Karen Sandrik, “Formality in patent licensing”

Liveblogged from Drake IP Roundtable 2013.

Karen Sandrik asks what is the role of the common law in patent law right now?

Argues we need a formal but forgiving approach. Where an inventor assigns a patent to a company, we need a formal but forgiving approach; when a firm assigns a patent to another firm, we need much more formality.

In FilmTec and Arachnid, there were agreements to grant future interests in potential patent. In copyright, we have works made for hire; we don’t have anything like that in patent. In FilmTec, language was “does hereby grant”. In Arachnid, the language was not quite as active – “rights will be assigned”. Under FilmTec, the “does hereby grant” connotes a “magical” immediate transfer of a future right when it vests. Under Arachnid, by contrast, the employer only has equitable interest until a further act of conveyance. The Supreme Court considered these cases, and Judge Breyer noted that given that there were only slight differences in wording (“hereby”), it seems too much has been made of the distinction between the FilmTec and Arachnid rule.

Do we need parties to use really specific magic words, or are other forms ok? Really bright line rules can lead to mechanical formalism. Sandrik considers formalities in light of Lon Fuller’s view about the importance of encouraging users to act in certain ways. Perhaps different levels of formality can be useful. In FilmTec and Arachnid, inventors were unsophisticated. For individuals inventors, it might be useful to use standard contractual principles to figure out intent. In that case, using plain language should be OK. For company to company transactions, on the other hand, certainty is important, and imposing burdens on companies to use strict formalities makes sense.