Is a licence valid without registration?

An invention can be validly used by a person other than the patent owner only on the basis of a licence agreement. This is a hard and fast rule without exception. However, sometimes borderline cases occur.

In 2011 a Russian company filed a patent application for a reinforced concrete flooring plate. One month later the applicant signed an agreement with another party for the use of the technical solution covered by the filed patent application. The agreement was valid from the date of signature and until the grant of a patent. The agreement also provided for the payment of money for the use of the invention. This business relationship lasted for two years and the user paid about $150,000 for use of the invention. A patent was granted to the applicant in 2012. Several months later, the recipient of the licence initiated a court action seeking the return of the money he had paid because, according to him, the licence was invalid without registration.

The first-instance and appeal courts rejected the plaintiff's claims. He appealed to the IP Court, which confirmed the earlier judgments. The IP Court explained that registration is obligatory for licence contracts concluded following grant of a patent. Such contracts are invalid without registration. The agreement concluded by the parties could not be considered to be a licence agreement subject to obligatory registration. The law provides that the parties may conclude agreements even though such agreements are not envisaged by law, provided that they do not contradict the law. Hence this type of agreement was not a licence agreement, but was still an agreement. Further, the court observed that provisional protection was in place during the pre-grant period. Provisional protection requires the payment of money for use of the invention. As a result, the money was retained by the 'licensor'.

This decision demonstrates that parties should be attentive when concluding agreements in advance of obtaining protection. Such agreements should include a provision to the effect that after grant of the patent, the parties will sign a regular patent licence. This will protect them from unforeseen consequences.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

Unlock unlimited access to all IAM content