Part 3 Patents and property rights, including software
31.10A.51 General information as to what constitutes a patent
A patent is essentially a deal, a bargain, between a state and an inventor. It is an intellectual property right granted by a country’s government as a territorial right for a limited period. Patents protect new and inventive techniques or technical aspects of products or processes, in return for a monopoly on the manufacture, use, importing or sale of an invention for a given period; by obtaining a patent the inventor makes public his/her invention (potentially to his/her competitors) and agrees that it can be freely copied once the term of the monopoly expires.
Patent rights make it illegal for anyone except the owner or someone with the owner’s permission to make, use, import or sell the invention in the country where the patent was granted.
31.10A.52 Eligibility for granting of a patent
Patents typically cover new technical or functional aspects to products or processes and are to do with how things work, how they are made or what they are made from. Not every invention is entitled to the grant of a patent. As well as being new, the invention must be inventive and capable of practical application in an industrial sense [note 1]. Theories, discoveries, rules, methods or artistic works cannot be patented [note 2], and the invention must not be in the public domain prior to the granting of the patent.
31.10A.53 Identity of person to whom patent is granted
31.10A.54 International conventions relating to patents
A UK granted patent gives protection only in the UK and the Isle of Man. To get protection in other countries would normally require separate applications to be made in each of the countries that protection is required. However, there is an international convention, the Patent Co-operation Treaty (PCT) which allows an application to be filed in one country and protection can be extended to a number of countries which are members of the World Intellectual Property Organisation (WIPO). Additionally, an application may be made to the European Patent Office (EPO) under the European Patent Convention. Similar to the Patent Co-operation Treaty this allows protection to countries which are members of the European Patent Convention.
The contact details of these organisations are as follows:
European Patent Office
Tel: +49 89 2399 4636
World Intellectual Property Organisation
34, Chemin des Colombettes
Central Number Tel: +41 22 338 9111
Central Number Fax: +41 22 733 5428
31.10A.55 Duration of a patent
In the UK a patent is fully effective from the date that the specification of the invention is published by the UK Intellectual Property Office (UKIPO) and this is usually some 18 months after the filing date. In the UK a patent lasts for 20 years, but the patent must be renewed to keep it in force. The first renewal date is the end of the calendar month of the fourth anniversary of the date of the application was filed (not granted). Renewal fees are then due every year for the remaining 15 years that the patent may be in force [note 5].
31.10A.56 Lapse of patent and restoration
The renewal fees (which are payable to the UKIPO) can be paid in the three month period before the due date or one month after that due date without attracting penalty charges for late payment. If the renewal fee is not paid within six months of the due date then the patent will lapse and the invention will not be protected [note 5].
In these circumstances it is possible to restore the patent rights by application to the UKIPO. It is necessary for the applicant to satisfy the UKIPO that he/she intended to pay the renewal fee on time and he/she must provide a witness statement or other form of statutory declaration, accompanied by evidence, setting out the circumstances in which the renewal fee was not paid. Such an application must be made within 19 months of the due date of the missed renewal payment [note 6].
If the official receiver is considering making an application to restore a patent in order to sell it, the UKIPO should be asked to confirm that the time limit for restoration has not expired, though they cannot give any indication on the likely success of such an application. The costs of the application should be taken into account in the negotiations relating to the sale and should not exceed the potential sale proceeds.
31.10A.57 Ascertaining a patent owner
The UKIPO maintains an online patent information and document inspection service, called Ipsum. This service provides free access to check the status of a patent, the most up-to-date information on a patent and access to some documents from published patent applications.
The European patent register is also available via the UKIPO website (www.ipo.gov.uk) which also offers another service called Worldwide Espacenet. This gives details of patents filed with, or granted, by, the EPO, the WIPO and 20 national EPOs.
