What happens if a patent application is inadvertently filed in the wrong name? By ‘wrong’ I mean that a party is named as an applicant which is not actually entitled to ownership of the rights in the claimed invention. More importantly, what happens if the patent proceeds to be granted to the wrong proprietor? When such mistakes occur, and are subsequently discovered, what should be done to correct them?
These questions recently arose in Federal Court of Australia, in relation to four innovation patents owned by the well-known producer of alcoholic beverages Foster’s Australia Limited (FAL) (now known as CUB Pty Ltd). Similar questions also arose in relation to two registered designs.
You might think that simple errors in filing details might be easy to fix. You might also think that once they had been fixed, that might be the end of the story. But the judgment of the Federal Court in this case demonstrates that you would be wrong on both counts! Even after reassigning the patents and design registrations to the correct owner, the alleged infringer in this case – Cash’s Australia Pty Ltd (Cash’s) – challenged the validity of Foster’s rights based upon an initial error in the identification of the applicant.
Resolving this challenge was not a mere formality. It involved numerous submissions to the court, a day of hearings, and resulted in a 139 paragraph judgment.
The moral of the story is that entitlement matters! It is important that everybody involved in the process of applying for registration of IP rights takes the appropriate steps to ensure that all of the filing details are correct – especially the identity of the rights-owner.
The Error at FilingThe problems with entitlement resulting in the – no doubt expensive – court proceedings occurred because of a simple error at filing. Foster’s had engaged an outside company to conduct some design work. Under the contract with the design company, all intellectual property rights resulting from the project were to be owned by, and assigned to, FAL.
The head company within the Foster’s group of companies at the time was Foster’s Group Limited (FGL) (now Foster’s Group Pty Ltd). In early 2009, a provisional patent application and two design applications were filed in the name of FGL, even though the relevant IP rights were assigned to FAL under the contract with the outside designers.
In July 2009, the two designs became registered in the name of FGL.
Discovery and ‘Correction’ of the ErrorIn January 2010, a standard patent application was filed, also in the name of FGL, claiming the benefit of the filing date of the provisional application. It was only at this stage that staff in the Foster’s Group IP Department noted the error in ownership, and asked their patent attorneys to take corrective steps.
The correction which was implemented was to prepare legal documents, which were executed by FGL and FAL, assigning the patent application and registered designs to FAL. On the face of it, these documents were evidence of a transfer of rights, and IP Australia duly recorded the change in August 2010.
Innovation PatentsIn December 2010, the four innovation patents were filed in the name of FAL. All were divisionals based on the standard patent application, and all therefore claimed priority back to the original provisional application filed in the name of FGL.
Further AssignmentIn March 2012, no doubt for the avoidance of any doubt, and for good form, a further assignment was executed between FAL and the external design company, confirming retrospectively that all of the rights represented by the patent application, the design registrations and the innovation patents, were assigned to FAL ‘with effect from the date on which those Intellectual Property Rights came into being’.
So What Was the Problem?The problem for Foster’s, according to the arguments made before the Federal Court on behalf of Cash’s, was that FGL was never entitled to ownership of any of the relevant IP rights. The original contract with the outside designers gave FAL an interest in the rights, and obliged the designers to assign those rights to FAL, which they did.
Despite being the head of the Foster’s group, FGL is a separate legal entity. It never acquired any rights from the designers, and therefore it was never entitled to own any registered rights arising from the patent and design applications.
Furthermore, since FGL never owned any rights in the IP, it could not have assigned any rights to FAL. The assignment documents executed by FGL and FAL, which were used to record the purported change of ownership, therefore could not have been effective. Cash’s further argued, therefore, that the recording of the assignments from FGL to FAL was based on a false suggestion or misrepresentation to the Commissioner of Patents.
Section 138 of the Patents Act 1990 provides three grounds in which Cash’s argued that the innovation patents could be found invalid:
- that the patentee is not entitled to the patents;
- that the patents were obtained by fraud, false suggestion or misrepresentation; or
- that an amendment of the patent request or the complete specification was made or obtained by fraud, false suggestion or misrepresentation.
- that one or more of the original registered owners was not an entitled person in relation to the design when the design was first registered; or
- that the registration of the design was obtained by fraud, false suggestion or misrepresentation.
The Innovation PatentsThe Patents Act is not particularly concerned with who applies for a patent, only with the person(s) to whom it is ultimately granted. Section 29(1) permits any person to make an application, without regard to entitlement. On the other hand, section 15(1) limits the persons to whom a patent may actually be granted.
In this case, despite the irregularities along the way, FAL – which was always the party entitled to own the innovation patents – was correctly recorded as the patentee when the innovation patents were granted.
It is therefore not surprising that the court ultimately found that FAL was entitled to the patents, which could not therefore be revoked due to lack of entitlement. What is perhaps more surprising is that the court gave lengthy consideration to the effect of the purported assignment from FGL to FAL, even though this does not seem to have been determinative of the outcome. In particular, at - of the judgment, the court concluded that FGL did, in fact, have an interest in the patent applications which was capable of assignment to FAL. It seems, however, to be a case of ‘belt and braces’, just in case the act of filing applications had resulted in some right or interest accruing to FGL.
As for the allegations of ‘fraud, false suggestion or misrepresentation’, it is established that this ground of revocation is only applicable when the accused action was a ‘material factor inducing the grant of the patents’ (see decision at , emphasis in original). In this case, if the Commissioner had been aware of all of the circumstances in relation to ownership of the IP rights, the patent would still have been granted to FAL. If there was any misrepresentation in the purported assignment of the standard application from FGL to FAL, it made no difference to the grant of the innovation patents to FAL (at ). In any event, the court did not consider that there was any misrepresentation made in this case (at -).
The Registered DesignsThe designs presented more substantial problems for Foster’s, in that FGL was, in fact, recorded as one of the original registered owners, despite not being, on the face of it, an ‘entitled person’. The agreement with the external design company made FAL, and not FGL, an entitled person.
To cut a long story (and a few different creative arguments) short, the court was willing to find (at  and ) that the relationship between FGL and FAL was such that:
…FGL held its applications for registration and the registrations … as constructive trustee for FAL. There can be no fraud on the Registrar or on the public in resolving the matter in this way. The effect of the Designs Assignment … was that FGL assigned to FAL all that it held as constructive trustee of the registration application and the designs registration, with the result that FAL held legal and beneficial title in respect of the designs registration. On this analysis, the Designs Register accurately recorded FAL as the registered owner of the designs consequent upon assignment from FGL to FAL.
All’s Well That Ends Well?Naturally, Foster’s would be reasonably pleased with the outcome in this case.
However, it is unlikely that any owner of registered rights would be thrilled to have to spend additional time, money and effort establishing ownership and validity of those rights as a preliminary issue when seeking to enforce them.
This is not to point the finger of blame at anyone. The fact is that mistakes and miscommunications of this kind do happen from time-to-time. Which is why judgments such as this one are such important cautionary tales for applicants and attorneys alike.
Sometimes in the rush to get something filed as quickly as possible, people fail to provide all the information they should, or fail to ask all of the right questions. It may seem like a little thing at the time, which can always be fixed up later. But sometimes little things grow into big problems.
The bottom line? Entitlement matters!