Category: Agreements

Qestions & Answers About IP Agreements and IP Terms & Clauses in Other Agreements

How Can I Correct An Assignment?

Post author By Austen Zuege

Assignments of intellectual property (IP) such as for patents, trademarks, and copyrights are sometimes signed and then an error is later discovered. This is often due to a clerical or typographical error or other inadvertent mistake. For instance, there might be a typo in the number identifying a given patent, patent application, trademark registration, or trademark application in a schedule listing many. It is possible—and beneficial—to correct an assignment to fix such errors, which can then allow correction of any prior recordation of the original assignment. But how can such a correction properly be made? There are a few different possibilities, including using mark-ups or creating a new corrective document.

Marking-Up and Approving Corrections

One approach suggested by the U.S. Patent & Trademark Office (USPTO) (in MPEP 323 & 323.01(b) and TMEP 503.06(b)) and the U.S. Copyright Office (in Compendium 2308.1) for making corrections to an assignment is to have each of the parties conveying the property in question, that is, all of the assignor(s), make and approve corrections on the original signed assignment. This involves the following steps:

Cross out the incorrect text or number (using strikethrough or a conventional proofreader’s delete/dele/deleatur mark through the text with a protruding loop)
Write in the the correct text or number next to the crossed-out information (ideally immediately above it) using printed or typed lettering; use a caret mark or similar line or arrow to show the proper place of insertion, if helpful (a suggested practice if the only or best available space for newly inserted material is in a nearby area spaced from the crossed-out information, such as at a page margin)
Have each and every assignor initial (or fully sign) and date the marked-up corrections; full signatures are also acceptable and are appropriate if multiple signatories have the same initials; if the assignee originally signed the document then the assignee should initial/sign and date the changes too

An example excerpt of a marked-up patent assignment document to correct an error on the original is provided below. In this example, the city of residence (Paris) of one inventor-assignor was incorrect and has been crossed out and the correct city name (Neuilly-sur-Seine) written immediately above it (using deleatur and caret proofreading symbols). Both of the two inventor-assignors (Joe Public/J.P. and Jane Doe/J.D.) have initialed and dated the marked-up change.

Scanned excerpt of example marked-up corrections of error on patent assignment with dated inventor-assignor initials — Excerpt of example marked-up corrections of error on patent assignment with dated inventor-assignor initials

An advantage of marking up the original assignment is that doing so leaves no doubt that terms of the original assignment are still effective. The mark-ups make explicitly clear what specifically has been corrected. The adjacent initials/signatures and dates also clarify who approved the corrections and when. With the error in the original corrected, the chances that anyone might later cast doubt on the assignment due to that error are reduced or eliminated.

The retroactive (nunc pro tunc) effect of the corrections to the date of the original transfer of rights is inherent in the nature of marking-up and initialing/signing (and dating) changes on the original assignment document. This might be significant if something occurred between the time the original was signed and the time the error was discovered and corrected. For instance, if the original assignment with the error was already recorded, making marked-up corrections on the original facilitates recording the corrected document while making clear what specifically has changed.

The USPTO and the Copyright Office do not expunge or delete the previously recorded document, but instead further record corrected document(s) while noting that it is a corrective recordation. Although, uniquely, the Copyright Office will allow substitution of a corrected assignment within ten (10) business days of the original submission.

Keep in mind, however, that many aspects of assignments are a matter of state (or foreign) contract law, not USPTO or Copyright Office administrative procedure or even U.S. Federal patent, trademark, or copyright statutory law. Under black letter U.S. contract law, and presumably that of most other countries, it is not permitted to unilaterally modify or alter a contract after it has been signed. That may make the original voidable and may even be considered forgery, unless the assignment expressly permits a particular change (like later inserting application filing details). But having initials/signatures next to the changes from all the parties that originally signed the assignment removes doubt about their recognition of an error in the original and the fact that the correction/amendment was later made with their knowledge and approval. Although any material changes negatively affecting rights of the assignee or others will merit further attention, despite assignor approval.

However, if an error is identified in an assignment document before all parties have signed or provided notice to the assignee, it is usually preferable to discard the erroneous draft and provide a new copy with all the errors corrected for signature. Marked up corrections are not needed in that scenario, because the assignment with the error was not yet effective.