31.10A.58 Patent as an asset
Once a patent is granted it may be bought and sold like any other property, provided the disposition is made in writing and signed by all parties to the transaction. A patent may also be subject to a secured loan by way of a mortgage [note 7]. A patent vests in the same way as any other personal property [note 8], so where it is owned by a company subject to a winding-up order it can be realised as an asset in the liquidation. Similarly, a patent owned by a bankrupt would vest in the trustee of a bankruptcy estate [note 9] [note 8] The official receiver should verify ownership of a patent through the insolvent’s accounting records and/or by searching at the UKIPO, using the website as detailed at paragraph 31.10A.57.
31.10A.59 Saleof a patent or patent licence
Where a patent (or a patent assigned to a company in liquidation or a bankrupt) has vested in the trustee or liquidation estate, the patent may be sold with the assignment being signed by the liquidator of the liquidation estate or the trustee of the bankruptcy estate as assignor. The UKIPO should be informed of the change in ownership [note 10]. In the same way, a licence to a patent may also be sold, and any assignment of this licence should be in writing and signed by all parties. The transfer of the licence should be notified to the UKIPO.
31.10A.60 Royalties due to the liquidator or trustee
Royalties may be paid by a third-party to the owner of a patent in exchange for exploiting that patent. The royalties may be payable under the terms of a licence, with the owner retaining the patent [note 11]. In circumstances where a bankruptcy or winding-up order is made against the owner of a patent, the official receiver should make contact with the third party paying the royalties and ask them to pay any royalties due to the trustee.
31.10A.61Royalties due as income as a result of the sale of a patent
It may be the case that a bankrupt is in receipt of royalties as a condition of the sale of a patent. In this case the royalties cannot be claimed as an asset as the patent does not vest in the estate. Instead, the royalties should be treated as income and can be claimed under an income payments agreement or an income payments order (see Chapter 31.7).
31.10A.62 Protecting a patent
Where an insolvent owns a patent, the UKIPO should be informed of the winding-up or bankruptcy order and asked to note the official receiver’s interest in the patent. The UKIPO should also be asked to provide details of the remaining “life” of the patent – as this could materially affect the value and details of any renewal fees outstanding. Enquiries should be made to establish whether there are any licensees or mortgages of the patent in order that they can be informed of the making of the insolvency order and asked to note the official receiver’s interest.
The address of the UKIPO is:
Tel: 0300 300 2000
Tel (outside the UK): +44 (0)1633 814000
Minicom (text phone): 0300 0200 015
Fax: +44 (0)1633 817777
Where information is required in respect of international patents the official receiver should contact the relevant organisation which deals with registration of patents. See paragraph 31.10A.78 for further details.
31.10A.63 Valuation of a patentThe valuation of intellectual property is a complicated and sometimes controversial area and the value will very much depend on circumstances. It is unlikely that the official receiver’s local agents will have experience in this field and consideration should be given to the employment of specialist agents. A specialist in patents may be contacted through:
The Chartered Institute of Patent Attorneys
95 Chancery Lane
London WC2A 1DT
Tel: 020 7405 9450
Fax: 020 7430 0471
31.10A.64 Jointly owned patents
Joint entitlement to ownership of a patent can arise where there are co-inventors or if a share of the patent is sold. Where a patent is granted to two or more persons they are entitled, unless there is agreement to the contrary, to equal undivided shares. The interest of each would survive his/her death as part of his/her estate. Joint owners may not sell their interest to a third party without the consent of the co-owners [note 12].
