Thursday, April 4, 2013

Ownership Issues in Due Diligence (Part 3 of an Occasional Series)

Thursday, April 04, 2013
With IP transactions as with any other kind of transaction, ownership is a threshold question. Does the person selling or licensing IP or seeking investment in their IP, actually own or control the IP in question?

IP rights generally originate with the creator of the IP. So the first owner of an invention is generally the inventor, and likewise the first owner of copyright is the author. If an employee develops IP in the course of their employment, then IP may be deemed to belong to the employer. If the IP is created by an independent contractor or outside of the course of an employee’s work, then absent an agreement to the contrary the creation may still belong to the inventor or author. The applicable presumptions can vary from country to country, and additional steps may be necessary to formally convey ownership to anyone other than the creator.

If applications to register the IP have been filed, then a first blush confirmation of the owner’s identity can sometimes be obtained online. Many jurisdictions maintain databases for patents, trade-marks, industrial designs and other types of IP. For example the European Patent Office, the Canadian Intellectual Property Office, and the United States Patent Office all maintain searchable records of published patent filings. These commonly indicate the names of the registered owner, the names of the inventors and other basic information. Although the publicly available records are useful, search results are always subject to a number of caveats. For example, databases contain errors and omissions and there are delays in updating their content. Normally patent applications are subject to an initial confidentiality period and even if an application has not yet been filed in a particular jurisdiction, there may still be time to file there while claiming the benefit of an existing priority filing elsewhere. Of course, unregistered rights are not likely to be identified by any amount of database searching. While patent rights depend entirely on registration, registration is optional for other types of IP and for some it is not possible at all. For example, some jurisdictions grant rights to the owners of unregistered trade-marks while others do not and there is no registration system for confidential information.

IP is a complex and sometimes counterintuitive area of law and this article only touches the surface of some issues that may arise. You should always seek qualified professional assistance before making any decisions.

Euan Taylor is a lawyer, patent agent and trade-mark agent and is based in MBM’s Vancouver office. He has wide experience of IP due diligence for a range of commercial transactions and can be reached at or at 604-239-0271.