Wednesday, October 15, 2025
Executive Summary
Covington & Burling Special Counsel Priscilla Dodson examined the mechanics and consequences of patent chain of title — tracing the assignment of rights from inventors to companies — concluding that while scope and validity challenges are often beyond a startup’s control, chain of title defects are entirely preventable, and a single broken link can render an otherwise groundbreaking patent portfolio worthless to a potential acquirer.
Instructor(s)
Priscilla Dodson, Covington
Keywords
patent chain of title — inventor assignments and USPTO recordation • automatic assignment provisions in employment contracts • patent assignment vs. patent license — 37 C.F.R. § 3.1 and MPEP § 301 • Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998) • USPTO recordation — three-month statutory deadline under 35 U.S.C. § 261 • priority claim validity and assignment timing in PCT applications • IP diligence in startup acquisitions and licensing transactions • joint patent ownership rights and co-inventor standing • how do I make sure my company owns its patents? • what happens if a patent assignment is missing or incomplete in a startup? • confirmatory assignment vs. operative assignment — illusory transfer doctrine
Legal Analysis
Why Chain of Title Ranks Alongside Scope and Validity in IP Diligence — and Why It Is the Only One a Startup Can Fully Control
When a potential acquirer, investor, or licensor conducts intellectual property diligence on a startup’s patent portfolio, three inquiries consistently rise to the top of the analysis: scope, validity, and chain of title. Dodson described scope as the foundational question of “do the claims, patent claims, sufficiently cover or protect the technology at issue,” and validity as the assessment of whether a patent will issue over the prior art or remain susceptible to challenge once issued. Chain of title, she explained, is “basically an ownership inquiry” — specifically, “does the company have a clean chain of title to the patents, or is there a significant risk of an intervening right?” The critical asymmetry among these three considerations is that scope and validity are often difficult to control: filing timelines are driven by commercial pressures, and the prior art landscape is largely beyond the applicant’s influence.
Chain of title, by contrast, is entirely within the startup’s power to get right. Dodson was emphatic on this point: “chain of title you do have control of, and you can get this right every time, and it does not take a ton of time, and it has huge value to your portfolio.” The practical stakes are severe. A company may hold patents with broad claims, no material validity concerns, and strong technical differentiation, yet a chain of title defect can “really drive down the value of your IP and sometimes to the point where a potential acquirer is ready to walk away.” The starting premise of US patent law is that inventors own their inventions by default: rights reside with the individual human inventors at the moment of conception. To transfer those rights to a company — the typical employer that is filing the patent — each inventor must execute a patent assignment, a written document that conveys their interest to the company.
The assignment requirement is not satisfied by a single inventor’s signature when multiple inventors are named. Dodson stressed that “it’s not enough to just have an assignment from one inventor or two inventors to the company. If you do not have assignments from all [inventors] to the company, then the company will not fully own the patent.” An unassigned co-inventor retains a joint ownership interest in the patent under 35 U.S.C. § 262, which entitles that co-inventor to independently make, use, license, or sell the invention without the company’s consent and without sharing proceeds. The result, when a startup later attempts to sell or license its portfolio, is that the company “can only sell what it owns” — a joint interest — which is “usually not attractive to the potential acquirer.” Because each link in the assignment chain connecting inventors to the ultimate owner must be complete and documented, the analysis must trace rights “from the inventors all the way to the new owner” through every intervening transfer, merger, acquisition, and intercompany assignment.
