How to avoid Entitlement Disputes

 

Jane Lambert

In Disputes over Ownership of Inventions 6 Aug 2015 NIPC South East I wrote:

"According to the Intellectual Property Office at least 30 disputes are referred to its tribunals every year over who should own or be entitled to apply for a British or foreign patent or be named as an inventor (see the table on page 50 of the IPO's Facts and figures for 2013 and 2014 calendar years)."

As I said in the next sentence, disputes over ownership of patents or patent applications are known as "entitlement disputes."  Of the 41 inter partes hearings, and reasoned decisions made without a hearing in 2014 mentioned in that table, 31 were entitlement disputes.  The situation had not changed much by 2018 which is the last year for which I have been able to find comparable statistics.  According to the table on page 60 of Facts and Figures 2018, entitlement disputes accounted for 24 of the 38 inter partes hearings, reasoned decisions made without a hearing and reviews of opinions in 2017 and 21 of the 32 in 2018.

Entitlement disputes are often heartbreaking because they arise from a breakdown of hope and trust and sometimes friendship.   The right to a patent or patent application is contested fiercely even when the patent is clearly invalid or of little commercial value.  There are three types of relationships from which entitlement disputes tend to arise:

• The first is between friends or acquaintances where one of them has a bright idea and the others pitch in to help him or her develop it.   
• The second is where the inventor hires a product design consultant, engineer or some other contractor to help with the product's design or development.
• The third is where the inventor or the original collaborators accept investment from an angel, venture capitalist or some other third party.

In the first situation, the friends or acquaintances fall out when they meet the first hurdle.   That can occur in a variety of ways.  One of them may want to apply for a patent or make a prototype and the others do not because they will have to dip into funds that they had earmarked for other purposes.  The second situation may arise because the inventor and third party fail to draw up a proper consultancy agreement or rely on the standard terms of business of the third party which do not reflect the parties' intentions.   The third situation can arise where the investor has paid for everything and the inventor has contributed nothing other than his or her initials idea but still insists on the application proceeding in his or her name alone.

Each of those situations can be avoided if the parties take independent legal advice and negotiate a written agreement that reflects the parties' intentions before any time or money is committed.   By independent, I mean a barrister, solicitor or patent attorney who is unconnected with the patent attorney who prosecutes the patent application.   I say that because in every entitlement dispute in which I have been instructed the attorney has been instructed by one of the parties.   It is next to impossible to act for a client but also safeguard the often conflicting interests of the other parties.

A properly negotiated and drafted agreement will anticipate the possibility of the parties falling out over minor as well as major issues and provide machinery for resolving them such as expert determination in the case of minor issues and mediation or some other form of alternative dispute resolution in the case of major issues.  Taking independent legal advice may be daunting at a time of rising interest rates and flattening demand but it is chickenfeed in comparison to the costs of the sort of entitlement dispute that I describe in my 2015 article.   And in relation to that article, the only thing that has changed since 2015 has been the costs of litigation which have increased along with everything else,  

So if you are thinking of collaborating on the development of an invention or investing in such a collaboration have a word with me or some other specialist lawyer or attorney first.  If you are unfortunate enough to be caught up in an entitlement dispute, I (or someone like me) may be able to advise you on how to resolve it without going before a hearing officer.   If a tribunal hearing cannot be avoided, you will need some skilled and experienced specialist representation before it.  Once again, there are members of the Intellectual Property Bar Association (of which I am one), the Chartered Institute of Patent Attorneys and specialist solicitors who can help you,

Anyone wishing to discuss this article may call me on 020 7404 5252 or send me a message through my contact page,

Further Reading

For an example of an entitlement dispute, read Jane Lambert Patents - Bionome Technology Ltd v Clearwater 14 Dec 2024 in NIPC Law.

