Start-up : About to file a patent? Who is its owner?

Filing a patent is often recommended to protect an invention. Generally it induces an investment of around 4 to 5 k € the first year. Without dwelling on the steps of patent filing, it turns out that a crucial issue is sometimes treated too lightly:

Who should be the owner of the patent?

The start-up? The inventors ? The main project leader?

If the inventors are not employees of the newly created company (or even not yet created), it is highly recommended to assign the rights property to the individuals. Then grant a license to the company that will exploit it. Also consider writing a co-ownership agreement if there are multiple owners!

In this case, it is preferable that the individuals pay the filing fees. It is often a heavy expense on a personal level, but it can provide a very interesting flexibility.

Note that if the inventors are employed by the company and the patent is part of the company’s purpose (in short, they have been paid for the work that led to the patent), it is the company that naturally owns the rights.

Why would it be better to privilege individuals’ ownership as much as possible?

 

There are 2 major reasons:

  1. If the company goes down, the patent remains valid because it is not officially an asset, owned by the company.
  2. When looking for financing, raising funds or welcoming new partners, this patent may be transferred to the capital of the company, enabling its holder (s) to:
    • Not being (too) diluted,
    • Access to higher financial support, which are sometimes indexed to the company’s capital.

Thus the patent must then be valued and its value accredited by an auditor. Without a patent, or without palpable intellectual property, it is really more difficult to proceed as described.

Patent filing is certainly a means of protecting its product or process, but it is also a crucial and strategic investment that will:

  • Prior to the capital contribution, reward the owners with any royalties agreed in the license granted to the company (this is neither a salary nor a dividend)
  • potentially grant operating licenses (on other sectors, other potential markets that are not part of the startup development strategy), 
  • After the transfer of rights, increase its capital, and thus …
    • access more easily to financial support
    • credibilize the position of the company regarding new competitors and the market.

 

This question arises again a year after the initial filing, when you have to think of extending the protection of the patent worldwide. The logic is the same. If the conditions are met, you can assign the rights ownership to individuals and update the license agreement in force between them and the company. Then you will be free to proceed to the capital contribution once your patent is in force in other countries and once you are certain that your startup will be able to exploit it.

Do not hesitate to take advice on these aspects, which, depending on your situation, must be treated with great caution, from a strategic, accounting, tax and legal points of view.