Cautionary Tale: Never break the chain

A new entity, a missing link

When businesses grow, restructure, or create new IP-holding entities, it can be tempting to assume that IP rights “flow” naturally through the group. Unfortunately, patent law demands more than assumption — it requires an airtight chain of title.

A new client had long commercialised one technology under an IP holding company and set up a second holding company for a new and discrete line of research. They filed an Australian provisional application, and then a PCT application 12 months later, both in the name of this new IP holding company. At first glance, everything seemed in order.

When the portfolio came to FB Rice, we wanted to clearly understand the chain of title for patent rights from the inventors to the listed owner for both the older and more recent IP holding companies. We asked for assignment documents — but none existed for the newer filings. The former counsel had accepted assurances that the inventors’ rights had “passed” to the new company, without checking the group structure or employment contracts.

A closer look revealed the issue: the inventors were employed by a head company, which wholly owned both holding companies. But there was no explicit transfer of rights in place from the head company to the new IP holding company.

In other words, at the time of filing the PCT, the new entity’s entitlement was shaky.

Shoring up the links

We moved quickly to shore up the position.

For Europe, it helped that the provisional and PCT had been filed in the same applicant’s name but shoring up entitlement still mattered. We worked with the client to locate internal documentation supporting their intention that the new holding company should own the new IP.

We then prepared a confirmatory deed of assignment:

• Confirming inventor rights first flowed to the head company (via employment contracts).
• Confirming rights were then assigned from the head company to the new IP holding company (based on the stated intent).
• Using “catch-all” language to ensure that any rights not previously transferred were now assigned.

Importantly, we did not reference the right to claim priority, maintaining the position that the new company already held that right at the critical time of PCT filing. While not a textbook solution, this strategy stabilised the situation and was accepted in Europe. Changes in European practice since then have helped further reduce the risk in this type of situation.

Lessons and takeaways

This case highlights the risks of assuming entitlement flows automatically within a corporate group:

• Always clarify the chain of title — Which entity employs the inventors? What do their contracts say?
• Don’t assume internal understanding is enough — Rights need to be documented and executed.
• Assignments before filing — If the IP-owning entity differs from the employing entity, ensure assignments are in place before the PCT filing.
• Best practice beats patchwork — Confirmatory deeds can patch gaps or speak to original intent, but they’re no substitute for getting it right the first time.

As we saw in our earlier story Who’s Who in the Zoo, clarity around entities and ownership is critical. Never leave the chain of title open to doubt.