Assignment Documents, USPTO Recordation Under 35 U.S.C. § 261, and the Ethicon Co-Inventor Trap
The patent assignment document is the operative legal instrument through which inventor rights transfer to a company. According to the USPTO Manual of Patent Examining Procedure (MPEP), an assignment constitutes “the transfer of a party’s entire ownership interest — the entire bundle of IP rights.” The Code of Federal Regulations at 37 C.F.R. § 3.1 defines an assignment of patent rights as “the transfer by a party of all or part of its right title and interest in a patent or patent application.” Dodson cautioned that assignment documents must use robust language — typically transferring “all right, title, and interest” or “entire right, title, and interest” — and that seemingly minor variations can create genuine ambiguity about what rights were conveyed. Where an assignment purports to transfer merely “right title and interest” without the qualifying “all” or “entire,” questions arise about whether the full bundle was transferred, and if specific rights such as the right to bring suit or the right to further assign were omitted, “some of those rights still reside with the first company or with the inventor and were never transferred.”
Recordation at the USPTO is the mechanism by which assignment documents are made public record, and the timing of recordation carries independent legal significance under 35 U.S.C. § 261. Dodson noted that recordation is “merely ministerial at the USPTO” — the Office makes no determination as to the validity or effectiveness of the assignment — but it serves two essential functions: providing constructive notice to the public, and protecting the assignee against a subsequent bona fide purchaser of the same patent rights. The statute requires that an assignment be recorded within three months of execution for the assignee to enjoy that protection. If a company fails to record within that window and the inventor later purports to assign the same rights to a second company that records first, the second company may obtain superior rights by virtue of its timely recordation, even though the first assignment was executed earlier. Dodson’s best-practice recommendation was unequivocal: record promptly, and treat the three-month window as a hard deadline rather than a default.
The dangers of incomplete inventor identification are illustrated with particular clarity by Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998), a case Dodson described as “a well-known case” and “a classic illustration of the importance of making sure you obtain rights from all inventors.” In that case, Dr. Yoon developed a safety trocar for endoscopic surgery with a technician named Choi; Yoon applied for and obtained a patent without naming Choi as co-inventor, then licensed the patent to Ethicon. When Ethicon sued U.S. Surgical for infringement, U.S. Surgical investigated Choi’s contributions and obtained a license from Choi directly. The Federal Circuit determined that Choi was a co-inventor and therefore held a joint ownership interest that could be independently licensed. The result: U.S. Surgical held a valid license to practice the patent, and the infringement action was dismissed. Dodson drew the practical lesson that a startup may “not necessarily know who all the inventors are” at the time of filing, making automatic assignment provisions in employment contracts the most reliable safeguard: “if an employee is later found to have contributed to the invention . . . their patent rights as an inventor will still automatically go to the employer without having to chase down an assignment.”
Automatic Assignments, Illusory Transfers, and the Priority-Date Consequences of Delayed Execution
Employment contracts may be drafted to include one of two distinct mechanisms for ensuring employer ownership of employee inventions. The first is an obligation to assign, under which the employee agrees to execute an assignment upon request; rights transfer at the time of execution, not at the time of invention. The second — and from a chain of title perspective, the more protective — is an automatic assignment provision, under which inventions created within the scope of employment transfer to the employer as a matter of law at the moment of conception, without any subsequent act by the inventor. Dodson explained that under an automatic assignment, “the rights are already with the company at the time of invention,” and any later confirmatory assignment executed for purposes of USPTO recordation is illusory: “the inventor actually doesn’t have anything to assign. At that point, they were already [automatically] assigned.” The illusory-transfer problem can also arise in cross-border structures, where an inventor employed by a parent company at the time of invention automatically assigned rights to that parent, but later joined a subsidiary that diligently obtained its own assignment from the inventor — an assignment that conveyed nothing because the inventor had no rights remaining to transfer.
Timing of assignment execution also carries direct consequences for the validity of priority claims in international prosecution. Dodson illustrated the issue with a scenario in which a company files a PCT application in January 2025 claiming priority to a 2024 provisional application, but does not obtain executed inventor assignments until July 2025 — six months after the PCT filing — because the inventors are still employees and the company does not perceive urgency. The critical question is whether the company “had a right to claim priority to the earlier filed 2024 application when it filed the January 2025 PCT if the inventors had not formally assigned anything until July 2025.” Absent an automatic assignment provision, the answer is that at the moment of PCT filing, the company did not own the rights; they remained with the inventors. Some jurisdictions, Dodson cautioned, take a strict view of priority claims, requiring the PCT applicant and the owner of the priority application to be the same entity, and will refuse to recognize the priority date if they are not. The practical consequence is that intervening prior art published between the 2024 priority date and the January 2025 PCT filing date could be applied against the company’s patent applications in those jurisdictions.
