postheadericon Title vs Owner

IPconnect: from the Expert's Quill

One of the popular misconceptions that I run into when I train people, is the belief that the assignment from a parent application does not need to be filed against its child continuation or divisional applications.The problem here is that there is a disconnect between the words “owner” and “title.” The word “owner” refers to a legal right of possession and the word “title” refers to the instrument that constitutes the evidence of such legal right, which is located in the ownership registry of the applicable jurisdiction in which the patent is registered.

In the US, the title to a patent application is initially held by the inventor; however, the initial owner of that application may be either the inventor or the entity to which the inventor has a legal obligation to transfer or assign their rights. If the inventor is employed, and the inventor has a legal obligation to transfer the ownership of the invention to the employer, the employer would then be the actual owner of the invention.

Typically, the ownership transfer will also be confirmed by an assignment from the inventor to their employer, which is then filed against that initial patent application. In most cases, when a continuation or divisional application is filed at a later date, that child application will also be owned by the employer, but the title to that child application does not change until the assignment is recorded at the patent office.

Why is it important to keep the chain of title clear? Money, of course. Intellectual Property is property that can be very valuable. If a company that owns IP wants to get a loan though a bank, the IP could be used as the collateral for the loan.

One of the due diligence steps taken by (or on behalf of) banks when they are contemplating giving a loan is to verify that the collateral is actually owned by the entity who is asking for the money. The easiest way of proving that is via a title search in the applicable registry. The bank wants to verify that the “chain of title” is clear and traceable back to the inventor, without any “breaks in the chain.”

Think of it this way, when you buy a house it will tyipcally be financed via a bank. The bank will lend you the money and the house is used as collateral. But before the bank will give you a loan, they want a title search to verify that the entity who is selling the property has a legal right to sell it, and that there are no encumbrances that are unknown. Banks normally treat “Intellectual” property the same as “Real” property.

Banks require the title to each property be clean because if the company defaults on the loan and the bank has to take over the ownership of the IP – usually to resell it – it is much easier in the long run if the ownership can be fully traced via the title history. A subsequent buyer will normally want proof that the IP is legally held by the bank before they buy it.

So why record the assignments at filing when it can be recorded at a later date? To cut costs? After all it’s not legally required. Well, unless the client is filing purely for posterity’s sake, recording the assignments up front IS cutting costs and saving them from unwarranted expenses. It will be much more expensive to trace and fix assignments than to simply record them up front.

Time is money in our industry. Being more cost-effective with your time while saving your client money means filing the assignment concurrently with the application.

This is not legal advice… merely best practice ideas for patent prosecution.


Ms. Ange may be reached for comment via email or from her company website.

© 2009 IPParalegals. All rights reserved

Leave a Reply

You must be logged in to post a comment.