How to transfer intellectual property rights

Intellectual property has to be transferred by a legal process – an assignment—if you want to dispose of it to someone else. And by law you need a written document, with the owner’s signature on it, to do this.

Often, assigning your rights won’t be the best way to exploit your assets – a licence deal with someone who will work your IP and pay you a royalty for doing so could be a better arrangement. And if you are giving ownership rights to someone else, beware that a joint owner might be able to do things with the IP that do not require your agreement – so, if you must give away a share of your IP, make sure you get sound legal advice from a intellectual property lawyer first.

What intellectual property rights can be transferred?

Patents, trade marks, copyright, registered designs and the various flavours of unregistered design rights can all be assigned, and so can applications for them. But at the fringes of the intellectual property world are some similar-looking rights that may need special treatment:

• Confidential information is generally considered not to be a form of property, so in practice it is transferred not by an assignment but by delivering the information in whatever form it is kept (by oral disclosure, if it is not recorded in permanent form) and undertaking to the recipient that you will not use it yourself, or tell anyone else about it.
• Unregistered trade marks are protected by the common-law action for passing off, but that does not make them property. The property protected by passing off is actually business goodwill, and that can be transferred by executing an assignment.
• Domain names are frequently lumped together with intellectual property these days, and given that they are often based on the same words as trade marks there is sense in this. But a domain name is not a piece of intellectual property: it exists as a result of the contract you have with the registrar, not under any statute. You can submit a transfer request in the required form to the registrar, which has the same effect as an assignment.
• Moral rights are part of the copyright world, and being deliberately designed to benefit creators regardless of who owns the other rights in their work they are expressly non-assignable. They can however be waived, which achieves much the same effect as an assignment – and they can be inherited, so the author’s heirs can enforce them.
• The rules about transferring copyright in other countries –  in particular, those that subscribe to the “authors’ rights” approach often make copyright inalienable, as is the case for example in Germany, so take care if there are valuable foreign copyrights involved (and remember that because copyright arises automatically there are usually going to be foreign rights to consider, though they may not be worth enough to worry about much).

What is the process for transferring intellectual property rights?

The statutes that govern the different types of intellectual property tell you what is required to transfer them to someone else: in general, you have to sign a written assignment. Only the person making the transfer needs to sign – they are the ones giving something away: the recipient does not have to sign, though frequently will do.

These days, it is common to use electronic signatures, and provided the parties to a document agree to sign electronically, and e-sign the document intending to be bound by it, this is usually enough. However, while the law is coming to accept electronic execution of documents, it is not yet settled so care needs to be taken. And if the assignment is by deed (which is common where foreign rights, especially copyright, are included) it is more likely that “wet-ink” signature will be needed.

The requirement for writing and a signature is all about creating certainty. That is not to say that an oral assignment is not (as the saying goes) worth the paper it’s written on: it cannot be effective in law, but it can work in equity. In effect, the courts will say that if you tell someone that they can have your patent, you have not actually transferred it but you cannot argue that the other person has no interest in it. You have given them beneficial ownership of the patent, just like if you had declared a trust over a piece of land you owned in favour of someone else.

If you would like help drafting an intellectual property transfer agreement our team of IP solicitors can help. A well drafted intellectual property transfer agreement is relatively inexpensive and can reduce the likelihood of disputes with the buyer.

What problems might arise?

Very often, people make agreements under which intellectual property is created but don’t deal with who owns the IP. When you commission someone to write a piece of software or take a photograph or write some copy, you don’t automatically get the copyright – however much you pay for the work. That remains with the creator until it is assigned in writing. This sort of problem accounts for a lot of cases before the courts.

If you ask a judge to sort it out for you (which is invariably much more expensive than paying a lawyer to write the document for you in the first place) they will rarely interfere with the ownership of the copyright, and you will have to be content with a licence to use the software, photo, copy or whatever in the manner that the judge finds the parties contemplated when the commission was made. Not always a happy situation, when you think you have paid handsomely for the work to be done. But sometimes the judge will decide that the IP has to belong to the commissioner – perhaps because the commissioner needs to be able to enforce the rights against the person they commissioned as well as against third parties. And if the facts show that the creator had agreed to transfer the IP, but hasn’t done so, the judge will usually order them to perform their side of the bargain. We see many cases where ownership of IP is in dispute, and would be happy to advise you on what you might expect the court to order.