The overarching takeaway Dodson offered is that best practices in chain of title management collapse into four operationally simple rules: use robust assignment language that unambiguously transfers all right, title, and interest; record assignments at the USPTO within the three-month statutory window under 35 U.S.C. § 261; draft employment agreements to include automatic assignment provisions rather than mere obligations to assign; and execute assignments promptly rather than deferring documentation until a transaction or dispute forces the issue. None of these practices is technically complex or prohibitively expensive. The asymmetry that makes chain of title so consequential is precisely that the cost of getting it right is low and the cost of getting it wrong — a broken link that causes an acquirer to walk away, a joint owner who can independently license to a competitor, or a lost priority date — can be existential for a startup’s IP portfolio.
Generated by AI based on the Interview/Transcript below.
Key Takeaways
- Chain of title is the controllable variable. Unlike scope and validity, chain of title defects are entirely preventable; Dodson emphasized that “chain of title you do have control of, and you can get this right every time,” and that a broken chain can drive portfolio value to zero even where the underlying patents are strong.
- All inventor assignments are required, not just a majority. Every named inventor must execute an assignment to the company; a single unassigned co-inventor holds a joint interest that entitles them to independently license or sell the invention under 35 U.S.C. § 262, as the Federal Circuit confirmed in Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998).
- Record within three months or lose priority protection. Under 35 U.S.C. § 261, an assignment recorded after the three-month window no longer protects the assignee against a subsequent bona fide purchaser who records first, creating a race-to-record risk that can displace an earlier-executed but unrecorded assignment.
- Automatic assignments outperform obligations to assign. An automatic assignment provision in an employment contract transfers inventor rights to the employer at the moment of conception, eliminating the gap period in which an inventor might claim or convey rights to a third party, and mooting the need to locate and obtain signatures from former employees after filing.
- Delayed assignment execution can invalidate priority claims. Dodson cautioned that in jurisdictions with strict priority rules, a PCT applicant that did not own the provisional application at the time of filing — because inventor assignments were not executed until months later — may lose its priority date, exposing the application to intervening prior art.
- Illusory assignments arise in subsidiary and spinout structures. Where an inventor’s rights automatically transferred to a parent company at the time of invention, a subsequent assignment from that inventor to a subsidiary or spinout entity conveys nothing, because the inventor had no rights remaining to transfer; a formal intercompany assignment from parent to subsidiary is required to complete the chain.
- Assignment language must be complete and unambiguous. Dodson warned that assignments using “right title and interest” without the qualifier “all” or “entire” may leave specific rights — such as the right to sue for infringement or the right to further assign — with the original transferor, potentially requiring joinder of the original party to establish standing in litigation.
- Confirmatory assignments serve recordation, not operative transfer. Where an automatic assignment has already transferred rights, a later confirmatory assignment executed for purposes of USPTO recordation is legally illusory but practically useful as a clean standalone document that can be publicly recorded without disclosing the full terms of an employment agreement.
- IP diligence scrutinizes every link in the chain. A chain of title analysis in an acquisition or licensing transaction must trace rights from each inventor through every assignment, merger, acquisition, and intercompany transfer to the current claimant; Dodson observed that “these scenarios can get far more complicated with many more links, and thus much more potential for the chain to break somewhere.”
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Interview/Transcript
This transcript was session three of an eight-part BCLT-Oregon Start Up Series. On October 15, 2025 Priscilla Dodson, Covington, lead a practical, engaging session that demystified the concept of “chain of title” in intellectual property law.
