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Chain of Title – The Importance of Getting It Right

April 2020

Making sure there are no issues with ownership of IP is of crucial importance to any business. The current economic outlook is likely to result in events which require careful management of IP.

Insolvency situations where IP is transferred as a valuable asset, litigation, where businesses try and protect their product and IP rights and sales of IP to raise funds are likely to be more and more common.

In our experience many companies suffer from broken links in the chain of ownership of their IP. Unless ownership of IP has been carefully managed, the problems facing businesses in such events could be costly, and at worse, fatal for a business.

In addition, mistakes often occur when IP rights are transferred as part of a bankruptcy or restructuring situation either because a) proper investigation into the subsistence and ownership of rights has not taken place before the transfer or  b) the rights are not transferred correctly to the new owner

What can go wrong?

Among many other things, the following problems can arise;

  • If a business sale agreement does not contain adequate wording to transfer the IP or there is no follow up assignment, a business purchasing that asset may find themselves having paid for an IP right they don’t actually own. If the previous owner is no longer in existence this can be a difficult situation to remedy.
  • A company who does not own an IP right will not be able to licence, transfer or enforce the right against third parties.  The IP may be an important part of the assets of a company but may not in fact be correctly owned by the company.
  • Where chain of title for a patent or other IP right is not correct, a business may lose  the right to file subsequent applications for the same invention, trade mark or registered design in another jurisdiction.
  • Bad management of records / previous transfers can cause major issues when looking to transfer or licence IP in a short time period.
How Can A Business Address this?
  • Ensuring that on any due diligence a careful review of all IP rights owned by a business is carried out and that the chain of title to these rights is correct. For example – ensuring that any consultants who have carried out work, have transferred such rights to a business, or inventors have transferred their rights in any inventions or that previous transfers are valid
  • Ensuring that where deficiencies occur, that assignments or other remedy to correct title of those rights are carried out
  • Careful document drafting /  management – ensuring that all assignments of IP rights are in the correct form, signed correctly, recorded at the relevant IP office and that the documents are stored in places that are easily accessible. Having documents in hard copy format during the Covid-19 Pandemic could make them difficult to access, so ensuring that where assignments have been executed that electronic copies are available is a good idea.
  • Making sure all transfer documents are reviewed properly to ensure that they are effective in transferring the rights that are intended.

This update was prepared by HGF Senior IP Solicitor Chris Robinson. If you would like further advice on this or any other matter, please contact Chris.  Alternatively, you can contact your usual HGF representative or visit our Contact page to get in touch with your nearest HGF office.

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