Do You Know Who Actually Owns the Patents You Depend On?

October 12, 2017

Do You Know Who Actually Owns the Patents You Depend On?

A great many companies depend on patents for their profitability, and doubts over ownership of intellectual property (IP) rights can put their very survival in jeopardy. This point was illustrated in a case that concerned a number of patents in respect of roofing products, title to which was claimed both by a company and one of its founding directors.

The company turned over about £500,000 a year in respect of the patented products and depended on them for about 40 per cent of its profits. However, they were the brainchild of one of its former directors, also the owner of one third of the shares in the company, and the patents were either registered, or had been applied for, in his name.

Following his acrimonious departure from the company, the former director claimed ownership of the patents and purported to terminate the company's licence to make use of them. He had taken steps to persuade manufacturers who made the products on the company's behalf to cease doing so. He had also tried to sell or license the patents to third parties, including the company's competitors.

The company argued that, by taking those steps, the former director had breached his duties of good faith and fidelity. It claimed ownership of the patents on the basis that he was its employee when he devised the products, essentially for its purposes. It was also submitted that he held the patents on 'constructive trust' for the company. He, however, argued that an exclusive licence agreement entered into between him and the company proved that he was the patents' rightful owner.

In granting an injunction that, amongst other things, prevented the former director from transferring or licensing the patents until after the trial of the action, the High Court found that the arguments on each side were finely balanced and raised serious issues to be tried. The balance of convenience lay in favour of maintaining the status quo pending final resolution of the dispute. Appropriate conditions were, however, attached to the injunction so as to ensure that it did not cause the former director irreparable financial harm prior to the trial.