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.
In this article, our intellectual property lawyers explain what intellectual property rights can be transferred, the process for transferring rights and the potential risks involved.
Contents:
- What intellectual property rights can be transferred?
- What is the process for transferring intellectual property rights?
- What problems might arise?
- Key clauses that an intellectual property transfer agreement should include
- How we document the transfer of intellectual property rights
- Which transfers of intellectual property rights should be recorded on the official registers?
- Can you transfer intellectual property if it is jointly owned?
- Intra-group assignments of intellectual property
- What happens if I transfer the IP rights but still want to retain some control over its use?
- Are there any ongoing obligations or responsibilities after the transfer of intellectual property rights?
- Summary
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.
- 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 closely related with other forms of intellectual property and given that they are often based on the same words as trade marks there is a 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 be waived, which achieves much the same effect as an assignment – and they can be inherited, so the author’s heirs can enforce them.
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 they frequently will do.
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. 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.
If you would like help drafting an intellectual property transfer agreement our team of intellectual property 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.
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 intellectual property 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. 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 intellectual property 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
Intellectual property 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 intellectual property rights have not been identified precisely enough in the wider agreement, or where the agreement creates a commitment to transfer the intellectual property, 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 been 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. 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.
Can you transfer intellectual property if it is jointly owned?
Yes, you can transfer jointly owned intellectual property but only if you have the consent of all the co-owners. This principle applies to various types of intellectual property rights, including patents, copyrights, and trade marks. This means that the default legal position is that all the co-owners must sign the transfer agreement. In practice, co-owners of intellectual property should ideally have a joint ownership agreement in place that outlines each party’s rights and obligations, including the conditions under which the intellectual property can be transferred. This agreement can help prevent disputes and provide clarity on the process of transferring ownership. The default legal position is also that the co-owners will own equal shares in the jointly owner property.
Obtaining the written consent of each co-owner could be complicated and result in unnecessary delays so the joint ownership agreement could include a procedure whereby when one party wants to assign its share of the intellectual property, it must first offer its share to the other owner(s and if the other owner(s) do not want to purchase it then the first party can then transfer it to someone else.
Intra-group assignments of intellectual property
In a group, it may be ideal for all the separate company intellectual property rights to be owned by a single company to make it easier to administer and manage them. The usual process for executing intra-group assignments is to transfer the intellectual property rights from the original owners to a designated company within the group, often referred to as "newco." Assignment agreements will need to be drawn up as with any standard intellectual property assignment but, if there is to be no consideration for the transfers, the assignments will need to be executed as deeds. Intra-group transfers may not contain any warranties or only limited warranties, if there is good transparency in the affairs between the group companies.
Once the assignment is complete, intra-group licences will need to be drawn up so that the individual trading companies within the group can use the intellectual property rights in the course of their business and to ensure that the ‘newco’ holding company obtains a benefit from the use of the intellectual property rights, so that beneficial ownership is not separated from the legal right in question. For example, the goodwill generated by a trade mark should be attributed to the legal owner of that trade mark so that the registered trade mark does not become vulnerable to revocation on grounds of non-use.
The group may also need to re-assess its existing intellectual property licences, which may need to be transferred or re-executed in view of the intra-group transfer.
What happens if I transfer the IP rights but still want to retain some control over its use?
You can achieve this though an assignment and licence back arrangement. This involves the assignee licensing back the right to continue to use the intellectual property rights following the transfer, either exclusively or together with the assignee.
This is useful where intellectual property rights are being transferred to a joint venture company, but the original owner wants to retain some use of them outside of the field of use of the joint venture or still be able to take enforcement action against competitors. The licence agreement will need to set out the responsibilities of the parties for the ongoing maintenance and enforcement of the intellectual property rights.
Another option is to negotiating specific terms in the assignment agreement, that permit you to retain control over certain aspects of the intellectual property rights, for example the retention of rights to future improvements or developments made to the existing intellectual property or undertakings requiring the assignee to take action against infringements.
Are there any ongoing obligations or responsibilities after the transfer of intellectual property rights?
Most intellectual property transfer agreements contain a clause requiring the transferor to provide any further assistance necessary to ensure that the transfer is properly effected. Such obligations can include payment of transfer fees, signing of registration documents, declarations and forms where necessary, transferal of domain names and re-direction of associated web traffic and providing the transferee with all necessary information and documentation required to use and register the intellectual property rights effectively.
Certain clauses of the assignment agreement may survive the end of the agreement, such as ongoing confidentiality clauses and warranties and indemnities.
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.
