ARTICLES & UPDATES

Transfer of patent rights is the process by which the ownership or rights in a patent is legally transferred from one party to another. This transfer can occur through various mechanisms such as assignment, licenses, or operation of law. In Kuwait, the transfer of patent rights is governed by Kuwait Law No. 71/2013 and its implementing regulations under Kuwait Ministerial Decision No.115/2016.

As per Article 12(2) of the Patent Law, the patent owner has the exclusive right to exploit his invention and prevent others from using their invention, whether such an invention is a product or industrial process, without their prior consent. A patent owner can transfer his ownership rights over a patent to another party by an assignment agreement. Further, Article 17 allows the patent owner to license all or some of the patent rights to others. This license must be in writing, signed by both parties, and registered with the patent office, following the prescribed requirements and payment of fees.

A license or an assignment must be registered with the Office under article 55(1) of Kuwait Ministerial Decision No. 115/2016, and any license or assignment which is not entered into the Office records, with the accompanying request fee and contract registration fee, will not be effective against third parties according to article 17(1) of Kuwait Law No. 71/2013.

The purpose behind transferring patent rights is to facilitate the commercialisation, utilization, and broader dissemination of innovations. For inventors and companies, transferring rights can provide financial benefits through sales, licensing fees or royalties, which could help recover costs incurred during research and development. Transferring patent rights enables companies without necessary manufacturing capabilities or market access to effectively bring their inventions to market. Moreover, transfer of patent rights allows the inventor to focus their resources towards their core objectives, to further contribute towards technological advancements through inventions.

Types of Transmission of Patent Rights

1. Assignments

An assignment refers to the transfer of ownership of the patent from the patent owner (assignor) to another party (assignee). The assignee may be a natural or juristic person and upon the assignment becomes the rightful owner of the patent. Article 23(1) of Law No. 71/2013 states that ownership of a patent can be transferable wholly or partly with or without compensation. However, it is important to note that the term ‘Assignment’ is not expressly defined under Law No. 71/2013.

Besides the Patent Law, the Article 28(2) of TRIPS provides the Patent owner with the ability to assign, transfer or license the rights in their patent and article 31 of TRIPS provides the basis for transferring of patent rights in the case of compulsory licenses.

Article 55 of Kuwait Ministerial Decision No. 115/2016 sets out the requirements for “an assignment of a license or change of its ownership, or licensing its exploitation.” To meet the requirements of article 55 of Kuwait Ministerial Decision No. 115/2016 (change of ownership) and to assign patent rights, any of the contracting parties must:

• Prepare a well-written contract with clearly defined terms of the agreement, and duly signed by the parties;
• make an application for registration to the Patent Office;
• accompany the request with a copy of the contract signed by both (or all) parties;
• ensure the signatures having been duly authorized;
• translate the contract into Arabic, if drafted in another language; and
• payment of the prescribed fee.
• It is crucial to register the assignment of patent with the patent office and the failure to do so will render the transfer ineffective.

• Types of Assignments:

A. Legal Assignment: A Legal Assignment is the formal transfer of patent rights from the assignor (the original patent owner) to the assignee (the new patent owner). Such assignment is typically executed through a deed, and once the process is completed, the assignee gains full ownership rights to the patent.

B. Equitable Assignment: Any form or agreement that includes a letter stating that the assignor has agreed to share certain potion of the patent rights with the assignee is termed as an equitable assignment of the patent. Unlike legal assignment, the assignee cannot enter his/her name into the official government records as a patent owner but can notify the patent office of their interest in the patent. Equitable assignments may involve sharing specific benefits or profits from the patent, but the assignee does not gain complete ownership rights as in a legal assignment.

C. Mortgages: Assignments in which the owner transfers all or a portion of their rights to the assignee in return for a fixed sum of money. The owner regains full ownership of the mortgaged property once the debt has been settled. The lender must have their name listed in the register as a mortgagee rather than registering themselves as the proprietor.

In order to avoid any ambiguities, it is recommended that the assignment agreement mention the rights in a patent or patent application being assigned, i.e., those rights provided in article 12 of Kuwait Law No. 71/2013.

2. Licenses

Unlike an assignment, which places the assignee in the position of the assignor, a license does not involve the transfer of ownership of the patent or patent application. Instead a license permits the licensee to obtain a right in the patent to perform certain acts, which acts would usually be prohibited.

Kuwait Law No. 71/2013 provides for two types of licenses: compulsory licenses, which are granted by the patent office under specific conditions allowing third parties to use a patented invention without the patent owner’s consent, and voluntary (or contractual) licenses, where the patent owner grants permission to another party to use the patent, usually in exchange for a consideration.

A register for requests and a register for approved licenses is created by the patent office, which includes all the details of the licenses, as per article 55(3) and 55(4) of the Ministerial Decision No. 115/2016. Once a request for a license is approved, the application is moved to the approved list. Any amendments or renewals of a license must be communicated to the Office for approval and for updating of the register.

