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Antony Gold |
Most businesses involved in R&D are aware that disputes over patented processes and products usually focus on patent infringement claims. The usual recourse by the alleged infringer is to claim in its defence that it has either not alleged any IP rights and/or to launch a counterclaim that the patent was invalid in the first place because it is obvious and/or it is not novel.
Patent disputes of this type are a familiar battleground for the IP practitioner, well trodden by technology-rich companies and their advisers. Recent experience, however, suggests that there are a growing number of disputes involving a much more fundamental issue - arguments over ownership of the patent itself. Such disputes are resolved through the mechanism of entitlement proceedings.
Entitlement disputes
The circumstances in which entitlement proceedings can be brought are varied. Many of the reported decisions relate to circumstances in which two or more parties have worked together on a project and one party believes that it has contributed to an invention but this has not been acknowledged by the applicant for the patent. The aggrieved party seeks to establish that it is a joint or possibly sole owner of the patent. Other circumstances where entitlement proceedings may be brought include where a company believes that employees who left to join a competitor took with them information which has become part of, or led to, claims within the competitor's patent or patent application.
Entitlement disputes have traditionally been perceived as rare. There are few reported cases and the standard textbooks offer only a limited amount of commentary and guidance on their conduct. This may be at least in part because entitlement disputes would usually be dealt with by the comptroller of patents, whose decisions are less likely to find their way into the law reports than disputes before the Patents Court. Indeed, in many ways it would be surprising if litigation over the key issue of ownership were not more prevalent than the relatively modest space devoted to the subject in the law reports might suggest.
| Seeking redress The principles and procedures of seeking redress through entitlement proceedings are very different from those applicable to claims relating to the misuse of confidential information. The relevant legislation relating to entitlement proceedings is contained in the Patents Act 1977 of which the key provisions are as follows:
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It is a common feature of business life - and an occupational hazard for almost every company involved in R&D - that employees engaged in product development regularly move to competitors. What worries the companies is that these ex-employees are taking ideas with them, whether this is in their heads or their laptops. Inevitably, perhaps, some knowledge acquired at the previous place of employment can percolate whether deliberately or unwittingly into new research for the current employer.
Sometimes the use of knowledge acquired at an earlier employer can be both innocent and legally permissible. But companies keen to protect the value of R&D should naturally be concerned about whether key ideas are leaking away to a competitor. And if so, what action they can take if they believe a competitor's patent contains, in whole or in part, the product of work or ideas first conceived at their company?
Duty of confidence
A common way of addressing this issue has been to ascertain the employee's duty of confidence both during the existence of the contract of employment and after its termination. These duties can be contractual or governed by the general principles regulating the use of confidential information to the former employer. The company then seeks to enforce this through an application for an interim order restraining the employee and the new employer from using confidential information and/or trade secrets belonging to it.
Many employers will have at least a passing familiarity with the body of law (most notably Faccenda Chicken v Fowler) concerning the use and abuse by employees of confidential information, which clarifies the different classes of information that can and cannot be used by employees before and after the determination of their contracts of employment. However, in order to ensure that the full range of potential remedies is considered, when employees engaged in valuable R&D leave to join a rival, businesses can usefully be appraised of the principles applicable to the evaluation and pursuit of entitlement claims to patents or patent applications.
Determining claims
What exactly can form the subject of a claim? So far as patent applications are concerned the comptroller has the jurisdiction to determine whether the complainant should be granted a patent for the invention, whether solely or jointly with the existing applicant. Co-proprietors can seek to refer the question of whether any right under their application should be transferred or granted to any other person. So far as granted patents are concerned, claimants and defendants can refer questions to the comptroller including: who the true proprietor or proprietors of a patent are; whether the patent should have been granted to the person or persons to whom it was granted; and whether any right in or under a patent should be transferred or granted to any other person.
| A working example The numerous issues requiring consideration in claims of this nature were well illustrated by one recent case in which I was involved. It involved circumstances in which, over a period of months, employees of a company operating in one highly specific segment of the printing industry (C1) left to join a competitor start-up company (C2). It was not contended that the employees had deliberately taken with them any information confidential to C1. Inevitably, however, at C2 they were working on products that competed with those made by C1. As a result C1 asserted claims to both granted and pending patents which were in the name of C2 in a number of separate fields of technology. |
Cases such as one I was involved in (see box) throw up a number of complex issues. They include:
Proceedings asserting ownership of part of a competitor's IP can have a profound effect on the reputation of both companies, particularly the defendant. It may be tempting for companies to advance claims to ownership partially, at least, in order to secure this collateral benefit against a trade rival. However, restraint is strongly advisable - the courts will disapprove of proceedings being used (or abused) for this purpose.
As indicated above, the starting point is that the comptroller of patents will determine references. Many parties, however, will feel that the Patents Court is a more appropriate tribunal for the determination of complex disputes, not least because judges have greater experience in assessing the credibility of witnesses and the parties can avail themselves of far reaching rules relating to disclosure. Where appropriate it may also be possible for parties to seek from the court an order for a speedy trial that is likely to ensure that the dispute will be dealt with within a far shorter timeframe than would normally be expected if a reference is determined by the Patent Office. Rapid resolution to an entitlement dispute is likely to be of particular interest to a defendant keen to remove the stain on its reputation created by an assertion that it is not the true owner of some of its IP.
