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Monday, 11 January 2016

Does a patent assignment require consideration?

This Kat was perusing the excellent IPDraughts blog the other day, and read this report of an interesting case Wright Hassall LLP v Horton Jr & Anor [2015] EWHC 3716 (QB), which is a bit of an oddity - it is basically a solicitor negligence case, brought about by the solicitor claiming for unpaid fees, and the client counterclaiming for negligence.  The oddity is that it is a case heard by a County Court judge sitting in the Queen's Bench division of the High Court, but with a substantial IP element (whereas usually a specialist IP case would be heard in the Chancery Division).

The case raises and answers an interesting question - under English law, does an assignment of a patent (other than by deed) require consideration?

The answer is given clearly in [47] of the judgment:

“an instrument in writing satisfying s30(6) is effective as a legal assignment without any additional requirement for consideration.” 

Section 30(6) of the Patents Act 1977 requires only that the assignment "is in writing and is signed by
or on behalf of the assignor".

Now, this moggy must confess to being surprised by this.  Many, many years ago he was told (by a solicitor, so it must be true, he thought) that an assignment not executed as a deed had to fulfil the requirement of contract law for consideration, and that therefore consideration was required.  IPDraughts himself on the other hand was already of the view that consideration is not required for an IP assignment, and so the decision merely confirmed his already-held view.  But this moggy suspects he is not the only practitioner to find this case surprising.

So this Kat wonders three things:

1) Who among our dear readers is surprised by this decision?
2) Does anyone think that it is wrong? and
3) Should practitioners carry on putting consideration into IP assignments (not executed as a deed) anyway?


Anonymous said...

Interesting! When it says 'effective as a legal assignment', does this mean an assignment assigning legal title only, as opposed to equitable/beneficial ownership? Or does it mean an assignment of both rights is legal without consideration?

Darren Smyth said...

I am not completely clear about that - I read it as the latter: a written assignment without consideration can transfer all rights. However, earlier at [44] the decision states "Consideration may be required to support an equitable assignment, since equity does not assist a volunteer." This might support the legal title only reading; but that passage was in relation to a situation where the document being considered there was not a legal assignment (which in those days had to be by deed), and therefore could at most be an equitable one. I am used to the idea that an instrument can be an equitable assignment only, but I have not come across a situation where a document might be a legal assignment only without transferring equitable/beneficial ownership.

Michael Risch said...

I know nothing of English law, but the ruling doesn't surprise me. So long as it is an assignment (and not a promise to assign at a future date), it's unclear why one would need consideration. Just like a gift, ownership passes at the changing of title. If I call my broker and ask to put stock into someone else's hands, I don't need consideration -- so, too, with a self-executing patent (or any other) assignment.

Barbara Cookson said...

I'm not surprised and it's not wrong and if there is no other clauses in the assignment that you would need to enforce you don't need consideration. We really need to put this myth to bed that an assignment has to be a contract. It doesn't.

Edward Humphrey-Evans said...

Perhaps the significance of a value of a transaction was more relevant when stamp duty was required to be paid in the United Kingdom, as a matter of course? Presently, Patents Form 21, in section 7 (for signature) maintains the confirmatory comment: "I/we hereby confirm that rights as indicated in part 5 above have been acquired and that any necessary stamp duty has been paid."

Walter Jones said...

What is the basis for that?

Anonymous said...

If it covers multiple jurisdictions, do you need consideration? What else do you need? For example, witness boxes?

Sally Cooper said...

It's wrong. Patents Act says "assignment shall be void unless" and an assignment is a transfer between two parties governed by the law of contract and the (English) law of contract requires consideration.

Philip Harris said...

As Barbara says, and as I understand it, there is a distinction between the element effecting the transfer, which if itself requires no consideration, and any additional contractual elements such as further assurance, which do, if it is not executed as a true Deed. So it is not uncommon to see consideration in an assignment where there are additional terms to enforce.

Barbara Cookson said...

I have to disagree with Sally - the law of contract does not cover everything. An Assignment like a land transfer is a creature of its own statute

Anonymous said...

I always give consideration to assigning a patent. Such matters of import should not be dealt with any other way.

Yegor Gaidar said...

I agree with Anon @ 12:27 - always make sure there's consideration (even if nominal) to avoid the issue. Of course, consideration doesn't have to be money.

Stephen Johnson said...

In the US, the Federal Circuit December 2014 decision under Illinois law in Memorylink v Motorola ( assumes consideration is required, finds recitation of consideration is enough under Illinios law if extrinsic evidence is not required for interpretation of the contract (“[f]or and
in consideration of the sum of One Dollar to us in hand
paid, and other good and valuable consideration, the
receipt of which is hereby acknowledged . . . .”), but alternatively and in addition found extrinsic evidence of other sufficient consideration.

Philip Harris said...

FWI see also Chaplin v Leslie Frewin (Publishers) Ltd and Others, 1966 2 WLR 40 per Danckwerts LJ and Winn LJ which recognises the distinction between an effective assignment and a contract, even where the former is included in the latter. Compliance with the statutory formalities is sufficient. Although it is a copyright case, the principe is the same.

Anonymous said...

For what it's worth, this weighty tome has various chapters discussing the different ways in which intangible property can be transferred, only one of which is by way of contract:

So it says you can "gift" a patent, for example - and there would be no consideration in that case. (By definition?)

But I'd still always include consideration myself - partly to avoid arguments, but mainly because of the "additional terms" point Philip Harris mentions above. I struggle to recall seeing an assignment that didn't include other terms, even if it was just a promise by the assignee to execute any future documents that turned out to be required.

ipdraughts said...

@stephen johnson, on the question of whether US contracts should recite consideration see

In my view, English law contracts (whether for the purpose of IP assignment or otherwise) should avoid reciting consideration. Consideration is either present in the contract or it isn't.

Ron said...

When I was in industrial practice in the UK, it was our usual procedure to execute the precautionary inventor's assignment as a deed, with no consideration, and to make an assignment with a consideration of one dollar for the US filings. It never gave rise to any problems.

The assignment was of course precautionary because the rights normally belonged to the employer anyway under UK law, because he inventions were made as part of the employees' normal duties. The only exception that I am aware of was where a workshop technician had made an invention and had worked on refining it in his lunch break using the company's workshop facilities, and had been disciplined for doing so on the ground that it was not part of his duties. He persevered and the merits of the invention were eventually recognised. We had to tell the employing company that, in view of the disciplinary proceedings, the invention had clearly not been made as part of his normal duties, and so the company had to get him to assign it to them for a considerable consideration.

Lindsay Gledhill said...

The late great Niel Ackermann (ex Bird and Bird) would not have been surprised by the judgment - I was trained on that basis. This is also the law that was taught at the College of Law in the early 1990s

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