Allison Schmitt 00:30
Hi and welcome to today’s startup Signature Series program focused on chain of title issues with your patents. My name is Allison Schmitt. I am the the hoster of the series. It’s my pleasure today to welcome Priscilla Dodson as our expert speaker. Priscilla is Special Counsel at Covington and Burling in their Washington office. Priscilla is really a jack of all trades. She has significant, more than a decade’s worth of experience in patent litigation, where she’s focused, although not entirely, but primarily, in the life sciences space. Priscilla has also done a significant amount of work with patent prosecution and strategy issues, as well as with intellectual property diligence issues, the types of things that come up when you’re trying to seek funding for your company, for example, you’re trying to do a licensing deal. So Priscilla is really an expert in all of these areas, and we’re very lucky to have her with us today to share her thoughts and really get you ready to go on chain of title issues, which are really as you’re going to learn from Priscilla, are really important part of the puzzle in terms of making sure that your IP has the value that you want it to have. So with that, I’m going to turn it over to Priscilla.
Priscilla Dodson 01:36
Thank you, Allie. So my topic today is chain of title in the context of patents and patent portfolios. So before we even get into what chain of title is, let’s start with why it matters, why a clean chain of title is critically important to the value of your patent portfolio. In the context of conducting IP diligence in the potential acquisition of a company’s patents, there are a number of important considerations depending on the particular circumstances. However, these are some of the considerations that are nearly always come up and are nearly always at the top of the list in terms of importance. So scope, validity and chain of title, which is basically ownership. So scope is a foundational question, which is, do the claims, patent claims, sufficiently cover or protect the technology at issue. Validity is: Do we expect that patents to issue over the prior art? If you have an application, is there going to be significant prior art such that you have concerns that the patent might not issue? Or, if the patent is issued, do you expect that there will be it will be susceptible to significant validity challenges? In other words, how strong is your patent? And finally, chain of title, which is basically an ownership inquiry, does the company have a clean chain of title to the patents, or is there a significant risk of an intervening right? So of these considerations, scope and validity can be difficult to get right or to control. So with respect to scope, sometimes you need to file IP early on in a project before you really know what the scope of the final product will be. So there is some guesswork involved. There can be and validity challenges to patent depend in large part on the priority landscape, which you usually don’t have control of. But chain of title you do have control of, and you can get this right every time, and it’s it does not take a ton of time, and it has huge value to your portfolio. It is well worth your time to get this right. So the takeaway here is that you can have a groundbreaking invention patents that cover the scope of your of the technology, no significant validity issues, but if you have a chain of title problem, it can really drive down the value of your IP and sometimes to the point where a potential acquirer is ready to walk away. So before we get further into it, here’s an overview of my presentation. We’ll walk through some basics first, including what do we mean by a chain of title and also cover some basics on patent assignments and recordation at the USPTO, which is all part of the chain of title analysis. Next, we have some examples to walk through, showing you how this plays out in real life and how it can go wrong, how I’ve seen it go wrong, and we’ll end with a short summary of takeaways and best practices. So let’s start with what we mean by chain of title. In the US, where patent laws tend to be inventor friendly, an inventor owns their invention by default, so to transfer their rights in the invention to a company, such as the employer who is filing a patent on the invention, inventors will assign their rights in the invention to the company, and this is typically done through a document called a patent assignment, which we will discuss in more detail shortly. The assignment from the inventor to the company transfers rights in the invention from the inventor, where they originally reside by default, to the company, such that the company now owns the. Patent unless we have a chain of title from the inventor to the company. So note that other countries other than the US may treat this differently. So if inventors reside outside the US, they may not have default rights in their inventions. For example, in some countries, an employer will own the employees inventions by default. So there’s no assignment that is needed. It’s also possible, and sometimes preferable, as we will discuss, to write automatic assignments into an employee contract, such that even in the US, where inventors own their inventions by default, the inventions created by an employee within the scope of their employment, can automatically assign to the employer as of the time of invention, such that the rights are already with the company at the time of invention. In this case, there is still a chain of assignment from the inventor to the employer. It’s just that it happens automatically. In this case, you can still have a confirmatory assignment that is executed from the inventor to the company, for example, at the time of patent filing. But this is often just done for purposes of keeping a clean paper trail or having something to record at the USPTO, which we’ll talk about in a minute, since at that point, the inventor actually doesn’t have anything to assign. At that point, they were already medically assigned. So if they’re assigning later, at the time of the patent filing, they don’t really have any rights. It’s just a documentation, really. And there’s another scenario where an employee may have an obligation to assign written into their employment contract, and in that case, the rights the invention transfer the to the employer at the time of execution of the assignment, not automatically, although there is an obligation to assign. And also, timing of the inventor assignments or intercompany assignments can be important as well, as we’ll discuss later. So yeah.
