An intellectual property (“IP”) portfolio may include patent assets, copyrighted works, trademarks, and trade secrets. Understanding ownership, title, and cloud on title (e.g., third-party rights) of IP assets is of key importance in review and initial valuation of a target portfolio. In particular, understanding specific party ownership and any intervening third-party rights of patent assets and copyright assets is a focal point in IP due diligence. This understanding emanates from title searches through the U.S. Patent and Trademark Office (“USPTO”) online database, examination of the chain of title via the USPTO Abstract of Title, and an audit of software assets for open source software (“OSS”) license terms.
Chain of Title
For U.S. patent applications and U.S. granted patents, the USPTO Assignment Recordation Branch has an online database, the Patent Assignment Search, that allows one to search for recorded title. The online search may be performed based on assignee name (e.g., employer company), assignor name (e.g., employee inventor), application number, patent number, application publication number, or reel/frame numbers (if known).
The search results in a listing called an “Abstract of Title” for the given patent asset (patent application or granted patent). The listing shows recorded conveyances or transfers of patent rights; security interests (liens) against the patent rights; and, if any, forgiveness of the security interests. The sequence (date order) of the recorded component parts in the Abstract of Title informs the searcher of the so-called title and any intervening third-party rights in the patent asset.
Under U.S. patent laws, patent rights begin with or originally vest in the named inventors of the corresponding patent application. Assignment of each inventor’s rights to an assignee (e.g., by employees under employment contract obligations to assign such rights to their employer corporate entity) is typically a first “leg” in the chain of title. A typical example of a second “leg” in the chain of title is a company-to-company assignment from the initial employer corporate entity to a merging or acquiring entity. Another example one may find in the Abstract of Title is recordal of a third party’s interest or intervening rights in the patent asset. Third-party rights may be in the form of a lien, mortgage, or other security interest where the subject patent or patent application is used as collateral to secure the loan or debt.
It is important that the conveyance documents (original assignments by inventors, merger/acquisition documents in pertinent part, loans with a security interest) be recorded at the USPTO Assignment Recordation Branch against each affected U.S. patent, U.S. patent application, and Patent Cooperation Treaty (“PCT”) international patent application. Such recordal provides notice to the public of one’s patent rights or interests therein. An interest in a patent asset may be statutorily void against a subsequent purchaser or mortgagee unless that interest is recorded at the USPTO within three months from the conveyance/assignment/grant of rights, or prior to the date of such subsequent purchase or mortgage.