Whether you already own a patent or are pursuing a patent for your big idea, one important consideration is whether to own the patent rights individually, to assign the patent rights to your company, or to create a company and then assign your patent rights to this newly formed company.
Should I Assign My Patent to My Company?
Which option is best for yourself as the inventor and your patent will depend on the specific circumstances related to your patent. We’ll explore different considerations for you as you decide whether or not assigning your patent to your company is right for you
What Does Patent Assignment Mean?
Patent assignment transfers your ownership rights in your patent from yourself to your company. This means that once you assign the patent, you transfer all ownership and control of that patent and its intellectual property rights as the patent inventor to another entity/company, known as an “assignee”. If you are currently in the application phase, this means you transfer all ownership and interest in your patent application to the company.
This differs from another popular way people utilize their patents — licensing their patent rights. Licensing a patent does not provide the licensee with complete ownership of the patent rights. The licensor still retains some rights to the underlying patent. For example, the licensee may be able to use the patent for only a specific time period or only if the licensee pays a specific royalty rate.
Should I Form a Company to Assign My Patent To?
Whether to form a company that you can assign your patent to will depend on your long term plans. If you plan to offer services or to make and/or sell products or technology, establishing a company is likely a good idea for you.
Forming a company will provide you protection against any potential liability that may occur in the future that is related to the patent. Forming a company will also provide a platform from which to offer your products, technology, or services. But this still does not mean it would be best to assign the patent to that company. Once the company owns the patent, it is an asset that may be vulnerable to creditors.
Of course, if you form a company you must continually observe certain corporate formalities to retain the protection and benefits of having a company. This includes holding regular board meetings, keeping finances distinct, and other laws that may vary depending on your location.
This is why it is a good idea to consult an attorney, especially one who specializes in intellectual property, to understand the requirements and benefits of forming a company.
Advantages to Assigning Your Patent to Your Company
As a patent owner, there are several advantages to assigning your patent rights to your company.
Limits Your Liability
By assigning your patent to your company, including a company you form yourself, you limit any potential personal liability that may arise related to the patent. This means your personal assets are not on the line should issues arise down the line and litigation ensue related to your patent. Consider, however, that most liability arises actions taken such as manufacturing and selling products, and not simply by owning the patent.
Provides a Clear Structure
Assigning your patent to your company provides very clear structure and understanding regarding who owns the rights to the patent. If you choose to only license your patent to your company rather than assigning the patent rights in full, it may be more complicated when trying to draft a comprehensive and cohesive licensing agreement between you and your company. This is also helpful when there are investors or other partners that would like to see the patent owned by a company in which they themselves have an ownership interest.
Puts the Public on Notice
If you choose to assign patent rights to your company, this puts the public on notice about your patent and the corresponding intellectual property rights. You must make certain postings on public websites regarding your patent certifications. Assigning the rights to your company provides a medium to showcase this information to the public.
Aids in Licensing Opportunities
Assigning your patent rights to your company can help as you pursue and negotiate licensing opportunities with other entities. If you are planning to license your patent in return for royalties, having an entity that can be the negotiator of the patent rather than you as an individual will lend more credibility to the transaction. This in turn will attract more reputable businesses who will be the best partners to aid in your patent’s success.
Build Asset Valuation
By assigning your patent rights to your company, you build your company’s asset valuation. Your patent rights will be seen as a valuable intangible interest, which is important when attracting investors or lenders should you need additional funds.
Disadvantages to Assigning Your Patent Rights
There are also some disadvantages to assigning your patent rights to your company that you will want to consider as you make this decision.
Removes Control Over the Patent
One key consideration for many patent holders is who will control the intellectual property rights associated with the patent. By assigning your patent to your company, you give up your individual control over the patent.
Depending on your corporate structure, this may mean that any decisions related to the patent are now controlled by your company’s board of directors. You may also have to give up control of your company in exchange for receiving financing from outside investors. And as mentioned previously, making the patent a corporate asset makes it vulnerable to seizure by creditors of the company.
Incurs Incorporation Costs
Another consideration as you look to assign your patent is that it costs money to create and maintain a corporation. These costs will vary depending on where you live, the type of entity you form, and how much of the details are completed by an attorney. You will also probably have to pay yearly corporate taxes for your company.
How to Assign Patent Rights
If you have decided to go ahead and assign patent rights to your company, you must draft an Assignment Agreement. This Assignment Agreement must have language that assigns all rights to any and all patents related to a specific patent application. This Assignment Agreement must be signed by all inventors of the patent.
You then must record this Assignment Agreement with the United States Patent and Trademark Office. This recording can be done online through the Electronic Patent Assignment System. This can be done at any point during the patent application process.