Patent Title Gaps in Technology Transfers: How to Clean Up Ownership Before Filing or Enforcement

Introduction : Patent ownership is a complicated task to settle as it appears on paper. A Founder had an idea before the company even existed, consultants are being consulted to build a technology, and employees revolve around that organisation carrying half developed inventions with them, yet at none of these states does anyone bother to verify that the person who is claiming patents right now were actually legally transferred to the entity. This gap between assumed ownership and documented ownership is what created a “title defect”. The problem runs deeper than sloppy paperwork, Eg- founder who hired a freelancer to develop its application and neglected to transfer copyright on his name then he may assume that ownership rests with him but actually without documentation he cannot prove that.

Also In Indian jurisdiction Under patent law there is no default rule that employee invention is employer invention done in the course of employment, ownership depends entirely on the correct paper assignment. So even if an employer or investor spent a hefty amount on innovating a product they still have a risk of not owning the patent despite making heavy investment. In this situation investor had to face difficulties in manner that the resources provided by him and financial support may be drained by employee and investor is left mere as silent spectator. Indian legislature missed the principle of “deemed ownership” which means anything which an employee invent in course of employment the title for the same will be with employer.

Reason behind this principle is that employee used the facilities, resources etc, of employer and employer should be given the benefit.This issue is not resolved just by paperwork, the paperwork itself is misunderstood. A pre-invention or pre-employment clause promising that “all future rights belong to the company” is treated as “agreement to assign” not an actual or operative transfer in the eyes of law, because at time this clause was signed an invention does not even exist. Cross border technology transfer adds a further layer of complexity, since foreign filings built on inventions created by employees can trigger separate domestic compliance requirements that are easy to overlook.

The Issues in the Indian Legal Position The inability of the Patents Act to recognize assignments with regard to future inventions and future works result in an unnecessary complexity. The need to file another assignment, while a pre-existing contract of assignment exists, which would constitute as an ‘actual assignment’ within the meaning of Section 68 of The Patents Act appears to be a mere procedural hindrance. These defects rarely surfaced when they are created by negligence, they tend to arise later, when transfer of title matters, when investors ask for IP transfer, License is negotiated.

How title review should be done before filing, licensing, investment, or enforcement

Most companies don’t realise that they have a problem with their IP. Instead this matter becomes serious and requires rigorous steps. Reviewing the title ownership with due diligence is what matters the most in ownership or technology transfer. Here below are the key points to remember step by step while reviewing Intellectual property:-

Building a centralized Record- sometimes records become messy and it’s hard to summarize who owns what and how much. Eg-under a company logos are created by designer, UX-UI design are created by engineer cum designersCode written by engineers, investment to fund these operations are coming from someone else. So without a central record it’s very hard to tackle this role associated with invention. This record becomes your starting point for confirming titles, reviewing gaps.

Match IP to inventor- This step includes understanding the missing relationship. From your record connect your assets to IP inventor, Because this will let you know who actually knows the Title Rights. Eg- An employee still can be an owner of his invention he created for you under your resources. So this step will make the initial way of who actually owns the IP so that you will not be in a dilemma of owning the IP.

Signed Assignments- If you are done with framing initial ownership and want to go for transfer the title, then check for the language of the assignment like “agree to transfer” or “hereby Transfer”. In “agree to transfer” the inventor agrees to transfer the title in future by the rights still vested in his hands. If you want to transfer immediately then hereby is become necessary in the agreement. The court can reject the claim of ownership as agreeing to transfer is not present and agreeing to what is not even invented yet is sometimes seen as vague. Also check assignments given which type of rights- license, mortgage, Verbal/informal.

Open Source and licenses- If you are an investor or a founder and using third party service or where you are investing that entity is using third party service, then checking their license rules and conditions should be your priority. Because the entity in which you are investing or founding does not hold the IP rights. Reviewing license rules and conditions will help to understand the ownership of IP.

Related IP analysis- This is also the most important step while reviewing the IP. Even If you have well established ownership but other related IP like trademark and copyright have issues then at a later stage of exercising the right or at litigation stage it will be problematic to claim your ownership. Deceptively similar trademark or copyrighting something with genuine ownership of Patent can spoil Patents rights too.

Freedom to operate Risk- Freedom to use patent is different from ownership. Mere having ownership does not give you right of using, it just provide you to exclude others from using it. So if someone who holds older patent of same basic technology then that older patent can legally block you. So when you buy/sell/license a patent you need to search for these blocking patents and also that seller has license to use it if found such patent. After this check for cluster patents, a technology/product requires more than one patent to work and all these patents in combination make one complete, so checking if these supporting tech patents are properly patented will help you commercialise or execute your product efficiently. Even when ownership paper seems perfect still check for- if that patent was ever involved in lawsuit and find out what was the actually the issue of lawsuit and parties contention. If the case was settled , check for grounds and condition for settlement.

