The lawsuit seemed like a slam dunk. Finnish inventor Lauri Valjakka owned patents on content delivery networks and digital rights management. Netflix was using his technology without permission. The infringement was clear.
Valjakka filed suit in September 2021, confident in his case. His patents covered core Netflix functionality. Victory seemed inevitable.
On January 8, 2024, federal Judge Jon Tigar threw out the entire case. Not because Netflix didn’t use Valjakka’s technology. Not because his patents were invalid. But because of a devastating legal reality: Valjakka didn’t actually own the patents he was trying to enforce.
Years earlier, Valjakka had assigned his patent application to a company he owned. That company went bankrupt. A Finnish court ruled the patents belonged to the bankrupt company, not to Valjakka personally. When Valjakka tried to enforce “his” patents anyway, the U.S. court applied Finnish law and dismissed his case for lack of standing.
This nightmare scenario plays out more often than you’d think. The U.S. Court of Appeals for the Federal Circuit requires that all co-owners of a patent must join as plaintiffs in patent infringement lawsuits, and one co-owner has the right to impede another co-owner’s ability to sue infringers by refusing to join. Even worse, if you don’t actually own what you think you own, you have zero standing to sue anyone – regardless of how valid your patent is or how obvious the infringement.
The “standing rule” in patent law is unforgiving: only the legal patent owner can enforce patent rights in court. Get the ownership wrong, and your patent becomes worthless paper. This guide reveals the critical ownership mistakes that destroy patent rights and shows you exactly how to avoid them – because understanding patent ownership isn’t just legal housekeeping, it’s the foundation that determines whether your innovation can actually protect your business.
What Is Patent Ownership?
Patent ownership grants exclusive legal rights to control, license, and enforce a patent. The patent owner has authority to file infringement lawsuits and exclude others from making, using, or selling the invention. The rights to a patent include the ability to transfer, license, or enforce the patent, as well as to benefit commercially from its use. These rights specifically pertain to the claimed invention, which is the subject matter defined and protected by the patent.
These rights come directly from the U.S. Patent Act (35 U.S.C. § 154) and include the power to:
- Block competitors from using the patented invention
- Grant licenses to generate licensing revenue
- File a patent infringement lawsuit against violators
- Transfer ownership through assignment agreements
- Control how the invention enters the market
Ownership provides commercial benefits including licensing revenue and market exclusivity. A patent owner can negotiate exclusive license agreements worth millions or use patent protection to maintain competitive advantages.
The Critical Distinction: Inventorship vs. Ownership
Here’s where many inventors get tripped up: inventorship and ownership of a patent are completely different things. This distinction is at the heart of patent inventorship, which refers to the legal process of identifying who qualifies as an inventor under patent law, separate from who owns the patent rights.
Under U.S. law, the inventor – the person(s) who actually conceived the invention – is presumed to be the initial owner of a patent or patent application. The original applicant, who is the entity or individual that files the patent application, is presumed to own the rights until an assignment occurs. If there are multiple inventors, each becomes a co-owner of the patent by default, unless they’ve assigned their rights elsewhere.
Importantly, only natural persons (human beings) can be inventors. You cannot list a company or AI as an inventor. Only individuals who make an inventive contribution to the patent claims are considered inventors under the law. Accurately determining inventorship is crucial, as errors can jeopardize patent rights and lead to legal disputes; the legal standards to determine inventorship focus solely on inventive contribution, not on factors like funding or supervision.
In fact, in 2022 the Federal Circuit ruled that an AI machine cannot be an inventor under U.S. patent law, reaffirming that inventors must be human. A company may employ inventors and even be the owner of the patent, but the company itself cannot be an inventor. Someone who simply implements an idea or follows instructions without contributing novel elements is not an inventor.
Key Point: By default, the inventor owns the patent. Unless there is a written agreement saying otherwise, an employer or investor has no automatic rights to an employee’s invention – “rights in an invention belong to the inventor” under longstanding U.S. law. Employers can only claim ownership if the inventor expressly assigns the rights to them. In the vast majority of cases, patent applicants are employees who assign their rights to their employer, resulting in company ownership of most patents.
Other Ways Companies Can Claim Ownership: Beyond assignment agreements, several legal doctrines can affect patent ownership, including work-for-hire doctrine (for independent contractors), shop rights doctrine, and hire-to-invent doctrine. These exceptions to inventor ownership depend heavily on state law and specific employment circumstances. The optimal approach for your situation should be determined in consultation with qualified patent counsel familiar with your jurisdiction’s laws.