 

Types of Licenses:

A. Compulsory license

In order to obtain a compulsory license, the intended licensee must adhere to the requirements for set out in article 19 of Kuwait Law No. 71/2013, which are:

• the invention has not been used or made for a period of three years from the date of issue of the Letters Patent, as per article 13(1) of Kuwait Law No. 71/2013;
• a reasonable effort has been made to obtain a license from the patent holder;
• that the patent holder is unable to provide reasonable justification as to why the patent has not been used or made;
• that the license will not be issued in absolute terms;
• the scope of the license terms be set out and that the license is intended to serve the local market;
• sub-licenses will not be provided; and
• the licensor shall receive fair compensation for the license.

Kuwait Law No. 71/2013 does not outline the process for a potential licensee to apply for a compulsory license, except to state in article 19(1) of Kuwait Law No. 71/2013 that the Board of Directors may grant a compulsory license in the case where the above requirements have been met.

Article 20(1) of Kuwait Law No. 71/2013 limits compulsory licenses to non-exclusive licenses and, does not prevent the owner from exploiting the invention or others from obtaining a similar license.

A compulsory license may be cancelled under article 22 of Kuwait Law No. 71/2013, if it is shown that:

• the licensee failed to exploit the invention for a period of two years from issue of the license (including a further two year period if working was not immediately possible);
• the fees accompanying the request and grant of the license have not been paid within three months from the date of maturity; or
• if the licensee does not adhere to terms stipulated in the license upon its approval.

A compulsory license may additionally be cancelled if the circumstances leading to the issuance thereof end and, are unlikely to reoccur.

Article 20(2) of Kuwait Law No. 71/2013 states that the Board of Directors may disregard the requirements of clauses 19(1)(1) and 19(1)(2) which pertain to the elapsed time since the grant of the patent and the applicant’s efforts to obtain a license from the patent owner, if the request for a compulsory license is due to a state of emergency, a dire public necessity, or for non-commercial use in one or more council states.

B. Contractual license:

The owner of a patent is free to contractually license its rights afforded under article 12(1) of Kuwait Law No. 71/2013, to any party on terms which are agreeable between the parties, provided the license is reduced to writing and signed by both parties and, authenticated by an authority in one of the Cooperation Council states as set out under article 17(1) of Kuwait Law No. 71/2013. The licensee may not issue sub-licenses without express permission to do so in the contract, as per article 17(3) of Kuwait Law No. 71/2013.

Although not specifically covered in Kuwait Law No. 71/2013, the term of a license may not exceed the term of the patent itself, nor can a license extend to territories outside of the jurisdiction in which the patent is registered.

As per Article 17(2) of Law No. 71/2013, the license can be granted as an exclusive or non-exclusive license:

• Exclusive License: An agreement that gives a grant of exclusive rights to the licensee (the person or entity receiving the license) by the licensor (the patent holder), to use the patented invention; excluding all others (including the patentee) to exploit, use, or license the invention to anyone else during the term of the agreement. The rights can be divided and assigned, restrained entirely, or in part. The patent holder retains ownership of the patent, but only the licensee holds exclusive rights for the agreed-upon scope.
• Non-Exclusive License: An agreement where the license of the patent can be granted to more than one party and all of them can exploit or use the patent as per the respective terms of the contract. Unlike exclusive licenses, where only one party has the rights to use the patent, a non-exclusive license enables the patent owner to license the invention to several parties simultaneously.

In order address concerns related to the misuse of patent rights, Article 18 of Kuwait Law No. 71/2013 mandates that licensing contracts for the exploitation or disposal of patents be subject to review by the Patent Office. The Office may request amendments to the contract to eliminate potential abuses and any negative impacts on competition within the Council States, as well as issues related to the possession and propagation of technology. If the parties fail to respond to these requests, the Patent Office reserves the right to deny approval of the contract and refuse its registration.

C. Sub-license:

A sub-license is an agreement that allows a licensee to transfer some or all of their rights under the original license agreement to a third party, known as the sub-licensee. This transfer enables the sub-licensee to use the patented invention according to the terms specified by the original licensee.

For a sub-license to be valid, the original license agreement must permit such an arrangement.

D. Cross-license

A cross-license refers to an agreement between two or more parties where each party grants the others the right to use their patents. This arrangement allows the parties to utilize each other’s patented technologies. Companies often use cross-licenses to combine technologies for product development, access new markets, etc.

3. Transmission of Patent by Operation of Law:

Transfer of patent by operation of law refers to the transfer of patent rights or ownership that occurs under certain legal circumstances, rather than through a voluntary agreement between the parties. Transmission by operation of law generally occurs in the following circumstances:

• Death of the Patent Holder: Upon the death of the patent holder, the patent rights may automatically transfer to their heirs or beneficiaries as specified in the will or as per the laws in the absence of a will.
• Bankruptcy: If a patent holder declares bankruptcy, their patent rights may be transferred to the bankruptcy trustee or creditors as part of the liquidation or restructuring process to pay the debts to the creditors.
• Corporate Changes: In case of mergers, acquisitions, or corporate restructuring, patents may be transferred to the new entity or acquired by another company as part of the transaction.