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Contractual Interpretation of Patent Vesting Agreements
Based on the spirit of contractual autonomy, the Patent Act permits the parties concerned to agree among themselves on the vesting of patent rights for inventions made by an employee or a contracted service provider in the course of performing his or her duties in accordance with Article 7 of the Act. However, if the agreement between the two parties on the vesting of patent rights is not completely clear or has contradictory terms, a significant controversy may arise as to how the patent rights should be vested, as attested by the discrepancy between the Supreme Court of Taiwan Civil Decisions (2020) Tai Shang Zi No. 8 and No. 9 and the Intellectual Property Court Civil Decision (2017) Min Zhuan Shang Zi No. 9.
In its decision, the Intellectual Property Court held that the Plaintiff and the Defendant had entered into a Joint Venture Agreement requiring the Defendant to provide the technical know-how and the Plaintiff to provide non-technical resources for the joint production and sale of diamond products. Both parties subsequently signed an employment contract in which the Defendant agreed to serve as the general manager of the Plaintiff's company, Diamond Technology Center. Later, the Plaintiff commissioned a university to conduct a research and the Defendant, on behalf of the Plaintiff's company, inked an industry-academia collaboration agreement with the university to develop a new technology of diamond tools. It was also agreed that the intellectual property rights and patents arising from the agreement should vest in the Plaintiff and the patent rights may be applied for jointly by the project leaders or co-leaders of both parties. After comparing the relevant technical documents and industry-academia collaboration reports, the Intellectual Property Court concluded that the patents in dispute should be the patents arising from the above-mentioned industry-academia collaboration agreement. Thus, the patent rights in dispute should vest in the Plaintiff based on the agreement without granting the Defendant any real ownership of the patent. Hence, the Defendant's sole or joint application for the patents in dispute with a university's project leader infringed on the patent application rights and patent rights of the Plaintiff. In light of this, the Plaintiff may request to transfer the ownership of the patents in dispute under the relevant provisions of tortfeasance, contract, and unjust enrichment.
Nevertheless, the Supreme Court noted that the Joint Venture Agreement between the Plaintiff and the Defendant had provided that "title to the intellectual property rights in the products or technologies developed under this Agreement shall be registered in the name of the Defendant and the Plaintiff shall have the right of first refusal," "if the Plaintiff uses such intellectual property rights in the development of products or technology, the Plaintiff shall own an interest in and value of 2/3 of such intellectual property rights...," and "if both parties agree to assign and grant an external license to use the Plaintiff's intellectual property rights, 2/3 of the consideration paid by the third party shall belong to the Plaintiff and 1/3 of that to the Defendant, after deduction of necessary costs." In other words, the Supreme Court questioned whether the patents in dispute were inapplicable to the Joint Venture Agreement between the Plaintiff and the Defendant? If applicable, does it mean that a joint application for the patents in dispute filed by the Plaintiff and the university's project leader is not recognizable based on the agreement? If the Defendant is the registered owner of the patent in dispute, but in reality both the Plaintiff and the Defendant have agreed to share the patent ownership in the 2/3 and 1/3 ratio, should the Defendant's sole or joint application for the patents in dispute with the university's project leader as well as registration of the patent ownership be considered a violation of the agreement? Does it involve an infringement of the patents in dispute owned by the Plaintiff? Has the Defendant violated the Deed of Appointment between the Defendant and the Plaintiff? Has his status as the registered owner of the patents in dispute involved any receipt of interests without legal grounds? All these points still raise doubts that should be clarified.
From the case discussed, we can learn that if the agreement between the two parties on the vesting of patent rights is not completely clear or has contradictory terms, a major controversy may arise as to how the patent rights should be vested,especially when there are multiple contracts signed. There may even be potential contradictions in interpretation. Therefore, all parties involved should be particularly careful and clarify all relevant terms in the contractual documents when determining the vesting of patent rights.