Wednesday, May 8, 2013

Chain of Title (Part 4 of an Occasional Series of Articles on Due Diligence)

Wednesday, May 08, 2013
Any party acquiring IP needs to be confident of the effects of the series of transactions transferring ownership from the original creators to the vendor. This is commonly known as the “chain of title”, and like any other chain, it is only as strong as its weakest link.

There are a variety of issues that can weaken the chain of title or lead to uncertainty over the true ownership of the property . Common problems include the following:

Failure to obtain assignments from all the relevant parties: If an inventor or co-owner has not executed a suitable binding assignment then they may retain rights. In some jurisdictions, unless there is a written agreement to the contrary, co-inventors may be free to independently exploit a patent, or may have to account to other co-inventors for any profits.

Failure to accurately identify the parties: Is the correct owner SmithCo, SmithCo Inc.; SmithCo Ltd.; SmithCo Corp.; or Smith & Co.? Naming errors may be difficult or impossible to correct at a later date. Failure to properly identify the subject matter: Which specific trade-marks, patent applications, or industrial designs have been assigned? Were worldwide rights assigned or, did an assignment limit itself to specified countries?

Lack of capacity: In some jurisdictions only specified individuals have the authority to bind a company. A corporate assignment may not be effective unless signed by the authorized legal representative.

Formalities: Some jurisdictions may require that signatures on the assignment be properly witnessed, notarised or comply with other formalities in order to be enforceable.

Registration: Some jurisdictions require that assignments and licenses be registered with the authorities in order to be given legal effect.

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