31.10A.65 Plant breeders' rights
New varieties of plants may be registered with the Controller of Plant Variety Rights [note 13] to protect against any person other than the right-holder from producing, selling, importing or exporting the plant variety. The duration of the protection is usually 25 years, but this is extended to 30 years in the case of trees, vines or potatoes [note 14]. The right can be transferred like any other form of property [note 15]. The Plant Varieties Rights Office is required to maintain a public register of protected plant varieties [note 16] [note17], and this is searchable by application to the following:
Plant Variety Rights Office and Seeds Division
Department for Environment, Food and Rural Affairs
White House Lane
Cambridge CB3 OLF
Telephone: 01223 277151 (operator)
or 01223 34 (plus extension if known - direct dial)
Fax: 01223 342386
Farmers usually buy the seed as “certified seed” for which the plant breeder will receive a premium to take account of the intellectual investment in the development of the plant variety. Farmers may collect what is known as “farm-saved” seed from a subsequent harvest of the initial planting. Use of this farm-saved seed is subject to a royalty payment and the British Society of Plant Breeders Limited administers collection of these payments on a registration basis. In circumstances where an insolvent holds a plant breeders’ right the official receiver should inform the British Society of Plant Breeders of his/her interest in outstanding royalty payments. Their contact details are as follows:
British Society of Plant Breeders Limited
16 Market Street
Tel: +44(0)1353 653200
Fax: +44(0)1353 661156
31.10A.66 Software/intellectual property rights
Computer software is commonly used in an insolvent’s everyday business. It is frequently leased and so is not available for assignment by the official receiver as liquidator or trustee. If the software has been purchased “off the shelf” then it is likely to be under license to the insolvent and that license will not be transferable, however see paragraphs 31.10A.68 to 31.10A.70 regarding the sale of Microsoft open software licences. Where the insolvent is using bespoke software (i.e. uniquely tailored or designed for his/her business), the official receiver should examine the agreement entered into with the supplier both for restrictions on assignments and the ownership of copyright. If a software supplier has 'invented' the software for the insolvent’s use it is likely that the supplier will retain ownership, rather than it being transferred to the ownership of the insolvent business or individual.
31.10A.67 Software written ‘in house’If the software has been written 'in house' i.e. within the business, this may be problematic. Individuals dealing with software are usually contractors rather than employees and in such case the agreements by which they are engaged should be examined carefully by the official receiver to determine who owns any intellectual property rights created.
For every software program there is a source code and the software cannot be sold without this. This code enables the software to be revised and maintained and access to the code will only be permitted subject to the agreement with the insolvent.
Computer programs may be protected with copyright, which is a saleable asset in its own right. See Part 1 for further information on copyright.
31.10A.68 Re-sale of used Microsoft volume software licences
When dealing with an insolvent company or individual which has used a Microsoft software package for their business, it is possible in some circumstances to realise some value from this software by arranging for its re-sale. Only specific types of Microsoft volume software programs can be realised in this way, the ‘Open’ licence’ (designed for small businesses with as little as five desktop personal computers (PCs)), the ‘Select’ and the ‘Enterprise’ licences, which are used by corporate, government and academic institutions needing 250 or more desktop PCs. Domestic software licences held by individuals (e.g. for a home computer) could not be re-sold in this way.
31.10A.69 Use of specialist sales agent to re-sell Microsoft volume licences
Due to the unique nature of the re-sale requirements for such licences, in particular the requirement to comply with Microsoft’s specified terms and conditions, The Service has established a working relationship with a company called Discount-Licensing.com Ltd (Disclic) in order to effect a realisation of such licences; its webpage and full details are available at Discount-Licensing.com. Having identified the disused Microsoft 'volume' software licences, Disclic then brokers a sale or sells or transfers them to businesses which are migrating or experiencing a licence shortfall. The company provides proof of ownership for every purchase and sale and also ensures that Microsoft’s terms and conditions are met in relation to the transfer of ownership of the Licence Agreement and Product Use Rights.
Disclic can deal with a range of Microsoft application and server products, including Office, Microsoft SQL Server, Exchange and Windows server products and more specialised applications such as Project, Visio, Biztalk and CRM. They can also work with other software manufacturers such as SAP and Blackberry.
31.10A.70 Action by official receiver when dealing with Microsoft volume licences
The official receiver should ascertain at the earliest opportunity the type of software used by the insolvent and whether there is a possibility it can be dealt with by Disclic.
Where it appears the licence may have a re-sale value, the official receiver should then contact Technical Section (providing full details of the insolvent and all relevant licences). Technical Section can then arrange for a letter of authority to be issued to Disclic, providing it with the authority to make the necessary enquiries concerning the licence information applicable to the licence agreements purchased by the specific insolvent company or partnership. The authority is limited solely to obtaining details of the licences and does not cover negotiating any sale or transfer of licences, although the information obtained may eventually assist in the realisation of the value of the used licence through sale or transfer.