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Renato Smith, Esq.
When negotiating joint development and license collaborations, startups tend to focus on the financial terms, as they should. But the legal terms can be critical. For agreements involving co-owned patents, there’s an important clause to include. If the clause is missing, there could be infringers that you want to sue but lack the legal standing to bring the suit. With no ability to sue, your startup could face loss in market share and lost opportunities for royalty revenue and damage awards.
On February 19, 2015, Intel Corp. filed a brief with the U.S. Supreme Court related to the case, STC.UNM v. Intel Corporation. This case involves the rights of patent co-owners to sue third parties for patent infringement. In 2014, the Court of Appeals for the Federal Circuit (CAFC) ruled against STC.UNM, reiterating the dated principle that all patent co-owners must join an infringement suit or else the suit will be dismissed. Moreover, the CAFC held that the procedural rules do not compel the court to join an unwilling co-owner. The CAFC, however, noted an important exception: when a co-owner has waived the right to refuse to join suit, the court may then involuntarily join the co-owner. With no waiver in place, STC.UNM’s suit was dismissed because its co-owner, Sandia Corp., was unwilling to join the suit. STC.UNM then petitioned the U.S. Supreme Court, taking issue with the CAFC’s decision, and Intel later filed its brief in opposition.
Joint development projects often involve joint inventors, leading to co-ownership of patents. To avoid enforcement obstacles, the underlying agreement should address co-owned patents and include an important clause regarding suits. The clause provides that the other patent co-owners agree to join suits at your request. In other words, the co-owners waive their rights to refuse joinder. Simple as it may be, this type of clause could be the difference between success and failure for a startup.
This lesson applies to patent licenses as well. If your startup is receiving a patent license from a university, for example, your license agreement should contain a similar clause.
So think twice before downplaying legal terms as “boilerplate,” and be sure that your joint development and license agreements are drafted with an eye toward patent enforcement.