Priscilla Dodson 07:05
So the chain of title analysis is pretty straightforward when you are just dealing with the direct inventor assignment to the company, as was shown in the last slide, but it starts to get more complicated very quickly when you add more inventors, sometimes from different companies, and those companies maybe subsequently be acquired or merged with other companies, and perhaps patent rights may be transferred within different entities or subsidiaries of a single company, for example. So, I’m showing here a scenario where it starts to get more complicated, so let’s add three inventors, and in this case, the chain of title analysis looks at assignments from each of the inventors. So, it’s not enough to just have an assignment from one inventor or two inventors to the company. If you do not have assignments from all three inventors to the company, then the company will not fully own the patent. So, for example, if inventors one and two assign to the company, but number three does not, then the patent rights will be jointly owned by inventor three and the company until and unless inventor three assigns. And this is important, because if the company wants to sell this patent later on down the road, it can only sell what it owns, which at this point would be a joint interest in the patent with inventor number three, and that’s usually not attractive to the potential acquirer. The company who wants to buy the patent wants to own all the patent rights, so it’s really important to get all of the inventor assignments. Okay, here’s an even more complicated scenario, just for illustration purposes. Let’s say that Company A and Company B are collaborating on an invention made by their respective employees. So inventors one and two, let’s say are employed by Company A, and they assign their rights in the invention to Company A. Similarly, inventor three is employed by Company B and inventor three assigns their rights and the invention to Company B. So at this point, the patent would would be owned by both Company A and B because the inventors have assigned all their rights. Now let’s say that Company A buys Company B’s rights in the patent because they want to own the whole thing, and so Company B will assign their rights to Company A. So now the result is that company A owns all the rights in the patents, and then Company A is able to sell the patent rights to Company C, such that Company C can own all the rights. So this is a an example of a complete chain of title that follows the original rights from the inventors all the way to the new owner, Company C. And the important thing to note here is that there are many links in this chain, and if any of the links are broken or do not exist, then Company C will not have the full rights of the patent that it thinks it is buying. Thus a chain of title analysis has to look at every link following the flow of rights from the inventors to make sure that they all eventually end up with Company C. And these scenarios can get far more complicated with many more links, and thus much more potential for the chain to break somewhere. So let’s step back and take a closer look at the patent assignment document that we’ve been discussing, according to the USPTO manual for patent examining procedure, or the MPEP, an assignment is the transfer of a party’s entire ownership interest, the entire bundle of IP rights. I’ve given a quote here from the MPEP, and also, according to the Code of Federal Regulations at 37 CFR 3.1 defines an assignment a patent right, similarly as the transfer by a party of all or part of its right title and interest in a patent or patent application. Note also that an assignment must be in writing. It is a document. It will usually take the form of a patent assignment document that includes language transferring quote, All right title and interest, or entire right title and interest, or very familiar, common phrasing of this often a patent assignment will further specify particular rights within the bundle that are being transferred, including, for example, the right to sue for infringement, the right to further assign or license and the right to claim priority to the invention in later applications. So this may seem simple enough, but I have definitely seen people get this wrong. For example, what if an assignment purports to transfer just quote, right title and interest, and a patent from one company to another, not quote all or quote entire right title and interest, but just the right title and interest. So in this scenario, did they transfer everything or not? And sometimes you can look to specific provisions that are included in the assignment document. For example, transferring the right to bring