In the era of knowledge-based economy, technical innovation has become the core driving force for enterprises to participate in market competition. Facing the double pressure of accelerated technology iteration and high R&D investment, enterprises find that commissioned development and cooperative development become important business cooperation modes which could integrate external technology resources, exploit the technical strengths of all parties involved and achieve resource complementarity and collaborative innovation. Who shall own the technical achievements formed during cooperation and how to distribute the rights in and to the relevant patent applications are one of the concerns of each party.
This article aims to systematically sort out each party’s rights and obligations in and to jointly filed patent applications, reveal the internal logic of relevant legal rules, and on this basis, provide operational guidance for practical operations.
Research and Development (R&D) Stage
There are two common R&D modes: commissioned development and cooperative development. The two modes have essential differences in respect of legal relationship, risk-bearing manner, and ownership of the technical achievement; thus the rights and obligations of each party are different as well.
Commissioned development means that the commissioning party commissions the commissioned party to develop a technology. In this mode, the commissioning party shall provide R&D fund and remuneration, put forward R&D requirements, and accept R&D achievements; while the commissioned party shall formulate and implement the R&D plan, make reasonable use of the R&D funds, complete the R&D work on schedule, deliver the R&D achievements, and provide relevant technical materials and necessary technical guidance so as to help the commissioning party master the R&D achievements. In short, the commissioning party provides funds and puts forward requirements for the development, while the commissioned party implements the R&D work and delivers the R&D achievements.
Cooperative development means that the parties participating in the R&D work by performing their respective duties and collaborating to complete the R&D tasks, i.e. all parties participate in the technology R&D substantially. It should be noted that if during cooperative development, one party only provides material conditions such as funds, equipment, materials or undertakes auxiliary cooperation matters, and the other party is responsible for research and development, such development should be determined as commissioned development rather than cooperative development.
No matter which R&D mode is adopted, the parties involved may agree on their respective rights and obligations through written agreements, and make explicit agreements on the ownership of the right to file patent applications for the "invention-creations developed".
Under the commissioned development mode, the purpose of the commissioning party is generally to master and own the "invention-creation developed" so as to maintain its position in market. Therefore, it is suggested that the parties involved clearly agree that the commissioning party solely owns the "invention-creation developed" and has the right to decide whether to file patent application(s) or not; in the event of filing patent application(s), the commissioning party shall be the sole applicant, and without the commissioning party’s consent, the commissioned party shall not file patent application(s).
If there is no agreement on the right to file patent application(s) for the "invention-creation developed", such right shall belong to the commissioned party. Where the commissioned party obtains a patent, the commissioning party has the right to exploit the patent according to relevant provisions, i.e. make, use, offer to sell, sell or import the patented product, or use the patented process, and use, offer to sell, sell or import the product directly obtained by the patented process, for production or business purposes. Where the commissioned party assigns the right to file patent application(s), the commissioning party shall enjoy the priority right to obtain the assignment under the same conditions.
Under the cooperative development mode, the parties involved can agree on the ownership of the "invention-creation developed", the rights and obligations of each party, and whether to file patent application(s); in the event of filing patent application(s), who is the applicant, and each party’s rights and obligations after grant.
If there is no agreement on the right to file patent application(s) for the "invention-creation developed", such right shall be co-owned by the parties involved in the cooperative development. Where one of the parties assigns its co-owned right to file patent application(s), the other parties shall enjoy the priority right to obtain the assignment under the same conditions. Where one of the parties declares abandoning its right to file patent application(s), the other party/parties may file patent application(s) independently/jointly. Where a patent is granted, the party abandoning its right has the right to exploit the patent for free.
It is worth noting that if one of the parties involved in the cooperative development does not agree to file patent application(s), the other party/parties cannot file patent application(s). In this case, the parties need to further discuss whether to protect the "invention-creation developed" as trade secrets so as to safeguard the commercial interests of the parties.
Patent Prosecution Stage
Where a patent application is co-owned by two or more applicants, the applicants could sign an agreement to stipulate their respective rights and obligations, such as who is the first-named applicant, who is the representative and responsible for the patent prosecution procedure, how to share and bear the expenses.
If there is no agreement on who is the representative or the China National Intellectual Property Administration (hereinafter referred to as the "CNIPA") is not informed of who is the representative, the first-named applicant will be the representative. The representative may, on behalf of all applicants, handle relevant formalities (except formalities directly related to co-owned rights, see below for details) before the CNIPA, for example, filing a request for substantive examination, responding to an Office Action, asking for an extension of a deadline, going through formalities for grant, paying fees.
Formalities directly related to co-owned rights include: filing a patent application, entrusting a patent agency, assigning a patent application, withdrawing a patent application, withdrawing a priority claim. To go through such formalities, all applicants shall give their consent by signing or stamping the relevant documents.
Among the formalities directly related to co-owned rights, the formality for assigning a patent application requires not only an assignment contract signed and sealed by the assignor and the assignee but also materials proving that the other co-owner(s) agrees with the assignment, i.e. the assignment shall be consented by the other co-owner(s). For the assignment, the other co-owner(s) also enjoys the priority right to obtain the assignment under the same conditions.
Each applicant may individually declare abandoning its all rights in and to the patent application; and for this, an abandonment declaration signed by the applicant will be sufficient, with no need of consent from the other co-owner(s). In such case, the patent application will be owned by the other co-owner(s).
Patent Maintenance Stage
Where a patent application is granted and the patent is co-owned by two or more patentees, the patentees could sign an agreement to stipulate their respective rights and obligations.
According to the provisions of Article 14 of the Patent Law, where no agreement on exercising the rights in and to a patent is concluded by the co-owners, any co-owner may independently exploit the patent or license another party to exploit the patent through a non-exclusive license; the licensing fee shall be distributed among the co-owners and the grant of the non-exclusive license need not be consented by other co-owners. That is, each co-owner could make, use, offer to sell, sell or import the patented product, or use the patented process, and use, offer to sell, sell or import the product directly obtained by the patented process, for production or business purposes. It should be noted that "independently exploit" is usually limited to the co-owner’s own production and business activities.
Important matters relating to disposal of a co-owned patent, such as abandoning the patent, assigning the patent, granting an exclusive or sole license, establishing a patent pledge, and appointing an agency in invalidation procedure, shall be agreed by all co-owners.
In summary, in the commissioned development and cooperative development, it is a proper option for the parties to agree on each party’s rights and obligations and the ownership of the patent applications in advance through written agreements to avoid potential disputes. At the same time, for co-owned patent applications and patents, the rights and obligations of each party should be clearly agreed upon in advance.
In practice, technical cooperation involves complex and diverse specific situations. For specific questions or questions, please consult patent@afdip.com; bhtdlaw@bhtdlaw.com.