What Are The Requirements for Patent Ownership?
To establish and maintain clear patent ownership, certain legal and procedural requirements must be met. Establishing clear ownership is especially important before filing a patent application, as ownership rights are typically determined at the time of filing. These requirements ensure that ownership rights are valid, enforceable, and recognized by the United States Patent and Trademark Office (USPTO) and other competent jurisdictions.
Written Assignment Agreement
Patent ownership transfers must be documented in a written patent assignment agreement signed by the original owner (assignor) and the new owner (assignee). U.S. patent law (35 U.S.C. §261) requires patent assignments to be in writing and allows patents and applications to be freely assignable. Oral agreements or informal understandings do not effectively transfer ownership rights. The assignment should clearly specify the patent or patent application being transferred and the intent to transfer ownership rights.
The Contract Language That Makes or Breaks Ownership
Here’s where many companies get burned: the specific wording of assignment clauses can determine whether you actually own the patent or just have a promise of future ownership.
There are actually three approaches to assignment language:
- Present assignment: “Employee hereby assigns all inventions”
- Future assignment: “Employee agrees to assign future inventions”
- Present and future assignment: “Employee hereby assigns and agrees to assign all present and future inventions”
Many patent attorneys prefer the combined present and future approach for maximum protection. However, the optimal language depends on state law and specific factual circumstances. You should consult with a skilled patent law expert to determine the right approach for your particular situation and jurisdiction.
Examples of Potentially Problematic Language (Promise to assign):
- “Employee agrees to assign future inventions”
- “Employee will assign all inventions”
- “Employee shall assign inventions to Company”
Examples of Present Assignment Language:
- “Employee hereby assigns all right, title, and interest in inventions”
- “Employee does hereby assign all inventions”
- “All inventions are hereby assigned to Company”
This distinction proved crucial in the landmark Stanford University v. Roche case (2011). Stanford’s researcher had signed an agreement saying he “agrees to assign” his rights to Stanford, but had also signed a visitor agreement with another company saying he “will assign and does hereby assign” his invention rights to that company. The Supreme Court ruled that because Stanford had only a promise of future assignment, while the other company had an immediate assignment, the researcher’s rights legally transferred to the other company first. Stanford lost exclusive rights and their infringement case failed because they lacked standing.
Important Note About NDAs
Non-disclosure agreements (NDAs) do not solve ownership problems. NDAs only create confidentiality obligations – they don’t determine who owns inventions. Many people mistakenly rely on NDAs for ownership protection, but confidentiality and ownership are completely different legal concepts.
Recording with the USPTO
To protect ownership rights against subsequent purchasers and provide public notice, patent assignments should be recorded promptly with the USPTO’s Assignment Recordation Branch. Recording assignments is important not only for patent applications but also for an issued patent, as it ensures the legal owner is recognized and can enforce the patent. Recording within three months of execution is recommended to establish priority and safeguard against competing claims. If an assignment is not properly recorded with the patent office, a subsequent purchaser may acquire rights to the patent, potentially overriding earlier, unrecorded assignments.
Meeting these requirements is essential for securing patent ownership and enabling the patent owner to enforce rights, license the invention, and benefit commercially. Failure to comply can lead to ownership disputes, loss of patent protection, and challenges in enforcing patent infringement claims. The specific requirements and optimal strategies vary by state law and factual circumstances, so proper legal counsel should be consulted for your particular situation.
The “Standing Rule”: Why This Legal Requirement Can Destroy Your Patent Rights
Getting patent ownership right isn’t just paperwork – it’s the foundation of your ability to enforce your patent. U.S. courts enforce a strict “standing rule” in patent cases: only the patent owner (or exclusive rights-holder) can sue for infringement. If you’re not the legal owner, or if all co-owners aren’t on board, your case gets dismissed regardless of how valid the patent is or how obvious the infringement.
Real-World Consequences of Standing Problems
Case Study 1: The Joint Ownership Trap
In Advanced Video Tech. v. HTC (Fed. Cir. 2018), a patent was co-invented by three engineers. Two signed assignment agreements to their employer, but one inventor refused to assign her share. When the company tried to sue major tech firms for infringement, the court dismissed the case because the lone holdout inventor was still a co-owner and wasn’t party to the lawsuit. Her employment contract said she “will assign” inventions, but since she never actually did, the court held the company never acquired her ownership share.
