Articles
IP Due Diligence: The Importance Of Correctly Naming The Inventors
Guy F. Birkenmeier
One of the first questions to explore in any technology transaction is who owns the intellectual property under consideration. The simplicity of this question, however, belies its profound importance to the proposed transaction: a grantor must first own rights to an invention before it can convey those rights to another. It also belies the potential complexity of the due diligence analysis that may be required.
In the U.S., the question of ownership necessarily raises the question of inventorship because, irrespective of their relative contributions, inventors are each presumed to own a pro rata undivided interest of the entire application and any patent that issues therefrom. See Ethicon, Inc. v United States Surgical Corp., 135 F.3d 1456, 1465 (Fed. Cir. 1998). In addition, each inventor is entitled to grant exclusive licenses to make, use, or sell the entire invention claimed without accounting to the other co-inventors. See 35 U.S.C. § 262. Thus, any chain of title purporting to vest rights in the grantor must include each and every inventor.
Although a due diligence analysis may begin with an inspection of the assignment records, it often will require going further to ensure that the patent accurately names the actual inventors of the claimed subject matter. This analysis may be essential to a proper assessment of a patent’s strengths, weaknesses, and overall value.
When investigating a patent listing two or more inventors, it is important to consider the dangers associated with naming more than the actual inventors. For example, if a collaborator was named as an inventor as a professional courtesy without any bona fide contribution to the claimed subject matter, the patentee/applicant has needlessly vested in the collaborator and/or the collaborator’s employer an ownership interest in the invention. This raises concerns regardless of whether the due diligence is pursued on behalf of the improperly named inventor or the legitimate inventors.
In addition, each individual named may have different responsibilities to granting agencies. For example, non-profits and small businesses that receive federal research grants are generally required by statute to report (a) the subject invention to the government within a reasonable period of time after its creation and (b) a notice electing to retain title of the invention, generally within two years. See 35 U.S.C. § 202. Failure to provide the funding agency with this notice may result in relinquishment of title to the invention to the federal government. See id. Thus, for each additional inventor added, there are additional reporting requirements that may come into play, with the stakes being as high as forfeiture of the invention.
As a practical matter during prosecution, because each individual is likely to be familiar with different prior art references, naming additional inventors is likely to increase the number of references that must be reported to the Patent and Trademark Office ("PTO"). Even if good arguments exist for distinguishing the invention over the additional references, there may be an added cost of prosecuting the application associated with filing the additional references. First, there is the obvious cost of reporting the references to the PTO. Second, there is the cost of responding to one or more office actions in which those added references are asserted against one or more claims. Finally, there is the cost of carefully responding to rejections based on those added references in an effort to reduce the odds that they may be used against the patentee during litigation later.
Each additional inventor also exposes the patent to additional risks of being found unenforceable because every inventor has an obligation to report to the PTO documents that are material to patentability. See 37 C.F.R. § 1.56. Thus, naming individuals as inventors has the effect of imposing upon them the duty to report prior art to the PTO. If they fail to do so, the patent (and potentially other members of the same patent family, if any) may be held unenforceable.
If the subject patent is ever asserted, each of the named inventors may be called to testify. Thus, a professional courtesy today may backfire five, 10, or 15 years later when that individual is called to court, particularly if the individual’s connection to the invention was so remote that it leads him or her to testify that he or she didn't really contribute much to the invention.
Just as there are dangers associated with over-inclusiveness, there are also dangers associated with excluding inventors. In extreme cases, for example, when there is deceptive intent, failing to name the correct inventors can render a patent unenforceable. See Frank’s Casing Crew & Rental Tools, Inc., v. PMR Techs., Ltd., 292 F.3d 1363, 1377 (Fed. Cir. 2002). If no deceptive intent exists, it is generally possible to correct the application (during prosecution) or patent (under 35 U.S.C. § 256) to name the correct inventors. However, it is likely to be an unwelcome surprise to find out only after suing a competitor for patent infringement that the competitor has a strong defense based on a license to the technology from an unnamed, yet legitimate, co-inventor.
The omission of inventors may pose a greater due diligence challenge than naming too many inventors because of the relative lack of information. Perhaps the best source of information regarding inventorship, and therefore ownership, is a laboratory notebook that memorializes conception and reduction to practice of the invention, particularly if the entries have been corroborated by a non-inventor. A complete laboratory notebook record is persuasive evidence that the list of inventors is complete and accurate.
Another potential resource for identifying omitted inventors is the publication record of the named inventor(s). Although there is no presumption under the law that authorship and inventorship are coextensive, prominent names on publications that are not present on corresponding patent applications may warrant further investigation. This may be particularly true when the specification incorporates one or more of these publications literally or by reference. If one or more of the named inventors has received grant funding, another potential resource for identifying potentially omitted co-inventors is the corresponding grant application. It may be worthwhile to question why individuals named as co-investigators on the grant application are not also listed as co-inventors on related patents or patent applications.
Therefore, a thorough due diligence analysis of patent ownership may require going beyond a simple comparison of the list of names on the subject patent application with the names on an assignment to look for inventors who may have been mistakenly included or omitted. Regardless of how good the technology is and how good the claims are, investment in technology without a clear chain of title is unlikely to provide a desired return.
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