Intellectual Property Rights after a Development Agreement has been Terminated
There are development agreements in which the assignor agrees to provide the development funds and the assignee agrees to develop a new product. The rights to restore and work the intellectual property rights which may arise during the development are generally laid down in the agreement. However, if the development agreement is terminated during the development or after the development of a new product, the restoration of the right tends to be a source of a conflict.
For example, there may be a conflict when one party files a patent application by itself after the agreement, which stipulated that the intellectual property rights shall be shared, has been terminated. In a ruling dated October 28, 2008, the Japanese Intellectual Property High court addressed just such a dispute. In this case, the assignor and the assignee had a development agreement which stipulated that they would share the patent rights related to the products developed during the term of the agreement and would file joint patent applications. However, after the development finished and the agreement was terminated with the mutual consent of both parties, the assignor filed a patent application alone and obtained a patent. The assignee requested an invalidation trial before the Japan Patent Office (JPO) on the grounds that the concerned patent did not comply with the joint application requirements set out in Patent Law Article 38. However, the JPO rejected the assignee’s argument and maintained the patent. To overturn that ruling, the assignee filed a suit against the JPO before the Intellectual Property High Court.
The agreement included a special provision that stipulated “the provision related to the industrial property rights should be valid during the term of the concerned industrial property rights.” Therefore, the Intellectual Property High Court determined that the above stipulation concerning the joint application in the agreement was valid based on the above special provision and overruled the JPO.
The main reason for the High Court ruling is that because the concerned invention was at a stage at which a patent application could be filed before the agreement was terminated, the patent rights must be shared by the assignor and the assignee and both parties have a responsibility to file a joint application as stipulated in the agreement. In this case, such a stipulation is valid even after the termination of the agreement because of the special provision about the term of the industrial property rights.
The court addressed the question of whether the special provision about the term was terminated with the agreement or not by pointing out that the purpose of the special provision was to prevent the other party from monopolizing the profit produced by the joint development, and that even if the agreement was terminated without achieving the purpose of the agreement, preserving its effect would accord with the rational intentions of both parties.
It is not unusual for a development agreement to be terminated in the middle of the term, depending on the changes in the business environment or the situation surrounding the development. Although the above ruling by the High Court is based on the special provision, it is likely that the expectations of the parties concerning the provision relating to the restoration of rights should stay effective nonetheless. This case is a good reference when preparing a similar provision in a development agreement or when handling a similar dispute.