It is for the parties to persuade the comptroller that he should decline to deal with the reference because he considers that the question involves matters that would be more properly determined by the court (section 8(7) of the Patents Act for patent applications and section 37(8) for granted patents). Of course, if claims of entitlement are coupled with assertions of breach of confidence, these claims would be beyond the remit of the comptroller to deal with and the court would be the natural forum for resolution of such a multi-faceted dispute.
Section 8, which deals with pending applications, considers entitlement to inventions. However, how does the court define the invention in issue? Take, for example, the laudable goal of finding a car that will run on water. Say C1 has an idea for how this may be done and employees moving to C2 use this idea and make it work in practice. Is the invention the realization that a particular technique might enable cars to run on water or the precise implementation of that idea, as developed at C2? It is worth noting that under section 7(3) an inventor is described as the person who is the devisor of the invention. Arguably this could mean that the person who thought of the clever idea (the car that runs on water), rather than the person who thought of the particular way of making the invention work, is the inventor.
It may not always be easy to decide where to look to discern the invention. Is it contained only within the numbered claims at the end of the patent, or can one also look in the body of the patent and the specification for the purpose of deciding exactly what constitutes the invention? In this respect the starting point for looking at granted patents is almost invariably the claims because these will be generally recognized as reflecting the exact invention to which the owner has laid claim. The position in relation to patent applications may be different. The approach sometimes taken by the court is to look at the application as a whole in order to ascertain the inventive concept but then to examine the claims to see if the concept is accurately reflected within them. If the claims do not properly reflect the inventive concept then the court may look at the entirety of the application for the purpose of establishing the inventive concept.
What is the court to do if it decides that most of the claims properly belong to C2 but that a subsidiary claim was invented at, and belongs to, C1? For example, C1 may be given ownership of a product according to claim 1 in which a preferred substrate used in the product is made of a specific material. C1 won't derive any practical benefit from having this claim awarded to it unless it is also given a licence to use claim 1. Will such a licence be granted and if so on what terms?
Real problems can arise from the manner in which claims tend to be drafted. Patent agents almost inevitably wish to ensure that claims are drawn as widely as possible in order to capture the broadest inventive concept for the client. Broad claims made in applications are then often narrowed during prosecution, so they can't always be relied on as defining the correct scope of invention at that stage. However, drafting claims in this manner brings with it the attendant risk that to do so might unwittingly mean the drafted claims encompass work which employees may have undertaken whilst engaged on similar projects for a previous employer. This is a very important issue and is linked to point 4 above. Whether the invention is considered by reference to the claims alone, or the patent or patent application as a whole, could well determine whether or not the court would conclude that part of the invention encompasses work created elsewhere.
What relief is available to the comptroller or the court? The Patents Act gives the tribunal determining the dispute wide-ranging powers. For example, patent applications can be transferred to another person to be held either solely or jointly with the existing applicant, or amended to exclude matter that is the subject of dispute. An order can be made granting a licence of the patent application to any person. It can even be ordered that the patent should not be granted. These provisions are in section 8(2) of the Act with similar provisions for granted patents contained within section 37(2). These sections provide discretionary relief. Pursuant to section 11(3), if the original applicant in good faith worked on the invention in the UK or made effective and serious preparations to do so, it is entitled to be granted a non-exclusive licence to continue to work the invention for a reasonable period and on reasonable terms. In other words, the original applicant would have a right to have a licence and not simply have to hope to persuade the court or the comptroller that this was an appropriate order to make.
One curious feature of entitlement proceedings is that even though one party or the other might find it desirable to be able to argue that some particular feature of the invention at issue was not innovative, the court is not entitled to take into account whether or not a patent or application is valid for the purpose of entitlement proceedings. So it will avoid making qualitative judgments about the validity or indeed commercial viability of the invention.
There will often be circumstances in which it would be tempting for the court to resolve the dispute by determining that a patent, an application, or particular claims are jointly owned. In many ways declarations of joint ownership will keep neither party happy. Although each party will then be entitled to use the invention defined by the claims for its own benefit without the consent of the other (section 36 of the Patents Act), the consent of the other party is required before anyone can grant a licence of the patent or assign or mortgage a share in it. The nature and extent of contributions require consideration - what if a really creative part of the invention was produced by one person and something much less sophisticated but equally essential devised by another?
Alternative
Litigation of this type is complex not least because the exact nature of work undertaken by the parties on the subject matter of the dispute is often not clear until the parties have exchanged witness statements. This is further exacerbated by the scarcity of judicial clarification of rarely used statutory provisions. Cases of this nature are also likely to be costly, requiring advisors to obtain a detailed understanding of the technologies at issue, and not simply what the client did but of the industry generally so that the character and value of the client's work can be put in context. However, as an addition or alternative to claims against employees for breach of confidence and associated applications restraining the use of confidential information by third parties, entitlement proceedings are a potent and under-used remedy.
© Antony Gold 2004. The author is head of contentious IP at Eversheds, based in the United Kingdom