Writing IP into your Business Plan

Author Grenavitar Licence Public Domain Source Wikimedia Commons

Paternoster Square, City of London

 

Jane Lambert

A business plan plots out the course that a business is to take from its present position to a point in the future.  During that time it is expected to develop new products and/or services that will attract customers.  The design of goods, the technology that the goods or services incorporate or by which they are made or marketed and/or the reputation that the business develops are business assets.  As they are creations of the mind rather than space or machinery they are often referred to as intellectual assets.  The legal protection of those assets is known as intellectual property.

The first step is to identify intellectual assets.  As they are not always obvious, startups and other small businesses should make use of the WIPO's IP Diagnostics and the British Intellectual Property Office's IP Healthcheck tools which I mentioned in Saving Money on IP at a Time of Rising Prices on 19 May 2023.  As a company expands and becomes more diverse its owners should carry out regular intellectual property audits.  In How to Use an IP Audit (13 Jan 2022 NIPC News) I described IP audits as "a tool for identifying 'potential IP assets', that is to say, protectable intellectual assets."  That article discussed the different types of intellectual audits and how they may be used in business planning.

In that article, I warned:

"Like other tools, an IP audit can be misused. The identification of a patentable invention does not mean that a patent must always be sought. Considerable resources may be required to protect the invention in the countries where it may be marketed as well as those in which suppliers of competing products are located. Unless the development, production, marketing and distribution of the invention are already featured in or can be incorporated into the company's business plan. there are likely to be better uses for such resources."

In the next paragraph, I wrote:

"An IP audit can be put to better use when devising and monitoring the implementation of an intellectual property strategy."

I defined an intellectual property strategy as "the systematic application of intellectual property laws to achieve business objectives" in "What is an Intellectual Property Strategy" in NIPC Law on 19 May 2017.  I gave an example of a simple intellectual property strategy in Putting IP at the Heart of Your Business Plan in NIPC News on 2 Jan 2015:

"(1) Identify the likely income streams over the period of your business plan: these may be sales, payments for services, grants, subsidies - any kind of revenue;
(2) Consider the threats to those income streams over that period - most of those threats will be commercial such as competition from other businesses and changing customer behaviour but a few could result from copying your products or riding on your reputation;
(3) Develop responses to those threats - as most of those threats will be commercial so will your responses such as reducing prices and developing new products but such threats as plagiarism and free riding may require a legal response;
(4) Tailor your response to suit the threat and your resources - there is often more than one form of legal protection such as keeping your new product under wraps and relying on the law of confidence to keep it secret rather than seeking patent protection so consider all the options before you actually spend money on searches and applications."

I amplified that last point in Saving Money on IP at a Time of Rising Prices.   Patent prosecution is expensive and comes with the important downside that every invention must be disclosed "in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the art," Not every invention needs to be patented.  Much innovation can be protected adequately by trade secrecy or design rights.   

I also emphasised the importance of enforcement in Putting IP at the Heart of Your Business Plan and  Saving Money on IP at a Time of Rising Prices.   Business planners have to beware that a well-funded competitor may attempt to revoke their patent or other intellectual property right or simply infringe it.  While the Small Claims Track of the Intellectual Property Enterprise Court will resolve most types of IP claims for £10,000  or less that can be tried in a single day and there are cost-effective alternatives to litigation such as patent examiners' opinions and the Uniform Domain Nane Dispute Resolution Policy that I mentioned in Saving Money on IP at a Time of Rising Prices, most IP litigation is expensive.  Few startups or other small businesses can afford the cost of litigation in the Patents Court or even the Intellectual Property Enterprise Court multitrack.  The only way many of them can defend themselves is by relying on before-the-event IP insurance. A small number of brokers such as Sybaris Special Risks and Safeguard IP are beginning to write policies for small and medium enterprises.   As I said in Saving Money on IP at a Time of Rising Prices, the IPO has provided some useful guidance on IP insurance and the Chartered Institute of Patent Attorneys and the Chartered Institute of Trade Mark Attorneys. publish a list of specialist IP insurance brokers.

