Record Transfers Promptly... or Suffer the Consequences

Article from our Winter 2008-2009 edition of InsideIP.

As is well known, patents and patent applications are commercial assets that can be sold, transferred or licensed. However, whilst their value in this respect may be recognised, the importance of keeping the relevant patent office informed of such transactions is often overlooked. The UK is a jurisdiction in which it is especially advisable to record transactions relating to patent rights, and a recent case before our Court of Appeal highlights the potential financial consequences of failing to do this.

Patent rights can change ownership by various means, for instance via the execution of an assignment document, or as a result of a merger of companies. Regardless of the means by which the transfer from one legal entity to another occurs, it is not compulsory to record a change of ownership at the UK Intellectual Property Office, but we usually advise our clients to do so. For example, recording the change in ownership avoids the risk that a third party incorrectly assigned rights through a later transaction will obtain any benefit from the rights.

If a change of ownership is to be recorded, it is strongly advisable to do so quickly in order to avoid repercussions. Specifically, transfers should be recorded within 6 months, otherwise the new owner does not retain full entitlement to their costs in infringement proceedings (this is a lesser penalty than the one in force for infringements occurring prior to the 29th of April 2006, when full entitlement to damages was jeopardised when a transfer was not recorded in time). The purpose of this law is to encourage the patents register to reflect the correct owner of patent rights.

The same advice applies to the registering of licences, particularly exclusive licences.

The recent case: Thorn Security Ltd vs. Siemens Schweiz AG

In the recent Court of Appeal case, Siemens had become the owner of a UK patent by a special mechanism known as “universal succession” under Swiss law, following a series of mergers among related Swiss companies. The operation of law by which Siemens acquired the patent was recorded at the Patent Office (now the Intellectual Property Office) in the UK within the required 6-month period, but the previous changes in ownership from the original proprietor had been recorded nearly 4 years late, on the 25th of February 2002. Siemens brought proceedings against Thorn in respect of alleged infringements occurring from 1998 onwards.

On the 22nd of October 2008, the UK Court of Appeal handed down its decision that Siemens could not claim damages in respect of the alleged infringements occurring whilst the true owner was not registered, i.e. before the 25th of February 2002. This would have represented a significant sum. Siemens was unsuccessful in their argument that the law relating to the recording of transfers did not apply where patent rights changed hands automatically by virtue of an operation of law.

Our Message

This case confirms the position that the penalty for failing to register transfers is not limited to transfers from the proprietor to a third party using an assignment document. Clients should particularly keep track of intra-group patent assignments, including those made as part of restructurings, and ensure that the managers of the patent portfolio are informed when this occurs. If, when dealing with a very large number of assignments in this context, it is decided to save the costs of the registrations and instead take on the risks outlined above, this should always be by informed decision rather than as an automatic course of action. Nevertheless, it would normally be that the cost of recording the transaction on the patents register is very small compared with the potential financial loss in any subsequent litigation. Finally, we recommend that, before purchasing a UK patent, investigations are made as to whether the current proprietor has their ownership properly recorded on the UK patents register.

13 Feb 2009

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