Newly-Created Corrective Assignment

Marking up and approving corrections to the original assignment is not those only way to correct errors. An alternative approach is to create a new corrective assignment document and have it signed by all the parties (meaning at least all the assignors). Federal agency guidebooks, in MPEP 323.01(b) (for patent assignments), TMEP 503.06(b) (for trademark assignments), and Compendium 2308.1 (for copyrights), recognize the possibility of such an approach for correcting previously-executed assignments.

For instance, if errors in a signed assignment are lengthy/voluminous, there is little available space to mark-up corrections, or the number of signatories does not leave enough space to add all their initials and dates, then a preparing and signing a new corrective assignment might be preferable to mark-ups. But if the original assignment containing the error was already recorded, or there has already been some reliance on that original assignment, any new “corrective” assignment may need its terms written to explicitly be retroactive to the effective date of the original. It is helpful if the title is identified as a “corrective” assignment too—although more than just the title should be changed. But the effort to create a new corrective document might be greater than using mark-ups.

A retroactive assignment is called a nunc pro tunc assignment, which is latin for “now for then”. These are widely used to correct errors in a prior assignment. The USPTO’s electronic assignment recordation systems EPAS and ETAS even have a special option for these, allowing the earlier date to be specified.

The USPTO describes a nunc pro tunc patent assignment recordation request as “[a] request to record an assignment, which includes documentation of transactions which occurred in the past but have not been made a matter of record in the USPTO.” This description implicitly treats nunc pro tunc patent assignment recordations as being (only) for corrective, confirmatory, or supplementary assignments. It means such a recordation request normally requires attaching additional documentation supporting the earlier claimed date of transfer or assignment (that is, the effective date prior to the execution date on which the new assignment document was fully signed).

The USPTO describes a nunc pro tunc trademark assignment as “an assignment that was prepared recently and is being recorded now, but the actual transfer occurred in the past. It is a complete transfer of ownership of trademark rights from the assignor/ (conveying party) to the assignee/ (receiving party). Use this conveyance type if the document being recorded was prepared after the time when ownership was actually transferred and after the time it should have been prepared and recorded, and has a retroactive effect. The execution date is usually later than when the actual transfer of ownership occurred.”

Lastly, if an error is identified in an assignment document before all parties have signed or provided notice to the assignee, it is usually preferable to discard the erroneous draft and provide a new copy with all the errors corrected for signature. A nunc pro tunc assignment or other explicit terms to provide a new, retroactive corrective assignment are not needed, because the assignment with the error was not yet effective.

Standing Limitations on Retroactive Patent Assignments

Corrective patent assignments, when necessary, should be completed before commencing a lawsuit for infringement. Courts generally do not allow nunc pro tunc patent assignments to provide retroactive standing to sue for infringement. The execution date on which a nunc pro tunc patent assignment was signed—or the date on which the last signature was obtained if multiple parties sign on different dates—is normally the effective date that controls for matters affecting standing. According to one district court, this also means that any subsequent assignments in a chain of title that were executed before a corrective nunc pro tunc assignment require further corrective action as well, because other purported assignments downstream in the chain were ineffective when executed (nemo dat quod non habet — one cannot give what one does not have). Clearing up chain-of-title issues before bringing suit allows the intended plaintiff(s) to be named, averting a possible ground for dismissal of the lawsuit due to the absence of a necessary party.

But not all nunc pro tunc assignments implicate standing. Minor corrections and supplemental terms may be given retroactive effect. At least one district court has held that correcting a drafting error in a prior assignment with respect to identification of a patent intended to be assigned did not deprive the assignee of standing in a pending lawsuit. And the Federal Circuit has held that retroactively adding the right to sue for pre-assignment infringement does not affect standing.

Practical Tip

There is an old saying that the best time to plant a tree was twenty years ago but the second best time is now. This provides a good analogy here. For assignments, the best way to correct them is to carefully check the information in them to fix any errors before they are presented for signature. In other words, be diligent and try to avoid errors from the start! That sometimes means verifying information provided by others, such as to ensure that legal names are used not nicknames or assumed names, corporations have not merged, dissolved, or changed names, addresses are current, etc. But the next best time to correct errors is as soon as they are discovered. Fortunately, there are ways to do that. Although doing so can become more difficult as time passes. For example, the original signatories can die, dissolve (if a corporation), or become uncooperative, and issues of standing can arise and later chain-of-title corrections might also become necessary that require additional corrective efforts.

Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.

