As technology evolves, innovation is becoming increasingly collaborative. It’s not uncommon for several parties to contribute to the same invention, by reason of their respective and distinctive inputs. Recent developments illustrate why it is important to draw up clear contracts to safeguard industrial developments and prevent disputes, both between co-owners and vis-à-vis third parties. However, the stakes and issues of the joint ownership of a French patent remain largely unknown. This article summarises the default rules of such co-ownership and demonstrates why private agreements are essential.
Patent co-ownership may be defined as a form of ownership whereby two or more persons (whether natural or legal) are privately invested with undivided shares of the same industrial property rights. This co-ownership may result from a joint application, a claim, a transfer of shares, a research contract or even a succession. It should be distinguished from joint paternité or co-titularité, ie collective authorship, granted to persons who have contributed to the technical conception (which does not in per se imply the allocation of a share).
Under French law, the legal framework for joint ownership of patents is defined by Articles L. 613-29 to L. 613-32 of the French Intellectual Property Code and clarified by case law. This regime is not public policy. It subsidiary to the intentions of the parties, which means that it applies automatically (in the absence of a contrary agreement) to their relations to define and allocate their rights and obligations relating to the patent.
1°) The default regime of the French Intellectual Property Code
In principle, each co-owner may exploit the invention for their own benefit. This personal exploitation is subject to a fair compensation paid to the « passive » co-owners (who do not exploit the invention personally and have not granted any exploitation licence). If no agreement is found, the consideration is determined by the court. For this reason, financial retrocessions, commonly referred to as “royalties”, should be clearly defined by way of contract (see below).
If co-owners do not exploit the invention personally and directly, they may choose to grant third parties a right of use by way of a non-exclusive licence. The law, however, provides a stringent pre-emption mechanism, designed to guard against competitors. The concession project must be notified to the other co-owners, together with an offer to transfer the relevant share within the patent at a specified price. Within three months of such notification, the co-owner(s) wishing to oppose the licence concession are obliged to acquire the share of the co-owner who wishes to grant the licence. Extending exploitation rights to third parties through a licence is therefore risky. It is a decision whose consequences must be fully anticipated.
While each co-owner may also grant an exclusive licence, this is always subject to the prior unanimous consent of the others. Failing this, the exclusive licence is unenforceable against those who did not consent, and the defaulting party may be held liable.
Another central prerogative of co-ownership is that each co-owner may bring infringement proceedings (for patent counterfeiting) autonomously. The co-owner initiating such proceedings must, however, notify the other co-owners of the action, to allow them to join if they so wish. Collective action remains possible, though it is not mandatory. In other words, each co-owner is vested with a potential role as defender of the patent and the rights and interests deriving therefrom.
Co-ownership naturally terminates upon the expiry of the patent. However, a co-owner may wish to exit the regime beforehand. Two main mechanisms exist in such cases: voluntary abandonment of the share or transfer of the same to third parties.
2°) The contractual framework for co-ownership of a French patent
As explained supra, the applicable regime default, derived from the provisions of the French Intellectual Property Code, is both clear and efficient. However, it remains quite broad and unspecific. That is why we usually recommend drafting co-ownership agreements. Ideally, this contract should be negotiated before filing a patent application, or even be the subject of preliminary deeds (invitation to tender, LOI, promise etc.).
It is possible to derogate from the supplementary regime set out in Articles L613-29 to L613-31 of the French Intellectual Property Code. In matters of co-ownership of patents, contractual freedom is the rule. In most situations, it is therefore wise to take advantage of this freedom by tailoring the rights and obligations of the parties during the term of their patent.
In our view, the following topics deserve to be addressed a minima in the co-ownership agreement (règlement de co-propriété sur brevet):
- The initial allocation of shares. It is in fact the contract that will define the respective proportions of the patent shares. This fundamental aspect must be the subject of an explicit agreement between the parties, if only to limit the risk of litigation.
- Transfers of shares. Like the articles of association of a company, the co-ownership regulations may impose certain conditions governing the validity and enforceability of transfers of shares. One example is the right of pre-emption, which allows the original co-owners to prevent the entry of an external member through acquisition.
- The appointment of a patent agent. A mandataire commun may be appointed to act both as a representative towards third parties and an internal administrator towards co-owners. Their powers are generally of two types: while certain administrative acts may be adopted freely, the more serious decisions must be approved by the co-owners. For example, while the payment of annual patent maintenance fees may fall within the basic remit, the creation of a security interest will necessarily be subject to prior authorisation. We recommend that the representative be given the role of ‘mediator’ between the co-owners. The personal and professional qualities of the person chosen (a trusted individual who is familiar with the invention) are therefore essential.
- Exploitation & licences. The personal right to exploit the invention, granted by default to each co-owner, needs to be clarified and regulated. In our view, direct exploitation (by a particular co-owner) must be distinguished from indirect exploitation (by a subsidiary or related person), and transparent communication may be required in this regard. The clauses relating to the terms and conditions of personal exploitation will also cover the payment of royalties mentioned above. Finally, the granting of licences may be subject to certain additional protective formalities.
- Infringement actions. Illegal imitation or manufacture of items protected by the patent is obviously the main threat the co-owners face. While the Code already enshrines an effective individual right of action, there is nothing to prevent going further, with a view to collective protection. The burden of legal costs, the option to settle, and joint defence strategies are all issues that need to be anticipated.
- Collective decisions, majority & quorum. By definition, ownership involves the adoption of collective decisions. The drafting of a co-ownership agreement is an opportunity to define certain participation and/or voting thresholds to be respected, depending on the seriousness of the decisions at hand.
3°) Pragmatic recommendations
The process leading to the official acknowledgement of an innovation and its legal protection is always exciting. When this process is collective (for example, between a company and academic institutions or research laboratories), the legal aspects must be addressed as early as possible. This is necessary to ensure the legal security of the relationships between co-owners, but also to protect the patent from third parties’ infrigements.
The legal regime applicable by default in France is efficient and flexible. Yet, in many cases, it proves too general for the parties to rely on it entirely. This is why drawing up a taylored co-ownership contract is a must.
If you feel that drafting a co-ownership agreement would be useful in securing your intellectual property rights, we would be happy to answer your questions.
Article co-authored by Simon Deceuninck, Partner, and Manon Haller, legal intern.