It is now possible to identify the information that can be written into a business plan:

• the intellectual assets discovered by using the WIPO or IPO diagnostic tools or commissioning an IP audit;
• professional fees for carrying out such an audit;
• costs of prosecuting applications for such patents, registered designs, trade marks or other registrable rights as are found to be necessary for devising an IP strategy;
• premiums for intellectual property insurance;
• renewal fees for patents and other registrable rights; and 
• contingencies and other miscellaneous expenses.

Costs are not the only information to be inserted into a business plan,   Assets have value and for many businesses, the most valuable assets may be their brand, their designs, their technology or their creative works.  Estimates of the expected values of those assets should also be inserted into the plan.   It is those assets that are most likely to persuade investors to invest or lenders to lend to the venture.

Anyone wishing to discuss this article may call me on 020 7404 5252 during office hours or send me a message through my contact form.

Legal Aid for Proceedings in the Unified Patent Court

 

Jane Lambert

Art 71 (1) of the Unified Patent Court Agreement enables natural persons who are unable to meet the costs of proceedings in the Unified Patent Court, either wholly or in part, to apply for legal aid at any time. The same paragraph continues that the conditions for granting legal aid are laid down in the Rules of Procedure.

 I first discussed this topic in Legal Aid for the UPC on 25 Jan 2016.  That was long before the adoption of the Rules of Procedure and references to "the Rules" in my article were references to the 18th draft which was published on 19 Oct 2015.  The main difference between the adopted Rules and the 18th draft is that rule 377 (1) of the draft restricted eligibility for legal aid to natural persons who are citizens of the European Union or a third country national residing lawfully in a Member State of the European Union.  I am glad to say that that qualification has been removed.  Rule 377 (1) of the Rules now provides:

"The applicant shall be entitled to apply for legal aid where: 

(a) owing to his economic situation, he is wholly or partly unable to meet the costs referred to in Rule 376; and 

(b) the action in respect of which the application for legal aid is made has a reasonable prospect of success, considering the applicant’s procedural position; and 

(c) the claimant applying for legal aid is entitled to bring actions under Article 47 of the Agreement."

It would appear that nations or residents of any state can apply for legal aid so long as they meet the other requirements of the Rules. 

As legal aid for intellectual property work in England and Wales was abolished by s.6 (6) and para 1 (1) (h) of Sched. 2 to the Access to Justice Act 1999, the availability of legal aid in the Unified Patent Court could attract many academics. research students and other individual inventors in the UK.  As the UPC will interpret and apply the European Patent Convention which is also the basis of English and Welsh, Scottish and Northern Irish patent law it could resolve many disputes that would otherwise have been decided in the Patents Court or Intellectual Property Enterprise Court.

The Rules governing legal aid are Rules 377 to 382 and they are essentially the same as in the 18th draft. Readers can refer to my previous article for the purpose of the Rules, the costs that are covered, the payment of costs to successful unassisted parties, eligibility applications, withdrawal of legal aid and the recovery of legal aid payments.  There is also a holding page on legal aid on the UPC's website.

British inventors cannot be represented before the UPC by British counsel and solicitors because art 48 of the UPC Agreement requires parties to be represented either by lawyers authorized to practise before a court of a contracting member state or European patent attorneys who are entitled to act as professional representatives before the European Patent Office pursuant to art 134 of the EPC and who have appropriate qualifications such as a European Patent Litigation Certificate.  Nevertheless, it is worth mentioning that James Bridgeman SC of the Irish bar is an ad eundem member of my chambers' IP team. He has considerable experience in IP law as he practised as a trade mark attorney before he became a barrister.  Although the Irish Republic has not yet ratified the UPC agreement it is a contracting member state.   There is no reason why IP practitioners from these or other chambers could not assist Mr Bridgenman or other advocates in appropriate circumstances.  

Anybody wishing to discuss this article may call me on 020 7404 5252 during office hours or send me a message through my contact form.