Case Study 2: The Flash of Genius Scenario
The movie “Flash of Genius” depicts a real inventor who couldn’t initially sue Ford for patent infringement because he jointly owned his windshield wiper patents with his investor. The standing rule requires that all co-owners of a patent must join as plaintiffs to sue for infringement, but his investor didn’t want to sue their biggest customer (Ford). The inventor had to sue his own investor first to regain sole ownership rights before he could pursue Ford – a process that cost him years and millions in potential damages.
Case Study 3: The Biotech Ownership Reversal
Dana-Farber Cancer Institute (2019-2021) corrected inventorship on breakthrough immunotherapy patents originally filed by a Japanese company and professor. The courts agreed that two American collaborators should have been listed as co-inventors – and as a result, Dana-Farber became co-owner of the patents worth hundreds of millions. For the original patent owner, failing to name all true inventors meant effectively losing sole ownership of extremely valuable patents.
The Timing Problem: Standing Must Exist When You File Suit
Patent owners must have standing when the lawsuit begins – you cannot fix ownership problems after filing. Any attempt to assign rights retroactively usually won’t save the case. A plaintiff must demonstrate that it held enforceable title to the patent at the inception of the lawsuit to assert standing.
Joint Patent Ownership: The Hidden Trap That Destroys Patent Value
Joint ownership occurs when multiple inventors from different entities create an invention together or when partial assignments create shared ownership. Joint inventors are individuals who have each contributed to the conception of the invention, and by default, joint inventors share ownership of the resulting patent unless an assignment agreement specifies otherwise. While this might sound fair, joint patent ownership creates significant legal and commercial problems.
The Dangerous Rights of Co-Owners
Under U.S. law (35 U.S.C. §262), each co-owner of a patent has surprising rights:
- Independent licensing: Each co-owner can grant licenses to anyone without the other owners’ consent
- No revenue sharing: Co-owners have no automatic obligation to share licensing income with other owners
- Use without permission: Each co-owner can make, use, or sell the invention without paying other owners
- Enforcement blocking: All owners must typically participate in infringement lawsuits
Real-World Joint Ownership Disasters
The Microsoft-Lucent Case: Frauhofer granted Microsoft licenses to various patents while Lucent sued Gateway and Dell for infringement on the same patents. Since Frauhofer was a joint owner and Lucent sued without them, the trial court held that Lucent lacked standing to sue and dismissed the case.
The University Collaboration Gone Wrong: STC.UNM v. Intel Corp. illustrates how a university licensing organization lost standing when their joint inventor (Sandia Corporation) refused to join the lawsuit, preferring “a neutral position”. Intel successfully argued that STC lacked standing to sue for failing to join all co-owners.
Employee Inventions and Company Ownership
One of the biggest misconceptions in patent law is that companies automatically own patents created by employees. This is false. By default, the inventor owns the patent, even if it was developed on company time using company resources.
The Legal Reality of Employee Inventions
Companies do not automatically own patents created by employees unless formal assignment agreements exist. Without proper assignment documentation, employee-inventors retain ownership and enforcement rights. This creates significant risks for businesses that invest in research and development but fail to secure ownership of resulting patents.
Essential Elements of Employee IP Agreements
Pre-invention assignment agreements should cover:
- All inventions developed during employment
- Inventions related to company business
- Use of company resources or confidential information
- Inventions developed within a certain time period after employment ends
- Appropriate assignment language (the optimal approach depends on state law and specific circumstances)
Important: The specific language and structure of these agreements varies significantly by jurisdiction. You should consult with qualified patent counsel familiar with your state’s laws to ensure your agreements are properly crafted for your situation.
Patent Claims and Ownership: Why Your Claims Define What You Own
Patent claims are the heart of any patent application—they are the legal definition of what your invention is and what you actually own. The claims section of a patent application sets the boundaries for your patent rights, specifying exactly which features and aspects of your invention are protected under patent law. For inventors, businesses, and patent owners, understanding the role of patent claims is essential, as these claims determine the value, enforceability, and commercial potential of your patent.
When you file a patent application, the claims you draft are what the United States Patent and Trademark Office (USPTO) or other patent offices will examine to decide what is protected. The claims are not just technical descriptions—they are legal statements that define the exclusive rights you can enforce against competitors. If your claims are too narrow, you may leave the door open for others to design around your invention. If they are too broad or vague, you risk having your patent invalidated or rendered unenforceable.