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Tags Assignments, Copyrights, Patent Prosecution, Trademark Prosecution

Agreements Copyrights Patents Q&A Trade Secrets Trademarks

How Can My Business Acquire and Own IP Rights?

Post author By Austen Zuege

Some intellectual property (IP) rights arise automatically under certain circumstances while others require affirmative action.

PRACTICAL TIP: Think about IP early to avoid waiving potential rights and consider the benefits of optional protections.

Copyrights

Copyright attaches automatically to the author when a new creative work (e.g., text, photo, etc.) is fixed in a tangible medium of expression. Registration is not required for copyright to exist. Copyright ownership is also independent of possession and ownership of a copy of a work—even the “original” or sole copy.

Trademarks

Trademark rights can arise through use of a mark to identify the source of goods or services, provided that the mark is distinctive. Registration is not required to have enforceable trademark rights in the U.S. However, registration of a mark, particularly a federal registration on the Principal Register, helps to secure rights through the entire country and over time can limit the possibility for others to challenge the trademark rights in the registration.

Trade Secrets

Trade secret rights can attach to information that derives economic value from not being generally known and not being readily ascertainable so long as you take reasonable measures to keep it secret, meaning the existence of trade secret rights depends on the affirmative steps you take to maintain secrecy.

Patents

Patent rights require applying for and then obtaining a patent following an examination to determine if the invention satisfies criteria for patentability, which include novelty and nonobviousness. In the U.S., a patent must be applied for within one year of any disclosure, public use, or commercialization of the invention by the inventor. In most other countries, a patent must be applied for before any public disclosure.

International Considerations

Patent and trademark rights are territorial and rights in the U.S. will generally not provide exclusive rights abroad. Copyright and trade secret rights may have international enforceability in both the U.S. and some foreign jurisdictions.

Assignments and Licenses

IP rights can also be obtained from others via assignment (i.e., a transfer of ownership) or licensing (i.e., authorization to use the IP without a transfer of ownership). For many types of IP, assignments must be in writing and/or satisfy other criteria to be valid. Trademark rights are tied to underlying customer goodwill and cannot be assigned apart from that goodwill. A “naked” assignment of a trademark without associated goodwill can result in abandonment, as can licensing without quality control.

Employee- and Vendor-Created IP and Joint Development

When employees create things that may be subject to IP rights, the general rule—with some exceptions (notably for copyrightable works made for hire created by an employee within the scope of his or her job duties)—is that the employee rather than the employer is the owner. Businesses wanting to obtain ownership of employee-created IP should consider a written agreement (e.g., employment agreement) that establishes either an obligation to assign IP (to be followed later by execution of an assignment) or a prospective assignment of expected future IP.

When hiring a vendor to create or develop something, or jointly developing something with a business partner, consider who will own the IP at the outset. Merely paying for development will not automatically result in the transfer of ownership of vendor-created IP. Joint development can raise complex questions about who will own what, and ownership of particular IP may depend on which person(s) or entity contributed to that particular subject matter in the absence of a written agreement.

A common mistake is to ignore ownership of IP rights until there is infringement or a big business deal. Attempting to “fix” or alter IP ownership after the fact is usually much more complicated than sorting that out from the start of a vendor/partner/employee relationship (or even at the start of a particular project).

Online Resources:

IP Guides from blue over gray
U.S. Patent & Trademark Office
U.S. Copyright Office
World Intellectual Property Organization

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Tags Copyrights, Patents, Trade Secrets, Trademarks

Agreements Copyrights Patents Q&A Trade Secrets

Who Owns the IP for Things a Vendor Creates?

Post author By Austen Zuege

Introduction — Why This Matters

Businesses often hire vendors to develop things for them, perhaps due to a lack of expertise in some particular area or just a lack of capacity. The vendor might be another firm, an individual independent freelancer, a temporary contractor working on-site, or some other type of consultant. This is often referred to as outsourcing. But who owns the intellectual property (IP) for things the vendor creates? This question should be asked at the beginning of a vendor relationship. Ideally, it should be answered before hiring the vendor.

All too often businesses ignore ownership of IP rights until there is infringement or a big business deal long after the vendor was hired. But cutting corners or forgetting to put IP ownership in writing at the beginning of a vendor relationship can potentially have huge (if avoidable) consequences later on. Businesses do come to regret such oversights later on. For instance, when selling a business, a prospective buyer might raise questions about lack of IP ownership due to vendor or outside contractor involvement, which might present barriers to completing the sale or might lower the purchase price. Or, when there is infringement, a business lacking ownership will not have standing to sue the infringer while the vendor (who still owns the IP) may be unconcerned and disinterested.

