EU-China Workshop on the Chinese Patent Law 24./ Topic II: Co-owned rights Prof. Dr. Christian Osterrieth

2 2 Overview I.Emergence of co-owned rights under German Law II.Statutory provisions regulating co-ownership III.Influence on licensing co-owned rights IV.Influence on enforcement of co-owned rights V.Way out: Contractual arrangements

I. Emergence of co-owned rights under German Law Original co-ownership according to § 6, 2nd sentence German Patent Act (PatG): –“If more than one person have jointly made an invention, the right to the patent shall belong to them jointly.” –i.e. Co-invention leads to co-ownership especially Co-inventions because of R&D-Projects Subsequent co-ownership because of a joint acquisition of a patent by more than one party

II. Statutory provisions regulating co-ownership General principle: The relationship between co-owners of a patent is governed by the contractual provisions between these parties Lacking such contractual relationship the co-ownership is deemed as a so-called co-ownership at fractions (Gemeinschaft nach Bruchteilen) in according with Sec.741 et seqq. German Civil Code (BGB) – every co-owner is in principle entitled to make full use of the patented invention (see Sec. 743 (2) BGB), without an obligation to compensate (e.g. royalties) the other co-owners (cf. Federal Supreme Court, X ZR 152/03 = GRUR 2005, 663 – Gummielastische Masse II)

II. Statutory provisions regulating co-ownership cont’d the Federal Supreme Court thereby ruled against a longstanding prevailing different opinion allowing compensations to the other co- owners however, even under the new case law every co-owner is allowed to claim a reasonable use balancing the interests of all co-owners (Sec. 745 (2) BGB) and upon such a request compensation might be justified – the new case law therefore did not change the general rule but only imposed a formal requirement by insisting on an explicit request for compensation of the co-owner furthermore, according to Sec. 743 (2) BGB the use of one co- owner must not be excessive in way precluding the other co-owners from their use of the patent – whether there are situations in which this rule could apply is debated –every co-owner is entitled to assign its fraction on the co- ownership to a third party, but not to assign the patent as such (Sec. 747 BGB)

6 III. Influence on licensing co-owned rights Because every co-owner is only entitled to its own fraction but not to the patent as such, licensing of the patent depends on the consent of all co-owners –this principle applies to all kinds of licenses, i.e. it does not matter whether “only” a non- exclusive license is to be granted or an exclusive one

III. Influence on licensing co-owned rights cont’d –in cases of non-agreement between the co-owners there are only three possibilities to handle this situation 1.maintaining the status quo, i.e. no licensing at all 2.assigning the fraction to the third party (cf. above) = the assigning co-owner will loose its right to use to the third party that becomes the new member of the co-ownership at fractions 3.Termination of the co-ownership at fractions which would lead to an auction of the patent whereby the revenue will be divided between the former co-owners (Sec. 753 BGB) = every co-owner will loose its right to use, assumed that it does prevail in the auction

8 IV. Influence on enforcement of co-owned rights Every single co-owner has an own standing to sue, i.e. every single co-owner is entitled to enforce the patent (Sec BGB) -it is not necessary that all co-owners consent on the enforcement, which means that a co-owner who does not agree with the enforcement has no direct means to stop proceedings initated by another co-owner One indirect possibility could again be Sec. 745 (2) BGB granting the right to claim a reasonable use balancing the interests of all co-owners (cf. above); however - if at all - this would only work in extremely rare cases because the interests of the suing co-owner would have to be considered as well

IV. Influence on enforcement of co-owned rights cont’d -the acting co-owner has to claim the rights for the benefit of the co-ownership at fractions, e.g. it is not allowed to claim payment in the own name Every single co-owner is entitled to defend the patent in nullity proceedings (Sec. 744 (2) BGB) -nevertheless, the nullity action has to be directed against all co-owners, it is not sufficient to sue only one

V. Way out: Contractual arrangements The statutory regime leads to many problems in either way, therefore in practice the conclusion of contracts between the co-owners regulating their relationship with respect to the co-owned patent prevail However, in cases of patents for the same invention in many different countries even the contractual solution raises difficult questions, especially regarding the governing law and the admissibility of certain terms