suit, enumerating the different rights as listed on this slide, for example. But what if less than all of the usual rights in the bundle of rights of IP rights as specified, for example? What if the right to further assign is not specifically listed? There may be a question at this point of whether less than all rights are transferred, and if less than all rights are transferred, some of those rights still reside with the first company or with the inventor and were never transferred. And this can have real consequences. In the end, if the right to bring suit was not transferred, for example, then the company that bought the patent or the second company that bought the patent from the first company may need to join the first company to have standing just to bring an infringement suit. So the takeaway point here is that while assignment documents can take different forms or use slightly different language, the important thing is that they need to include robust language that clearly transfers all right title and interest to avoid ambiguity and what rights were transferred. And for the sake of clarity, I wanted to make a distinction between a patent assignment and a patent license. So this language comes directly from the MPP at section 301 which distinguishes between an assignment a patent rights and a license, which is a transfer to another entity of less than all right title of interest in a patent, for example, may be a license to a particular field of use or a geographic area. A license may be exclusive, meaning that only one company has a license to the particular field or geographic area. Or a license can also be non exclusive meaning that many companies have taken licenses to use the patent in the same field or the same geographic area. So up until now, we have not yet mentioned recordation or discussed recordation. This is also an important piece of the chain of title analysis that we’ll take a closer look at now. So assignment documents can be made of public record through the USPTO, and this is the process of recordation. Note that the USPTO does not make a determination of the validity or effectiveness of the assignment document recordation is merely ministerial at the USPTO, you will fill out a form, identify the patent, identify the property, and they record it, and that’s all. It’s not. There’s no kind of determination that you can point to that the USPTO made that makes it any more valid. So while recreation is not required to make an assignment effective, there are good reasons to record assignments promptly. Recordation of an assignment provides legal notice to the public. For one for a patent to issue to a particular assignee, the assignment must have been recorded or filed with the USPTO. And importantly, the effective reporting assignment is that it protects the patent assignee from a subsequent third party purchaser of the same patent, If the assignment is reported within three months. So that’s the statute that’s provided here. On the screen, on the slide. So while the patent assignment does not become void if we don’t record within three months, the statue no longer protects the assignment in the event of a subsequent purchase, so the best practice is really to just report it within the three months. So here’s an example of a scenario that plays out the effect of failing to promptly record an assignment. So let’s say an inventor assigns their invention to their employer, Company A, and the company does not record within the three month statutory period, the inventor subsequently assigns their invention to another company, Company B, perhaps there was a question of whether the inventor was obligated to assign to company in the first place, and Company B came along and offered to buy whatever rights the inventor still held, if any, so Company B gets their assignment from the inventor and records within three months before Company A. And in this scenario, company B would have the superior rights to the patent by virtue of recordation, even though the assignment was executed first to Company A so the takeaway here is, it is the best practice to promptly report. Okay, so here’s an example of what happens when you have an incomplete transfer of rights from inventors. This is a well known case, and the example here this case comes up in the context of patent licensing rather than assignments, which we have been the focus of our discussion, but it’s a classic illustration of the importance of making sure you obtain rights from all inventors. So this is a 1998 Federal Circuit case involving two companies, Ethicon and US Surgical Corporation, or USSC, as shown in this slide, and it involves a patent covering safety trocars, which are used in endoscopic surgery.
