Patent assignment — How to guide

1. Overview

A company’s ability to buy and sell property is essential to its long-term life and vitality. Although it does not take up physical space, too much intellectual property can burden a company, directing limited funds towards maintaining registrations, defending against third-party claims, or creating and marketing a final product. Selling unused or surplus intellectual property can have an immediate positive effect on a company’s finances, generating revenue and decreasing costs. When it does come time to grow a business, companies looking to purchase property (including patents and other inventions) to support their growth must be sure that the seller does, in fact, have title to the desired items. A properly drafted patent assignment can help in both circumstances. 

A patent assignment is the transfer of an owner’s property rights in a given patent or patents, and any applications for such patents. These transfers may occur on their own or as parts of larger asset sales or purchases. Patent assignment agreements provide both records of ownership and transfer and protect the rights of all parties.

If you follow the enclosed sample and guidelines, you will have a written acknowledgment of the rights and responsibilities being transferred as part of your sale. This will provide essential documentation of ownership and liability obligations and you will be well on your way to establishing a clear record of title for all of your patents. 

2. Dos & don’ts checklist

1. A patent is a set of exclusive rights in an invention given by the government to its inventor for a limited period of time. Essentially, in exchange for the inventor’s agreement to make his or her invention public and allow others to examine and build on that work, the government provides the inventor with a short-term monopoly for his or her creation. In other words, he or she is the only person who can make, use, or sell that invention.
2. A patent assignment can take many forms. It can be the transfer of an individual’s entire interest to another individual or company. It can also be the transfer of a specific part of that interest (e.g., half interest, quarter interest, etc.) or a transfer valid only in a designated area of the country. The exact form of the transfer is specific to the agreement of the parties.
3. Licenses are different than assignments. The individual who receives license rights from the patent holder is not gaining ownership—rather, he or she is getting assurance from the patent holder that he or she will not be sued for making, using, or selling the invention. The terms of the license will vary from agreement to agreement, and may address issues of royalties, production, or reversion. If you are looking only to license your invention, and not to sell all or part of it, you should not use the enclosed document.
4. A patent transfer is usually accomplished through a contract, like the written agreement form that follows. However, after the parties have negotiated and signed their agreement, the transfer must be recorded with the U.S. Patent and Trademark Office (USPTO). The agreement will not be effective if this registration is not made. Moreover, if the transfer is not recorded within three (3) months from the date of the assignment, there can be no later purchasers. In other words, the patent is no longer sellable to a third party by the assignee if it is not recorded quickly and correctly.
5. There is a $40 fee for recording each assignment of a patent or patent application. If you are submitting your transfer papers to the USPTO by mail, you should send them (together with a cover sheet and the fee) to Mail Stop Assignment Recording Services, Director of the United States Patent and Trademark Office, P.O. Box 1450, Alexandria, VA 22313-1450. Note that if you submit your assignment by mail, you should not use the original, since the document will not be returned to you. In addition, the copy you submit must be on paper that is “flexible, strong white, non-shiny, and durable.”
6. Although you should feel free to adapt the document to suit your arrangement, you should always indentify the patent(s) being assigned by their USPTO number and date, and include the name of the inventor and the invention’s title (as stated in the patent itself). This is a requirement of federal law and failure to follow it could invalidate your assignment.
7. The advantage of selling your invention or patent outright (and not simply licensing or attempting to develop and market it yourself) is that you are guaranteed payment at the price you and the purchaser have negotiated. On the other hand, that one-time payment is all that you will ever receive for your property. You will no longer have the right to control anyone else’s use of your creation. By using it yourself or offering a temporary license, you retain the potential for future income. However, such income is by no means certain, and your opportunities are paralleled by risk. Before selling all of your rights in a patent or patent application, make sure this is the best (and most lucrative) approach for you and your company.
8. Do not enter into an agreement without completing your due diligence. If you are purchasing a patent, conduct searches with the USPTO and online directories to make sure the seller actually has complete and unique rights in the offered property. Has an application already been filed by another person or company? What are the chances that this is a patentable item? Although your findings will not provide guarantees, you may have protection as an “innocent purchaser” if disputes arise. You might also find critical information about the value of the patent. Consider hiring a professional to help in your investigation. Comparing patents and applications often requires a specialized and technical understanding to know how useful and unique each one is. 
9. If you are selling an invention or patent, make sure you own it. Although this may seem obvious, ownership of intellectual property is sometimes not clear- cut. This may be the case if, for example, the invention was created as part of your employment or if it was simply sold or otherwise transferred to somebody else. A thorough search of the USPTO website should be conducted before you attempt to sell your property.
10. Both parties should review the assignment carefully to ensure that all relevant deal points have been included. It is better to be over-inclusive than under-inclusive. Do not assume that certain expectations or terms are agreed to if they are not stated expressly on the document.
11. Sign two copies of the assignment, one for you and one for the other party.
12. It’s a good idea to have your assignment notarized. This will limit later challenges to the validity of a party’s signature or of the transfer itself.
13. If your agreement is complicated, do not use the enclosed form. Contact an attorney to help you draft an assignment that will meet your specific needs. 

