What Is Assignment And How Is It Different From Licensing?

A patent will confer so-called monopoly rights on the inventor following a formal application and registration procedure. However, It is important to remember that these rights are limited, not absolute.

We can distinguish this from property you own without restrictions, such as a new watch purchased from your local retailer. In this scenario, you are able to retain ownership of the watch for an unlimited period  (presumably until death) without any encumbrances.

A patent, on the other hand, confers a period of exclusivity to the inventor but typically this only lasts for 20 years after. After this period has ended, others are free to use the technical information disclosed in the patent document. Holding patent rights during this time also has conditions attached: periodic payments must be made in the form of a maintenance fee. There is also no presumption of lifelong validity for a patent. Therefore, when a patent  owner alleges infringement, a defendant will almost always challenge the patent's validity and ask the court for an order to revoke the patents so it is taken off the register.

Patent rights can be thought of like a menu of prohibited acts that the owner is authorized, at law, to prevent third parties from doing. This includes making, using selling and disposing of the technology as specified in the claims. Unauthorized use or dealing may amount to infringement if it does not fall within any exceptions or defenses.

It is however possible that these rights under a patent can be transferred to a third party to make use of them. This is where reassignment or licensing comes into play. Patents can be licensed, assigned and even used as a security interest, such as a pledge patent. There are various reasons to transfer rights to third parties but often it is the case that an inventor or a start-up company do not have the resources, expertise  or even capital funds to bring a product to market and therefore make money on the idea. Transferring these rights will hopefully result in a successful revenue stream.

Giving a third party permission to carry out one or more of the prohibited acts on the menu is equivalent to licensing the technology. Upon a successful licensing agreement, a licensee obtains an interest in the patent. This can be illustrated by an example using the inventor as the original assignee or owner of the patent: Inventor A enters into agreement with Company B, to allow Company B to sell the patented technology. Provided that there is a valid contract, Company B can retail a product based on that technology without the risk of incurring any infringement action from A. The typical terms of a licensing agreement will allow A to obtain a payment (royalty rate) or percentage of the net profit from sale of the product by B in exchange for the grant of this interest. The benefit B is obtaining is to market and also make a profit from the invention.

There are no restrictions on the number of third party interests that can subsist within a patent right. So it is possible for Company C to obtain permission to dispose of a patented product and Company D could be given permission to use the technology in a research process or technique. In this situation, it is advisable that Inventor A stipulates in the agreement who will be the owner of any intellectual property rights (IPR) arising from the patented product or process. What if Company D produced a new chemical compound from using  Inventor A's patented product? Who would be the owner of the new compound? This is why the licensing agreement would have to specify whether Inventor A or Company C would own any subsequent IPR arising from use of A's patented product. The only exception to this rule is an exclusive license where the licensee may sue for infringement in their own name.

A license is different from an assignment. An assignee takes the place of the previous owner and the previous owner will suspend any interest in the patented product or process. The third party, now the current assignee, will have the right to prevent other third parties from carrying out the restricted acts on the menu. They can also make a transfer of these rights again to another third party via assignment, licensing or as a security interest.

Where an assignment takes place, it must be in writing and signed on behalf of the assignor. This is because it is a transfer of the property, like selling a house. On the face of it, there is no obligation to put a licensing agreement in writing (it can be a verbal agreement) but it is advisable to do so because it will be easier for the licensee to assert the license against any infringers on behalf of the assignee. 

There can sometimes be a complex matrix of interests being transferred to third parties so it is important that you can trace these. It is likely that when looking at a patent you will want to identify (i) who the current assignee (owner) of the patent is and; (ii) if there are any third party transfers of the patent rights or encumbrances that affect the patent. In some cases, transactions involving a patent document can be an indicator of a valuable technology. If you want to interrogate the assignment record of the patent you are reading, hit the 'Transaction' tab to see assignments from the original assignee including who the current assignee is.