A common mistake is to wrongly assume that merely paying a vendor automatically transfers IP ownership or that receiving physical copies (even the sole original) transfers IP ownership. In the absence of something in writing, the vendor most likely retains any patent or copyright ownership interests. Vendors, for their part, may also be ignorant or misinformed about IP rights. Anyone hiring a vendor should not assume that the vendor understands potential IP issues or that the vendor’s standard agreement (sometimes called a master services agreement) will adequately or satisfactorily address and allocate IP ownership.

Type of IP	Default Owner (Subject to Exceptions)
Patents	Inventor(s)
Copyrights	Author(s)
Trademarks	User of mark (to designate source)
Trade Secrets	Rightful owner

Table Summarizing Who Typically Owns IP Initially (In the Absence of an Agreement or Local Law to the Contrary)

Seeking to obtain IP rights from a vendor after the end of the relationship can be difficult. You may find yourself without leverage to insist upon vendor cooperation or the vendor may no longer exist (or be deceased). And vendors may opportunistically seek windfalls to assign over IP rights after-the-fact. In worst-case scenarios, the vendor may own the IP and be able to freely commercialize it to your disadvantage, as well as to potentially block further independent development by you.

From the vendor’s perspective, an assignment of IP rights might be undesirable. But this is a question of leverage (bargaining power) and whether the vendor is willing and able to turn down potential new work. Though a suitable compromise may be to provide a license-back to a vendor, allowing certain uses by the vendor while still transferring IP ownership to the vendor’s client. An example is a portfolio license allowing the vendor to show examples of past work to potential clients. What makes sense in any particular situation will vary, of course.

Patents and Copyrights

For patents and copyrights, the general rule in the United States is that whoever creates the IP is the owner. In the absence of a written agreement to the contrary, this means that a vendor will generally own any patent rights or copyrights stemming from the vendor’s own efforts by default, even if the customer paid the vendor for it. But there are exceptions. And it is possible to agree in advance who will own the IP — that generally needs to be in writing.

“For patents and copyrights, the general rule in the United States is that whoever creates the IP is the owner.”

By statute, transfer of ownership of patents (or a patentable invention) and copyrights must be in writing — though copyright law allows the copyright owner’s duly authorized agent to sign an assignment. Any written document, including purely electronic materials, could include or constitute an assignment if it shows intent to presently transfer ownership rights. The written document should use words like “assigns”, “hereby assigns”, “hereby conveys, transfers, and assigns”, etc. to create a present transfer of ownership. Oral assurances will not transfer ownership of an invention (patent) or copyright; although limited implied non-exclusive licenses or equitable rights (e.g., shop rights) might still arise without being in writing.

Agreements that constitute merely an obligation to assign — typically phrased in the future tense such as with “will own” or “shall assign” language — do not effectuate an assignment of IP. Rather, obligations to assign require later execution of a separate written assignment. But ambiguous language relating to possible future agreements (such as “shall be owned as agreed upon”) may not even create an obligation to assign.

Some jurisdictions have different default rules about IP ownership. At least one U.S. state, Nevada, may vest initial ownership of patent rights with the inventor’s employer rather than the inventor by statute. Under common law, a “hired to invent” doctrine may affect patent ownership too, in limited scenarios. Some other countries also have laws that place ownership of an invention in the hands of the employer rather than the inventor. Though sometimes these laws establish only an obligation to assign. It is important to consider the location of the vendor, the location(s) of the individuals involved, and the location(s) were relevant activities took place to determine which jurisdiction’s laws will apply.

Joint development may also result in joint ownership. If the vendor and your business collaborate to jointly develop IP, by default they are each the owner of an equal and undivided interest in the entire IP right(s). Under the patent laws, in the absence of an agreement, co-owners can each independently exploit the invention without an accounting to the other (though all co-owners must join a lawsuit to have standing to sue an accused infringer). Under copyright case law, an accounting is due to the other co-owner(s) for profits arising from the jointly-owned work to prevent unjust enrichment. Joint development agreements or the like can set forth various ownership rights in advance and can also govern the handling of relevant pre-existing “background” IP.