Priscilla Dodson 16:50
So Dr. Yoon worked with the technician Choi on the safety trocars, and Dr. Yoon subsequently applied for and obtained a patent. Dr Yoon licensed the patent to Ethicon, and Ethicon turned around and sued us surgical for infringement. So that’s at number four on this slide. US surgical then realizes that Choi worked with Dr. Yoon and may have contributed to the invention, even though Choi was not originally named on the patent. So us surgical then obtains a license from Choi, because if Choi is found to be an inventor, then Choi has a joint ownership interest in the patents. The court subsequently determined that Choi was a co inventor, and thus did have joint and ownership rights that could be licensed. So at the end of the day, US surgical has a valid license to practice the patent and is not infringing. And the case was dismissed. So the takeaway here is that in analyzing ownership of a patent, it is very important to account for all the inventors, even inventors that may not have been listed on the patent in the first instance. Of course, this can get tricky if you do not necessarily know who all the inventors are. One practical way the companies can address the situation where they may not know who all the inventors are, is to build an automatic assignment provision, which we discussed earlier, or an obligation to assign into their employment contracts, such that inventions created by employees within the scope of their employment will go to the employer automatically, and that way, if an employee is later found to have contributed to the invention. For instance, after the patent application is filed, their patent rights as an inventor will still automatically go to the employer without having to chase down an assignment. Okay, next are a couple of examples to show how even one break in the patent assignment chain can result in the end company who bought or wants to buy the patents, it can result in the end company who bought or wants to buy the patents, not getting all the patent rights. So this is one of the scenarios we looked at earlier, where we have the three inventors and the two companies and everything eventually, hopefully goes to Company C. But in this scenario, there is a break in the chain of title. So inventors one and two are employed by Company A, and they assign their rights in the invention to Company A. Similarly, inventor three is employed by Company B and assigns their rights in the invention to Company B. So at this point, the patent is owned by both Company A and B, not the inventors, their rights have been assigned. But let’s say that company A tells Company C it owns this patent and the Company C wants to buy it. The Company C cannot own All right title and interest in the patent because Company B still has a joint interest in it. It is not assigned yet to Company A in this scenario. So the result here, at the end of the day is that the patent rights will reside with both Companies B and C if you have that break in the chain. Here’s one more example of a break in the chain of title. So if you have inventors one and two employed by Company A is the same example. But only inventor one assigns their rights and the invention to Company A. Perhaps this is an instance where a company did not realize the inventor number two was an inventor at the time the patent was filed and did not obtain an assignment. And so inventor two held on to their patent rights. Inventor three here is employed by Company B and assigns their rights in the invention of Company B. So at this point, who owns the patents? This is jointly owned by company A, B and inventor two, because inventor two never assigned so Company A, let’s say, then buys company B’s rights in the patents. Company B assigns to Company A. So at this point, the rights are owned by company A and inventor two. Company A then sells the rights to Company C. So what is the result is that Company C owns rights jointly with inventor two, because inventor two never assigned, and this is similar situation to the Ethicon US Surgical Corporation case that we discussed.