In short, your patent claims are the foundation of your patent protection. They determine what you can stop others from making, using, or selling, and they are the first thing scrutinized in any patent infringement lawsuit. For any patented invention, the claims are what give the patent owner the power to enforce rights, negotiate licensing agreements, and defend against infringers.
How Patent Claims Determine Ownership Scope
The scope of your patent ownership is defined by the claims in your patent application. These claims set the legal boundaries of your invention, outlining exactly what is protected and what rights you, as the patent owner, can enforce. A well-drafted set of claims can provide broad, robust protection, while poorly written claims can leave your invention vulnerable or even unprotected.
When multiple inventors or entities are involved, the claims also help clarify the extent of each party’s ownership. For example, in cases of joint ownership—where two or more entities or individuals are listed as inventors—the claims can help determine each joint owner’s rights and responsibilities. This is especially important in collaborative projects or when dealing with partially assigned patents, as the claims can help prevent ownership disputes and clarify who controls which aspects of the invention.
In the context of a patent infringement lawsuit, the claims are the focal point. The court, the patent and trademark office, and any licensed patent attorney will analyze the claims to determine whether an alleged infringer is actually using the invention claimed in the patent. If the claims are not clear or do not cover the infringing activity, the patent owner may lose the case—even if the underlying invention is valuable.
For businesses and inventors, it is critical to work with a licensed patent attorney to ensure that the claims in your patent application are carefully crafted, accurately reflect the invention, and provide the desired scope of protection. The USPTO and other patent offices will review these claims during examination, and any errors or ambiguities can lead to reduced protection or even invalidation of the patent. In situations involving multiple inventors, joint ownership, or complex ownership structures, clear and precise claims are essential to avoid costly ownership disputes and to ensure that all parties understand their rights.
Common Mistakes in Claim Drafting That Undermine Ownership
Drafting patent claims is a complex task, and mistakes made at this stage can have serious consequences for your patent rights and ownership. One of the most common errors is failing to ensure that the claims are fully supported by the specification in the patent application. If the claims are not adequately described or enabled, the patent office may reject them, or they may be found invalid in court.
Another frequent mistake is neglecting to conduct a thorough search of prior art before drafting claims. Without understanding what has already been patented or published, you risk submitting claims that are not novel or are obvious, which can lead to rejection or later challenges to your patent’s validity.
Using overly broad or vague language in your claims is another pitfall. While it may be tempting to try to cover as much ground as possible, claims that are not clear and specific can be challenged for indefiniteness or lack of enablement. This can result in the loss of patent rights or difficulties in enforcing your patent against infringers. Ambiguous claims can also create confusion in cases of joint ownership or when patents are assigned to subsequent purchasers, leading to disputes over who owns what rights.
In certain circumstances, such as with partially assigned patents or pending patent applications, it is especially important to draft claims that clearly define the ownership rights of each party. Failing to do so can result in confusion, disputes, and even litigation over ownership. The recorded patent assignment information maintained by the patent offices’ records administration can help resolve some issues, but only if the claims themselves are clear and unambiguous.
To avoid these pitfalls, always work with a competent and experienced patent attorney who understands the nuances of patent law and can help you draft claims that are clear, supported, and tailored to your business goals. Properly drafted claims not only protect your invention but also safeguard your ownership rights, making your patents valuable assets rather than potential liabilities. By taking the time to get your claims right, you can avoid ownership disputes, strengthen your patent rights, and maximize the commercial value of your intellectual property.
Common Patent Ownership Mistakes and How to Avoid Them
Mistake 1: Assuming Company Automatic Ownership
The Problem: Many companies believe they automatically own employee inventions. This costly assumption has destroyed countless patent rights.
The Reality: Each co-owner of a United States patent can make, use, offer to sell, and sell the patented invention without regard to the wishes of any other co-owner. Without proper assignments, employees retain ownership rights.
The Solution:
- Implement comprehensive invention assignment agreements for all employees
- Use appropriate assignment language (consult qualified counsel for your jurisdiction)
- Execute specific assignment documents for each patent application
- Record all assignments with the USPTO within three months
Mistake 2: Incorrect Inventorship Determination
The Problem: Getting inventorship wrong can jeopardize your patent through invalidation claims or unwanted co-ownership.
