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Should I Assign My Patent Rights to My Company?

I recommend that my clients assign their patent rights to an legally formed entity in which they are an owner (their own company).  As general practice, patent rights should be assigned to the entity practicing those patent rights.

Firstly, assigning the rights to your company gives the company a legitimate right to make, use, and sell the patented invention.  If you don’t assign those rights, you must at least license those rights to the entity in a licensing agreement.  The licensing creates a substantial amount of work that can be avoided with a simple assignment of your rights.  Although the license documents may seem like “formalities” (since you are also the owner of the company), because the company is a legal entity, it has several benefits such as, for example, protection from product liabilities associated with the product (protections that an individual does not have).  Without adhering to proper practices, you would risk exposing yourself, personally, to that liability.

Second, you should be putting the public on notice that your company has the patent rights to the product it is selling.  We recommend using our Patent Seal certificate to meet the legal notice requirements.  Without putting the public on notice, you will be required to identify and directly notify your market for products that may practice your invention or portions thereof. There is a nice explanatory video here.

Third, by assigning your patent rights to your company, you build your company’s asset valuation. This will add to the company’s valuation as an intangible asset which is of substantial interest to both investors and lenders.  Investors appreciate the value of an intellectual property portfolio held by a company, and it is common practice for a company to put up its patent rights as collateral for a loan.

In order to transfer your patent rights as an inventor, you, in your capacity as the inventor, must sign an assignment agreement to your company.  Upon execution, you transfer your rights as the inventor in the current applications (and any subsequently filed, related domestic or international applications) to your company, where you will have the rights to the application as an owner of the company, along with the other owners of the company.

In turn, your company will be named as the Assignee-Application on any subsequent filing (and appear on the publications of any application).  This means that your will receive all of the rights to the patent/trademark application and will have the right to subsequently file applications claiming priority to the subject matter disclosed in this application.

For those hesitant to share your patent rights with the current or future shareholders of your company – consider the following.  If you do not choose to assign your rights to an entity, you may form a single-owner entity as a holding company.  The owner of this entity may be you as an individual or, alternatively, a subsidiary of your company.  The single-owner entity serves to segregate the intellectual property (IP) rights from your company, while still maintaining them in your own entity with protection against liabilities under the law.  In turn, the holding company may license the patent rights held to the company that actually practices the invention (or any other entity to which it desires to license those rights).  The entity may collect royalties (i.e., payments for the use of the invention) in exchange for the licensing the rights.  In this way, you may also use this holding company to transfer funds from your company that uses the IP to your company that owns the IP.

The difference between as “assignment” of rights and a “license” to the rights should be understood.  An assignment is a full transfer of the rights from one party (assignor) to another (assignee).  The assignor loses all of their rights after the transfer, and the assignee gains them.  A license, on the other hand, is a limited and temporary transfer of rights.  As the licensor, you may allow but regulate the use of your invention by third parties (licensee) as you please (e.g., limits in time, territory, users, costs, etc.).

 

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

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