All the above concerns also apply to vendors themselves. For patents, an invention by a vendor’s employee is generally not automatically owned by the vendor. And if a vendor retains a subcontractor or non-employee then copyright ownership would likely initially vest in the subcontractor/non-employee creating a given work in the absence of an assignment or valid work made for hire agreement. Therefore, in the absence of a warranty relating to the vendor’s ownership of IP and/or a no-subcontracting contractual provision, or intimate knowledge of the circumstances involved in the creation of the IP, there is no assurance that an assignment from the vendor (alone) will transfer all IP ownership to you.

“Work Made for Hire”

An important potential exception to initial ownership under U.S. copyright law involves oft-misunderstood “work made for hire” statutory provisions. There are two, and only two, ways to qualify something as a work made for hire under current law. First, a copyrightable work prepared by an employee within the scope of his or her employment is deemed authored by and thus automatically owned from the outset by the employer. But vendors and even “internal” independent contractors do not fall within that definition.

Second, parties without an employee/employer relationship can also agree in writing that a work will be a “work made for hire” but only for nine categories of uses of works enumerated in 17 U.S.C. § 101, which may not apply—parties cannot contractually expand those statutory categories.

A “work made for hire” is-
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use [i] as a contribution to a collective work, [ii] as a part of a motion picture or other audiovisual work, [iii] as a translation, [iv] as a supplementary work [see definition below], [v] as a compilation, [vi] as an instructional text, [vii] as a test, [viii] as answer material for a test, or [ix] as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.
Definition of copyright “work made for hire” from 17 U.S.C. § 101

The “work made for hire” doctrine is frequently misunderstood. In practice, it might even be single the most misapplied and confusing provision in all IP law. Simply because you pay someone to make or provide something copyrightable is not enough. And even having a contract that purports to establish something a work made for hire may not actually achieve that goal. It is fairly common for contracts to include language about work made for hire that does not apply and has no legal effect. Only things that meet the statutory definition of “work made for hire” are legally effective.

Because the statute defines categories of possible works made for hire by a somewhat arbitrary and limited list, which is based on “use” rather than the inherent characteristics of the work, it may be difficult to know upfront if something will qualify with certainty. For instance, if a vendor is specially commissioned to write some text, that text could qualify as a work made for hire if commissioned for use as an “instructional text” but the identical text would not if instead commissioned for use in a novel or on an advertising billboard. Moreover, whether vendor-created software source code qualifies as “a contribution to a collective work” and/or “a compilation”, and was intended to be used in that manner, may be far from clear, particularly before any work begins. And agreements, on their face, may not clarify these crucial facts.

A work made for hire not only affects who owns the work but also who is considered the author. This can potentially be significant for copyright termination rights. The persons(s) who actually prepare a work made for hire have no termination rights, whereas person(s) who assign rights to a work can potentially invoke terminate prior assignment transfers (or licenses) decades later.

For older works, created before the 1976 Copyright Act, a much different “instance and expense” test was applied to determine who is the copyright owner. Under that older test, which is inapplicable to recently-created works but can still apply to old works, the commissioning or hiring party may be treated as an “employer” and thus the “author” and copyright owner for things a vendor or outside contractor creates—regardless of the type of intended use of the work.

Trade Secrets

The rightful owner of trade secret rights will be the party that develops the trade secret information, by default. This means technical know-how, etc. developed independently by a vendor will normally belong to the vendor. It may be unclear whether relevant trade secrets were part of “background” IP that pre-dated a relationship with the vendor or not, which can potentially become a point of dispute later on. But a written agreement can be used to establish intended trade secret ownership from the outset.

On the other hand, confidential information developed by a vendor might lose trade secret status if shared with a client business (or others) without reasonable measures to maintain secrecy. This might limit or prevent a vendor from attempting to assert trade secret rights against its client and/or its client’s customers, particularly if there was no non-disclosure agreement (NDA) or other enforceable contract term.

Trademarks

U.S. trademark rights accrue to the party actually using a mark in connection with commercial activity to designate the source of goods and/or services. For instance, a marketing firm creating a brand strategy and identifying a proposed mark for a client would not obtain U.S. trademark rights because only the client business would use (or intend to use) the resultant mark in commerce. But many other countries have first-to-register systems, which might allow a vendor to register your mark. Ownership of non-trademark rights, such as copyright, in graphical logos intended to be used as trademarks might be a little more complicated and might raise other issues too, including a potential divergence in who owns the copyright and trademark rights.

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Tags Ownership, Patents, Trade Secrets, Trademarks, Work Made for Hire