Priscilla Dodson 21:15
We talked a bit about automatic inventor assignments earlier, where an inventor’s employment contract provides that any inventions created by the inventor employee within the scope of their employment will be automatically assigned to the employer, such that the employer owns the patent rights. And I mentioned that it can also be the case in countries outside the US, where employee employers are the original owners of their employees inventions without any separate assignment. So in that case, a subsequent patent assignment by the inventor would be confirmatory only. It’s illusory; it cannot transfer any patent rights because the inventor does not have rights left to transfer at that point. They already transferred at the time of invention. So I’ve included this scenario here to illustrate how the situation could play out and potentially cause confusion if you’re not aware of it. So here, let’s say that the inventor was employed by Company A at the time of invention, and the inventor’s rights in the invention were automatically assigned to Company A at that time. However, let’s say Company A soon after, spun out a subsidiary, and the inventor because became an employee of the subsidiary, so the subsidiary then filed patents at that time on the inventor’s inventions and diligently obtained an assignment from the inventor to the subsidiary. So the subsidiary then sold the patent rights, let’s say, to Company B. So at this point, does Company B have all right title and interest in the patent? Then I think the answer here is maybe the inventor’s assignment to the subsidiary is illusory, as we talked about, because it’s not really transferring anything. The inventor’s rights reside with Company A, since as is the time of the invention. So the real question is whether Company A is rights in the patent transferred to the subsidiary, either through a formal assignment or by virtue of its relationship to Company A, that could then go to Company B. So there’s potentially a break here on the chain of title between the company and its subsidiary. So just one more note here. I think I had mentioned this earlier. What is the point of having a confirmatory assignment if his rights have already transferred? So why bother with executing this? And there are various reasons this may be useful. One is just to have a document that you can publicly record with the USPTO, because when you record that is public, publicly done. So you’re not going to want to put necessarily an employment contract record that. So it’s sometimes it’s nice to just have a standalone document, even confirmatory, that you can record with the USPTO. Okay, here’s a last example illustrating that timing of when assignments are executed can matter in some circumstances and sometimes very significantly matter. So let’s look at a scenario where Company A in the middle of the slide here files for a patent application that is based on work by two of its employees, say inventors one and inventor two, and they file the PCT in January 2025. This application is a PCT and international PCT application that claims priority back to a 2024 provisional application. So let’s say the inventors are still at the company, so the company is not in a rush to get its assignment documents and recordations in order for the provisional or PCT application. This happens a lot, but then six months later, the company is interested in selling the PCT patent family to Company B, and at that time, it gets its executed assignments from the inventors. In order in July 2025 so this is well after the filing of the PCT. So the result here is that the inventor assignments are executed after the PCT patent is filed and after the priority claim was made. So the question is whether Company A had a right to claim priority to the earlier files, 2024 application when it filed the January 2025 PCT if the inventors had not formally assigned anything until July 2025. So, in the event there’s no automatic assignment, we’ll assume, then the answer is that at the time the company filed the PCT application, with its priority claim in January 2025, it did not own the patent rights because those weren’t assigned until later formally. So, is this a problem and how much of a problem is so? And the answer is that it depends on the jurisdiction. So while the US takes a more lenient view, some jurisdictions around the world take a very strict view of priority claims and require that the applicant of the PCT and the owner of the provisional application to which the applicant is claiming priority to be the same entity. And if they’re not the same entity, then the priority claim is not valid. And this would be a problem in the scenario here, because Company A did not own the 2024 provisional at the time the PCT was filed, the inventor still owned it they had not assigned. And in this case, the national stage applications filed off of the PCT and certain jurisdictions that are very strict about the priority date may not get their priority date. And this would mean that if you don’t get your priority date, intervening art between the 2024 priority date and the January 2025 PCT application could become prior art to your application and be used against your application in those jurisdictions. So the takeaway here is that the best practice is to promptly execute assignments. Now we’re getting to our summary slide. So I’m just showing one of the scenarios we looked at earlier, showing the generic chain of title, from the inventors to an acquiring Company, in this case C, and I hope that I’ve convinced you that each link in this chain of title matters, and the value of your IP portfolio may depend on you getting this right. And I’ve highlighted some of the ways, and the next slide, of highlighted some of the ways in this presentation that this can go wrong and provided some best practices on the next slide for avoiding some pitfalls. So as a takeaway, I’ve summarized some of the best practices, practices we’ve discussed so robust assignment language clearly, assigning all right title and interest is important, recording within three months of the date of assignment may save you from a subsequent purchaser of patent rights. If feasible, there may be a benefit to drafting employment agreements to include an automatic assignment of inventors, of the inventors patent rights. And as the last example we looked at showed, it is important to execute assignments promptly.
Allison Schmitt 28:01
Thank you very much, Priscilla for this excellent program. This is going to be required viewing, I think, not just for startup companies who are engaging, but also for many of my students who will be heading into these fields. So thank you so much to our viewers for joining us. We really appreciate your engagement with the startup signature series. Stay tuned for our next set of programs.