Key clauses that an intellectual property transfer agreement should include

The law does not stipulate what must go into an assignment. The only mandatory provision is a clause making it clear that rights are passing from the assignor to the assignee. The details are up to you, and should cover the payments to be made and any right to have what you have assigned revert to you in the future.

There are also a number of clauses that a well-drafted assignment needs to contain to make it work smoothly:

• Warranties, to the effect that the transferor owns the rights (and that there are no encumbrances – they have not created a charge to secure their bank overdraft, for example), that no-one has infringed their rights (or, in diluted form, that they are not aware of any infringements), and that the rights being transferred are valid and subsisting and all renewal fees have been paid (although warranting the validity of any IP right is dangerous, and should not be done without very careful thought and legal advice).
• Further assurance – an obligation on the transferor to take steps that might be needed to make the transfer fully effective, which in the case of registered rights may mean confirming to the Intellectual Property Office that the transfer has been made.
• Power of attorney – it is common to find language that appoints the assignee as attorney for the assignor, so that they can execute any necessary documents without having to track down the assignor again and get them to sign papers. However, as powers of attorney have to be by deed and most assignments are not deeds, these clauses are often unenforceable, so take care to ensure that if there is a power of attorney the assignment document is a deed.
• Waiver of moral rights, which must be in writing. There are many exceptions to moral rights protection, making them weak and often useless for the creators for whose benefit they were intended, but any assignment that includes copyright must deal with moral rights too, just in case.
• Accrued rights of action. Just because the IP has been transferred does not mean that the new owner can sue for infringements that took place earlier. If the new owner wants to be able to deal with prior infringements (and this is usually preferable to relying on the old owner doing anything), the assignment must transfer the rights to take action.

How we document the transfer of intellectual property rights

IP rights are often transferred along with a collection of other business assets, and the transaction is recorded in a single very large agreement. Transfers can also be contained in commissioning agreements, publishing agreements, recording contracts, and a host of other arrangements. In some situations – for example, where IP rights have not been identified precisely enough in the wider agreement, or where the agreement creates a commitment to transfer the IP, perhaps when some later event occurs - a stand-alone assignment might be used. 

In some situations, your intellectual property solicitor will recommend the creation of a confirmatory assignment. A confirmatory assignment does not transfer rights – instead it provides evidence that they have transferred. As the main agreement will contain commercially sensitive or confidential information, it can be important to be able to show the rights have transferred without having to produce the main agreement. In addition, many intellectual property offices around the world have very specific requirements about what documents they will accept. And where ownership is in dispute, a confirmatory assignment may be useful because it does not contradict the argument that the rights were in fact transferred earlier.

Which transfers of intellectual property rights should be recorded on the official registers?

Transfers of UK registered intellectual property rights – patents, trade marks, registered designs and other minor rights – should be recorded at the Intellectual Property Office. In the case of EU trade marks and designs, transfers must be recorded at the EUIPO, and transfers of European patent applications must be recorded at the EPO.  Similar principles apply if there are foreign registered rights included in the assignment. Remember that there are some overseas rights that do not exist here, like utility models and (in some countries, notably the USA) registered copyright.

Summary

Intellectual property rights are generally easy to transfer although there are some suggested precautions you should take to ensure a transaction goes smoothly. It is best practice to have a transfer of ownership agreement drafted by an Intellectual Property solicitor. This will help you avoid legal disputes that are likely to cost significantly more than the cost of a transfer agreement. You should ensure that you notify the IPO and EUIPO of a transfer of a registered property right (trade mark, patent or registered design), we can help guide you through this process for a small fee. Contact us using the form below for more information or ask for a no-obligation quote.