An inventor loses his rights ; the importance of establishing clear agreements

ANINVENTORLOSESHISRIGHTS;THEIMPORTANCEOFEST
ABLISHING
CLEARAGREEMENTS
MARIE-ÈVECÔTÉ*
ROBIC,LLP
L
AWYERS,PATENTANDTRADE-MARKSAGENTS

Arecentcourtdecisiondemonstratestheimportanceofnegotiatingandentering
intoclearagreementsinvolvingtransfersofintellectualpropertyrights.Inparticular,
itillustratestheimportanceofestablishingunambiguousconditionsforclosinga
transaction.
Thiscase(QuantumLeapResearchInc.v.Kay,2010QCCS1449)dealtwiththe
ownershipofrightstoaninventiondevelopedthroughacollaborationbetweenMr.
IraKay,anexternalconsultant,andQuantumLeapResearchInc.,forwhicha
patentwasfiledandgranted.In2004,thepartieshadagreedtodevelopthe
inventionuponcertainconditionssetoutinaletterofintent,including,amongst
otherelements,thatMr.Kaybenamedasthesoleinventoroftheinventionwhile
assigningallofhisrightstoanewcompany(Newco)ownedbyhimandQuantum.

Afterwards,thepartiesexecutedamemorandumofunderstanding(MOU)whereby
Mr.KaywouldimmediatelyassignhisrightsintheinventiontoQuantumforandon
behalfofNewco.TheMOUprovidedforanassignmentwithimmediateeffect,
subjecttoMr.Kay’srighttoresolvethecontractintheeventthatQuantumrefused
toenterintoagreementsgivingeffecttothetransaction.Quantumsubmitteddraft
agreementstoMr.KayinordertosetupNewcoandputthetransactioninplace,but
Mr.Kaydidnotcommentorfollow-uponsuchdraftagreements.

Atthebeginningof2005,Mr.KayinformedQuantumofhislossofinterestinhis
collaborationwithQuantumandrequestedtheretrocessionofhisrightsinthe
invention,asperhisoptionintheMOU.Thisrequestledtolegalproceedings
amongsttheparties.
Initsdecision,thecourtdeterminedthattheMUwasenforceableandthatthe
conditiontoclosethetransactiondidnotprecedetheMOU,asitwassubsequentto
theMOU.TheCourtalsofoundthattheconditionthatwouldtriggerMr.Kay’soption
toretrievehisrightsintheinventionwasQuantum’srefusaltoenterintotherelevant
agreementsandnottheabsenceofagreementamongsttheparties,heremainly
causedbyMr.Kay’srefusaltopursuehisdiscussionswithQuantumtoclosethe

©CIPS,2010.*WithROBIC,LLPamultidisciplinaryfirmofLawyers,andPatentandTrade-markAgents.Published
intheFall2010Newsletterofthefirm(Vol.14,No.3).Publication068.125E.

2
contemplatedtransaction.Accordingly,theCourtconfirmedQuantumastheowner
ofallrightsintheinvention,anddeclaredtheretrocessionrightsofMr.Kayforfeited.

Thisdecisiondemonstratestheimportanceofnegotiatingandenteringintoclear
agreementsandestablishingunambiguousclosingconditions.Moreover,this
decisionservesasareminderthatincertaincases,intellectualpropertyrightsare
essentialinordertobeabletocommercializecertaininventions.Theassignment
andcooperationoftheinventormightberequiredeveniftheownershiprightsinthe
inventionbelongtothepartyhavingfinancedorordereditsdevelopment.Itis
thereforeessentialtohaveclearanddefinitiveagreementsinplacewithanypartner,
collaboratorandevenemployeesinordertosecureallrightsrequiredinthepursuit
andcommercializationofcontemplatedbusinessprojects.

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