IP co-ownership in the patent context.
In STC.UNM v. Intel Corp., No. 13-1241, a U.S. District Court
had dismissed a patent infringement suit filed by STC (a
wholly-owned licensing arm of the University of New Mexico) against
Intel because the co-owner of the patent (Sandia Corp.) had not
agreed to join the suit as a co-plaintiff, and could not be
involuntarily joined as a co-plaintiff. The District Court also
confirmed that U.S. law requires that all owners of a patent join
in an infringement suit. The U.S. Court of Appeals for the Federal
Circuit affirmed the District Court ruling. The CAFC found that, if
a co-owner of a patent "takes a neutral position" (as
Sandia did in this case) or otherwise declines to join in a patent
infringement suit brought by the other co-owner, the
non-participating co-owner cannot be involuntarily added as a
The effect of this decision is that one co-owner of a U.S.
patent can block the other co-owner(s) (absent an agreement to the
contrary) from enforcing the patent. It is very unlikely that STC
contemplated this result when it became a co-owner of the patent
with Sandia. The decision does provide some advice on how this
outcome could have been avoided. The CAFC confirmed that U.S.
patent co-owners can, by agreement, waive their right to refuse to
join in an infringement suit.
The CAFC proceeding was initially heard by a three-judge panel
and was a 2-1 decision. STC then requested the case be reheard by
the full panel of CAFC judges. This request was denied in a close
6-4 decision. Given the sharp divisions among the CAFC judges,
there is a chance that this case may end up before the U.S. Supreme
Court. Regardless of the ultimate outcome of this case, it teaches
The default rights of the parties in joint IP ownership
arrangements can be different in various jurisdictions and for
different types of IP rights (e.g. patents, copyright).
Consequently, there can be many potential pitfalls — of which
this case is but one example — particularly when the IP
rights are commercialized in a number of different markets. The
best way to reduce these risks is not to take the easy way out, but
to have the difficult discussions up front. Often, the best
alternative is to strategically divide up the IP ownership rights
between the parties. Any demands by one party to access the IP
rights owned by the other party may be handled by appropriate
licences. Even if the parties determine that joint ownership is the
best arrangement, they should put in place an agreement that
clearly sets out their respective rights and obligations. The
agreement should address issues such as: (i) if one co-owner is
able to obtain revenue from the jointly owned IP right without the
help of the other co-owner, is the other co-owner nevertheless
entitled to some portion of the revenue; and (ii) the level of
co-operation each co-owner will provide in enforcing the IP right.
If STC followed this advice, perhaps the outcome could have been
Previously published in the December issue of Canadian Lawyer
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guide to the subject matter. Specialist advice should be sought
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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