The Legal Standard: A person must contribute to the conception of an invention to be an inventor, meaning they had a definite idea of the solution as claimed. This is known as making an inventive contribution. Minor contributions, following instructions, or supervising others typically don’t qualify as inventorship. Individuals who do not make an inventive contribution are not an inventor, even if they help implement or reduce the invention to practice.
The Solution:
- Implement invention disclosure processes documenting all contributors
- Focus on conceptual contribution, not job titles or project management
- Correct inventorship mistakes promptly through USPTO procedures
- Maintain detailed records linking contributions to specific claims
Mistake 3: Ignoring Joint Ownership Risks
The Problem: Collaborations without clear ownership agreements create unwanted co-ownership situations.
The Solution:
- Negotiate ownership terms before beginning collaborative work
- Consider assigning all rights to one party with appropriate licensing back
- Use joint development agreements specifying ownership allocation
- Address field-of-use restrictions and revenue sharing upfront
Mistake 4: Poor Ownership Maintenance
The Problem: Ownership records become stale through company changes, mergers, or personnel turnover.
The Solution:
- Conduct regular IP audits verifying ownership documentation
- Update USPTO records for company name changes or mergers
- Track down missing assignments from former employees promptly
- Maintain centralized records of all patent assignments
The Financial Impact of Ownership Mistakes
Patent ownership disputes aren’t just legal technicalities – they have massive financial consequences. Consider these real-world impacts:
Lost Enforcement Rights: Companies can spend substantial amounts on patent litigation, only to have cases dismissed for lack of standing due to ownership problems.
Diluted Patent Value: Joint ownership can reduce patent value significantly because exclusive licensing becomes impossible without all owners’ consent.
Competitive Disadvantage: Co-owners can license to competitors without your consent, eliminating your competitive moat.
Investment Impact: Venture capitalists and acquirers routinely examine patent ownership in due diligence – messy ownership can kill deals or reduce valuations significantly.
Conclusion: Your Patent Is Only as Strong as Your Ownership
Patent ownership isn’t just about legal compliance – it’s about preserving the commercial value of your innovation. The standing rule in patent law is unforgiving: get the ownership wrong, and your patent becomes worthless regardless of its technical merit or commercial importance.
These problems are entirely preventable with proper planning and documentation. By implementing appropriate assignment agreements, maintaining accurate inventorship records, and addressing joint ownership risks proactively, you can help ensure your patents remain valuable, enforceable assets.
Your Next Steps:
For New Inventors:
- Start with proper documentation – Before you file your first patent, understand who owns your invention and get the paperwork right from day one
- Learn about assignment agreements – If you work for a company or have business partners, understand what rights you’re keeping versus what you’re giving away
- Get educated on the basics – Don’t let ownership mistakes destroy your invention before you even get started protecting it
For Experienced Inventors and Companies:
4. Audit your current patent portfolio – Verify that all patents have proper ownership documentation and recorded assignments
5. Review your employment and contractor agreements – Ensure they include appropriate assignment language covering all inventions
6. Address existing ownership gaps – Track down missing assignments and correct inventorship errors before they become problems
For Everyone:
7. Get professional guidance – Whether you’re filing your first patent or managing a large portfolio, understanding patent ownership is critical to protecting your rights
Don’t Let Ownership Mistakes Destroy Your Patent Rights
Don’t let ownership mistakes turn your breakthrough invention into worthless paper. Schedule a Free Patent Needs Assessment with Thompson Patent Law to learn about our proven process to protect your invention properly from the beginning.
What’s Included:
- Proven Protection Process: We’ll explain our proven process to protect your invention
- Expert Guidance: We’ll answer all your questions and guide you through every step
- Educational Information: We’ll help you understand the importance of proper patent ownership documentation
Why This Matters: Like Lauri Valjakka against Netflix, you could have the clearest case of infringement and still lose everything due to ownership problems. The standing rule is unforgiving – get the ownership wrong, and your patent becomes worthless paper.
Free Assessment – No Obligation: Your patent needs assessment is free with no obligation to retain our services. We’ll provide general information to help you understand how to protect your invention.
Contact Thompson Patent Law today. Because your patents are only as strong as your ownership documentation.
Important Disclaimer: This article provides general information about patent ownership issues and should not be construed as legal advice. Patent ownership laws are complex and vary by jurisdiction and specific factual circumstances. The optimal approach for your situation should be determined in consultation with qualified patent counsel familiar with your jurisdiction’s laws and your specific circumstances.
