Do Patent Assignments Require Consideration?

WRIGHT HASSALL LLP V HORTON JR & ANOR [2015] EWHC 3716 (QB)

One of the cornerstones of contract law in the UK is that for a contract to be valid, there must be sufficient consideration. Whilst it has generally been held that for a valid assignment of a patent or patent application consideration is also necessary, the judgement in Wright Hassall LLP v Horton Jr has seemingly removed this requirement.

Consideration is generally held to be something of value exchanged between parties in order for a contract to be valid and enforceable. Agreements without consideration are deemed to be mere gratuitous promises and are not enforceable by law. As a standard term, most patent assignments include a phrase similar to:

“In consideration of the sum of £X.XX (receipt of which is hereby acknowledged) the Assignor hereby transfers to the Assignee all rights in the Patent”.

in order to acknowledge that consideration for the assignment has been given.

However, following Wright Hassall LLP v Horton Jr & Anor [2015] EWHC 3716 (QB) it appears that no consideration is required for a valid patent assignment under UK law. Prior to this case, there was no clear authority as to whether a patent assignment required consideration. Therefore, in the case, the judge had to decide whether an assignment for an invention was valid where no consideration was given.

Section 30(6) of UK Patents Act 1977 states that:

“Any assignment … of a patent or any such application, or any right in a patent or any such application shall be void unless it is in writing and is signed by or on behalf of the parties to the transaction".

Based on this section, the judge concluded that the only requirements for a patent assignment under the 1977 Act are that the assignment is in writing and that it must be signed by or on behalf of the assignor. In addition, he saw no reason why an assignment could not be made by way of a gift, meaning that no consideration would be required. As other types of property may be transferred without consideration, there appeared no reason why this would not also be the case with intellectual property and, more specifically, patents.

Therefore, it was held that an assignment for a patent or invention was valid even where there was no consideration.

It should however be noted that patent assignment documents often contain other contractual clauses. For example, assignment documents may include clauses which assign the right to claim priority from the assignor to the assignee and terms that the assignor will execute any documents required for the grant of the patent. Whilst it is unclear whether an assignment of a priority right requires consideration, consideration would most likely be required for a legally binding agreement for the assignor to execute any required documents. Without consideration, the assignor would only be making a gratuitous promise to sign any documents and should he later refuse to do so, the assignee would not be able to bring an action against the assignor in order to fulfil this promise.

In addition, if the patent assignment document is intended to cover other derived patent applications which may fall under the jurisdiction of other countries where consideration is required for a valid patent assignment, the document should acknowledge that consideration has been paid to the assignor.

Therefore, despite the judgement in Wright Hassall LLP v Horton Jr to ensure that other clauses whose validity may be determined by contract law or patent law in other jurisdictions are still legally binding, it is still advisable that consideration is given and acknowledged for patent assignments.