3. Patent assignment instructions

The following provision-by-provision instructions will help you understand the terms of your assignment.

The numbers and letters below (e.g., Section 1, Section 2(a), etc.) correspond to the provisions in the agreement. Please review the entire document before starting your step-by-step process. 

• Introduction of parties. Identifies the document as a patent assignment. Write in the date on which the agreement is signed. Identify the parties and, if applicable, what type of organization(s) they are. Note that each party is given a name (e.g., “Assignor”) that will be used throughout the agreement. The Assignor is the party that is giving (“assigning”) its ownership interest and the Assignee is the party receiving it.
• Recitals. The “whereas” clauses, referred to as recitals, define the world of the assignment and offer key background information about the parties. In this agreement, the recitals include a simple statement of the intent to transfer rights in the patent. 
  Remember that the Assignor can transfer all or part of its interest in the Patents. If the entire property is being transferred, use the word “all.” If only part of an Invention or Patent is being transferred, specify the amount being assigned (e.g., one-half, one-quarter, etc.).
• Section 1: Assignment of patents. This constitutes the assignment and acceptance of the assignment of the Patents and Inventions. Note that the property being assigned is not described in the agreement itself. The Assignment references “Schedule 1,” and explains that the full description is located on that schedule. Be as complete and clear as possible in your description of the property being transferred.
• Section 2: Consideration. In most agreements, each party is expected to do something. This obligation may be to perform a service, transfer ownership of property, or pay money. In this case, the Assignee is giving money (sometimes called “consideration”) to receive the Assignor’s property. Enter the amount to be paid, and indicate how long the Assignee has to make that payment after the agreement is signed.
• Section 3: Authorization to director. The Assignor’s authorization to issue any Patents in the Assignee’s name. In other words, this tells the head of the USPTO that the transfer is valid and that ownership is changing hands by virtue of the Assignment.
  The bracketed last sentence is only applicable if the assignment is being recorded before a patent application number has been issued by the USPTO. It allows this application number to be written in after the assignment is recorded. If the applications have already been filed, and there have been application numbers issued, delete this bracketed sentence.
• Section 4: Assignor’s representations and warranties. The Assignor’s promises about the property being sold. More specifically, the Assignor is swearing that:
  • 4(a): it is the sole owner of the Inventions and the Patents. If there are other owners who are not transferring their interests, use the bracketed phrase. This means that the only part being transferred is the Assignor’s part.
  • 4(b): it has not sold or transferred the Inventions and the Patents to any third party
  • 4(c): has the authority to enter the agreement.
  • 4(d): does not believe that the Inventions and the Patents have been taken from any third party without authorization (e.g., a knowing copy of another company’s invention).
  • 4(e): does not know of any permissions that have to be obtained in order for the assignment to be completed. In other words, once the agreement is signed, the assignment will be effective without anyone else’s input.
  • 4(f): the Patents weren’t created while the creator was employed by a third party. In many cases, if an individual was employed by a company and came up with a product, the company will own that product. This section offers assurance to the Assignee that there are no companies that will make that claim about the Patents being sold.
    If you and the other Party want to include additional representations and warranties, you can do so here. 
• Section 5: Assignee’s representations and warranties. The Assignee’s promises about the transaction. More specifically, the Assignee is swearing that it:
  • 5(a): has the authority to enter the agreement.
  • 5(b) has enough funds to pay for the assignment. 
    If you and the other Party want to include additional representations and warranties, you can do so here. 