Checking business model and Financial analysis of IP – check for the business model that technology actually make sense for business. Does the license have potential to turn technology into a product? Also check for your product competitors in the market if they can steal your product sales by applying different or simple technology. Sometimes Founder/inventor abandon the technology without simply using it, this become problematic for later patent and also becomes blocking patents. Checking IP financial Capacity is also beneficial ( R&D, Manufacturing, Distribution, Royalties) to actually see if its better to invest in IP. Even when You have 100% clear ownership this financial analysis stops you from overlapping which is not paying more than the actual technology worth for.

Validity of Patent – Check for validity of patent, till when patent is valid and domestic and foreign ownership of patent. Also if some business is involved in data transfer then look for country Specific Data protection rules as it allows you to monitor your IP rights and licensing rules.

Case Laws

1. Darius Rutton Kavasmaneck V. Gharda Chemicals Limited : A claim was brought up by a company minority shareholder against the Company Managing Director who was entitled to personally own any invention he made during his tenure. When It came to notice that the Managing director of the company registered several patents using company resources, all shareholders argued that these patents belong to the company. However, the court rejected this stating that Indian law contains no such provision that automatically grants ownership of IP to employer/company if done by employee in course of employment. Held that Individual never charged the company royalties, So it suffered no real loss and his duty related to job does not include invention, so No employer-employee related to IP claim can be made.
2. Board Of Trustees Of Stanford V. Roche Molecular System, Inc. : A university researched had 2 independent Agreements, i.e. One was with his employee in university in which he used “agree to Assign” and other with a company with which he used “agreed to assign and hereby assigned” his invention immediately. He later invented a process technique through using company resources and this invention was claimed by both university and company. The U.S court held the company present tense language in agreement and assigned the rights with the company immediately when it was executed while the language of the university looks future promise to assign.

Common Red Flags To Avoid While Due Diligence

• Assuming that Hire for work always applies and for whatever invented by an employee belongs to you. Many businesses in starting avoid these issues and later pay hefty for these small issues.
• Do not wait to review IP until investors ask for it. This can be a deal breaker for your business, Pre documenting your IP before your fundraising prevents unnecessary Hassle.
• Not every IP is registered, some are trade secrets, this secret can be your data or your price listing, your process. A single data leak can cost you your whole company. So by signing NDAs with employees and encrypting systems or limited access is necessary.
• Check on employee data, when someone leaves the company they can become an asset to your competitor. So maintain an employee data , run an employee background if they were involved in IP related litigation or case.
• Third party Licensing, If the seller gave license rights to a third party make sure you check the language and content of agreement and make sure that right is transferable to you wholly in the future.
• Equity exchange- Some partners are silent and they hold equity in return for some role like for consultant but it should be clearly agreed between both parties that how much this partner has stake in their IP rights. A co-owned IP should be properly documented with very clear language.
• In a startup or business a person needs to sign many documents for creating his rights like- Partnership agreement, NDAs, General contract, so this makes documentation very complex. So make sure the IP specific Language is common in all Agreements irrespective of what title they serve.
  

Conclusion

The defects in patents rarely pop out early at the initial stage, they get noticed at point when stakes get too high to avoid these titles. As Indian law offers no or minimum rescue from title defects in this situation, maintaining extensive records, and keeping ownership clear at every stage becomes a necessity. Cost of Due-diligence is much lesser than pre litigation mediation and actual litigation which is why just a normal diligence check on your patent can save you hours which may not be profitable for you business.

Author :- Mayank, in case of any query, contact us at Global Patent Filing or write back us via email at support@globalpatentfiling.com.

Endnotes

1. The Patents Act, 1970, No. 39 of 1970, §§ 2(1)(y), 6, 7, 68 (India) (governing entitlement to apply for patents, assignment of patent rights, and requiring patent assignments to be in writing and duly executed).
2. Darius Rutton Kavasmaneck v. Gharda Chemicals Ltd., 2015 SCC OnLine Bom 4704 (Bombay High Court) (holding that Indian law does not automatically vest ownership of employee-created inventions in the employer merely because company resources were used, absent a contractual assignment or legal obligation).
3. Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 563 U.S. 776 (2011) (distinguishing between an agreement to assign future inventions and a present assignment of patent rights, emphasizing that patent ownership depends on the language of the assignment).
4. The Patents Rules, 2003, rr. 90–92 (India) (prescribing the procedure for registration and recording of assignments, transmissions, licences, and other interests in patents before the Indian Patent Office).
5. World Intellectual Property Organization (WIPO), Successful Technology Licensing (WIPO Publication No. 903E, 2020) (explaining the importance of clear ownership, assignment documentation, and due diligence in technology transfer and commercialization of intellectual property).
6. World Intellectual Property Organization (WIPO), Exchanging Value: Negotiating Technology Licensing Agreements—A Training Manual (2d ed. 2005) (discussing chain of title verification, ownership documentation, and IP due diligence in technology licensing transactions).
7. 35 U.S.C. §§ 261, 262 (2024) (providing that patents and patent applications are assignable by written instrument and governing ownership and assignment of patent rights under U.S. law).
8. Organisation for Economic Co-operation and Development (OECD), Collaborative Intellectual Property Transactions and Technology Transfer (OECD Science, Technology and Industry Policy Papers) (highlighting the importance of ownership verification and intellectual property due diligence in commercialization and cross-border technology transfer).