January '09 Newsletter

Cease and Desist
Who owns the patent?
Transfer of Copyright Renewal Rights

Timely Tips:
Who Owns the Patent?

If you hire an employee to develop a new product for you and she invents some valuable patents along the way, most likely you, the employer, own those patents.  But if you hired her to do maintenance on old products and she invents a new one, or perhaps she invents a new and better way to make the old one, she will own the patent unless you can convince her otherwise.  There is some case law that says that the employer might have a no-cost perpetual (but non-exclusive) license to use or make the invention if she used company resources to develop the invention, but she will still have the right to license it to your competitors. 


Can you avoid this issue by having all employees waive all rights to inventions?  Certainly!  But it must be in writing and there must be some consideration – the employee should get something in return for giving up rights to her inventions - even inventions that do not yet exist.



Transfer of Copyright Renewal Rights.

There is a little known provision of the 1976 Copyright Act that is just now coming into effect.   


If you own a copyright that the original artist licensed back in the 70’s for royalties that you think are now too low, the law allows you to terminate the agreement 35 years later, regardless of the terms of the contract. Actually, what you can terminate is the licensee’s right to renew the copyright.  This law gives you a 5 year window to re-negotiate higher royalties for those spy novels your late uncle wrote, not realizing that one day they would go DVD.

Cease and Desist:
What do you do if you get a letter accusing you of infringement?  Place it in that limbo box we all have on our desk for things we will get to someday?  After all, (1) the patent or copyright or trademark might not be valid; or (2) you might not really be infringing; or (3) you might actually have a license!  But this kind of thinking might play into the hands of IP holder. 


Imagine you designed a new line of widgets, started production and you are now selling $8mm per year.  Also assume that a reasonable royalty for the patent you are infringing is 3%.   If you get notice after a year, you could probably re-tool into non-infringement and settle the dispute for a few thousand dollars – much less than the $240,000 of reasonable royalties.  You would have the advantage.  The IP holder would have trouble bringing suit, since the damages are too small to get the attention of most attorneys, and besides, one of your three assumptions above might actually be true! 


But sit on it for a few years and wait till the reasonable royalties add up to a few million dollars and you have now passed the advantage to the other guy.   Not only will he be able to find contingency-fee representation, but since he notified you years ago, he can plead intentional infringement, upping the damages even more.


Of course, application of the law (and re-tooling your line) is more complicated than I just implied, but the bottom line is:  Don’t ignore the letter; the problem may get worse before it goes away.

Copyright © Robert F. Gilbert 2009

Robert F. Gilbert, Attorney at Law

 (713) 378-9645

10100 Kleckley #15-B

Houston, TX 77075

(713) 341-9062 (fax)


This newsletter contains no legal advice.  Before relying on any information found here, please contact an attorney to discuss your particular situation.