• Section 6: No early assignment. Prevents the Assignee from re-transferring the inventions or patents, or using any of them as collateral for loans, until it has made complete payment of the money due under the agreement. 
• Section 7: Documentation. The Assignor’s promise to help with any paperwork needed to complete an assignment (e.g., filing information about the assignment with the USPTO and transferring document titles). The bracketed phrases make the additional promise that the Assignor will help with transfer paperwork for filings outside of the country. If this is not relevant to your agreement, delete the bracketed phrases.
• Section 8: No further use of inventions or patents. Indicates that after the effective date of the agreement, the Assignor will stop using all of the inventions and patents being transferred and will not challenge the Assignee’s use of those inventions or patents.
• Section 9: Indemnification. A description of each party’s future obligations, if the patent or any application is found to infringe on a third party’s rights. There are two options provided, and you should choose the one that best fits with your situation. In the first, the Assignor takes all responsibility for infringement, promising to pay all expenses and costs relating to the claim. In the second, the Assignor makes its responsibilities conditional, greatly limiting its obligations if a claim is brought. Select only one of these options, and delete the other.
• Section 10: Successors and assigns. States that the Parties’ rights and obligations will be passed on to successor organizations (if any), or organizations to which rights and obligations have been permissibly assigned.
• Section 11: No implied waiver. Explains that even if one Party allows the other to ignore break an obligation under the agreement, it does not mean that Party waives any future rights to require the other to fulfill those (or any other) obligations.
• Section 12: Notice. Lists the addresses to which all official or legal correspondence should be delivered. Write in a mailing address for both the Assignor and the Assignee.
• Section 13: Governing law. Allows the parties to choose the state laws that will be used to interpret the document. Note that this is not a venue provision. The included language will not impact where a potential claim can be brought. Write the applicable state law in the blank provided.
• Section 14: Counterparts/electronic signatures. The title of this provision sounds complicated, but it is simple to explain: it says that even if the Parties sign the agreement in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city - much less the same room - this provision ensures that business can be transacted efficiently, without sacrificing the validity of the agreement as a whole.
• Section 15: Severability. Protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting choice-of-law clauses, it will not undo the entire agreement. Instead, only the section dealing with choice of law would be invalidated, leaving the remainder of the assignment enforceable.
• Section 16: Entire agreement. The Parties’ agreement that the document they’re signing is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision will not prevent a Party from arguing that other enforceable promises exist, but it will provide you some protection from these claims.
• Section 17: Headings. Notes that the headings at the beginning of each section are meant to organize the document, and should not be considered operational parts of the note.
• Schedule 1: List of patents. In order for a patent assignment to be effective, the patents being transferred must be clearly identified. Be thorough in your description and attach any registrations or drawings that you may have. If you do include drawings, reference the inclusion of those items in the schedule (e.g., “* See attached drawing”).
  Enter the patent registration number, and the name of all of the registered inventors of the patent(s) (even if they are not parties to this Assignment). If the assignment relates to a patent application, identify the application number (consisting of a series code and a serial number, e.g., 07/123,456). If the assignment relates to a provisional patent application, or an application that is being filed at the same time as (or after) the assignment, you must also provide the name of each inventor and the title of the invention.