His Honour Judge Hacon turns up the heat on assignments of the right to a future patent application in road heater battle

http://ipkitten.blogspot.com/2022/10/his-honour-judge-hacon-turns-up-heat-on.html

PatKat thanks Emeritus Kat, Darren Smyth, for bringing this interesting decision from the IPEC to her attention: Jones v Irmac Roads ([2022] EWHC 495 (IPEC)). At its core, the case relates to whether the right to file a patent application in the future is covered by the same provisions relating to the right to an existing patent or patent application. The case also includes some complexity concerning the difference between the assignment of legal rights and the assignment of equitable interest. 

Case Background

Jones v Irmac concerned an invention relating to

 an infra-red heater for road surfaces. Mr Jones owned a company that sold heaters of this type. Mr Jones had some initial commercial success with his heaters whilst also continuing to work on heater improvements. Unfortunately, Mr Jones then encountered some bad luck in the form of a fire at his business premises. Following the fire, Mr Jones fell into financial difficulties. 

At this point, Mr Gedroge approached Mr Jones with a proposal for a new business venture. Mr Gedroge proposed that Mr Jones assign his IP rights to the improved heater to a new company (IL Ltd.) set up by Mr Gedroge and associates. In exchange, Mr Jones would receive company shares. 

Mr Jones orally agreed to assign all his IP rights in the heater (including the improvement he had been working on) to IL, in exchange for a 45% shareholding in the company.  It was also agreed that if IL had not commenced active trading within 6 months from the filing date of a patent application filed for Mr Jones’ invention for improvement to the heaters, then Mr Jones could exercise an option for reassignment of the IP rights back to himself from IL. 

A patent application was then filed for the heater improvements, naming Mr Jones as the sole inventor and IL as the patent owner. In the following 6 months, IL did not succeed in selling any heaters. After the 6 months had elapsed, Mr Jones therefore served notice to IL that he was exercising his option for reassignment of the rights to the patent application back to himself from IL. 

After receiving Mr Jones’ notice, Mr Gedroge, without informing Mr Jones, withdrew the (unpublished) patent application. Mr Gedroge then filed a new patent application that was identical to the first except that it named a new company (IRL) as the owner. The question before the court was whether Mr Jones should be declared the rightful proprietor of the new patent application. 

Rights to jam today versus jam tomorrow?

Mr Jones’ position was that he had never validly assigned his legal rights to the patent application. Mr Jones argued that the assignment of the right to file a patent application must be made in writing. No written assignment of the right to file a patent application had been executed.  As such, assignment of the legal right to file the patent application to IL had never occurred. 

In response, IL argued that there was a distinction between the right to an existing patent and the right to file a patent application in the future. IL particularly argued that the legal necessity for a written assignment only applied to the assignment of existing patent or patent application rights. The right to file a patent application in the future could therefore be oral. 

However, the judge, His Honour Judge Hacon, agreed with Mr Jones. The judge found that the assignment of the right to file a patent application must be made in writing (S. 30(6) and 130(7) UKPA) (para. 36). Given that all the assignments to IL by Mr Jones were made orally, the judge agreed that the legal right to apply for a patent was never assigned by Mr Jones to IL. 

Equitable rights?

The right to a patent application includes both a legal right and equitable interest. Equitable interests can be assigned even if legal rights are not assigned. There was therefore a remaining question of whether any equitable interest that IL had acquired in the filed patent application had reverted back to Mr Jones after Mr Jones exercised his option following the 6 months of lack of sales by IL.  

The judge, found that the lack of any sales or orders within the option period for the heater meant that Mr Jones was in his rights to excise the option for reassignment of the patent rights back to himself from IL:

“none of the activities by IL […] could reasonably be taken to show that IL was capable of conducting a business in the sale of heaters. A hypothetical enterprise that was hopelessly incapable of selling anything could have carried out all of those activities“

Any equitable interest in the patent application had therefore reverted back to IL. The judge concluded that Mr Jones should be declared the sole owner of the patent application and resulting patent. 

Final thoughts

The judge in this case confirmed that the right to file a patent application should be legally considered equivalent to the right to an existing patent application. The case is a reminder that the IP residing in an invention exists even before a patent application has been filed, and in the case of trade secrets, may exist even if a patent application is never filed. 

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