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Does a Patent Right Automatically Revert to the Assignor When a Patent Assignment Contract Is Terminated?
When a breach of contract occurs in the patent assignment contract and the assignor terminates the contract, do the transferred patent rights automatically revert to the assignor due to the termination of the contract? The Supreme Court 113(2024)-Tai-Shang No. 719 Civil Judgment dated July 10, 2024 clearly holds a negative view on this issue.
In this case, Company A claimed that it had signed a patent assignment contract (hereinafter "Contract") with Company B for the disputed patents and completed the assignment registration. However, in violation of the terms of the Contract, Company B sold the disputed patents to Company C. Company A refused to acknowledge Company B's unauthorized disposal and notified Company B of the termination of the Contract, so Company A asserted that Company B had an obligation to restore the original state, and requested that the court declare that Company A owns the disputed patents. Additionally, Company A sought an order for Company B to transfer the right of the disputed patents in accordance with the supplementary agreement of the Contract, as well as Articles 179 and 259 of the Civil Code and Article 96(1) of the Patent Act. Company A also requested that Company B be prohibited from disposing of, encumbering, licensing, or changing the disputed patents, as well as from engaging in any related legal acts.
The Supreme Court upheld the Intellectual Property and Commercial Court's judgment of the second instance (111(2022)-Min-Chuan-Shang No. 45), and only agreed to order Company B to transfer the disputed patent right to Company A, dismissing the other two requests. The Court's determinations are as follows:
1. Company B did indeed violated the terms of the supplementary agreement. Thus, after termination of the Contract, Company A had the right to request the transfer registration of the disputed patent right.
2. However, the transfer of patent rights is a quasi-property act, a type of disposition, which is distinct from the debt contract (the cause of action) and has independent and non-causal principles. Even if the causal relationship is retroactively extinguished due to the assignor's exercise of the right to terminate, the quasi-property contract does not lose its effectiveness accordingly. Only the transferee of the transferred rights has the obligation to restore the original state in accordance with Article 259 of the Civil Code. Therefore, the transferred patent rights do not automatically revert to the assignor upon termination of the debt contract.
3. Therefore, even though the Contract has been terminated, and Company A has the right to request Company B to transfer the disputed patent right, until Company B expresses its intention to return the patent rights to Company A, Company A is not the rightful owner of the disputed patents and cannot exercise the rights of the patent holder. Therefore, Company A's request for the court to declare its patent rights in the disputed patents and to prohibit Company B from disposing of, encumbering, licensing, or changing the disputed patents, as well as from engaging in any related legal acts, is unfounded and should not be granted.