The Advantage of Recording a Patent Assignment
An assignment of a patent, or patent application, is the transfer to another of a party’s entire ownership interest or a percentage of that party’s ownership interest in the patent or application.
An assignment does not need to be recorded in order to be valid. However, per 35 USC 261, a first earlier assignment may be void against a second subsequent assignment if the first assignment is not recorded.
35 USC 261 provides:
An assignment, grant, or conveyance shall be void as against any subsequent purchaser or mortgagee for valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
For example, suppose a start up mortgages its patent portfolio. However, the lender fails to record the mortgage with the PTO. Later, the start up mortgages its patent portfolio with lender who properly records . Per 35 USC 261, the first lender’s interest may be subordinated to the second party.
Of course, most lenders are aware of these requirements and prudently record. A more likely scenario may be that one of the employee-inventors of the start up sells his/her interest in the patent portfolio after leaving the start up. Other scenarios that can complicate ownership if no assignment is recorded include bankruptcy and death or divorce of an inventor.
Interestingly, court decisions have treated a security interest different from a mortgage.
NUTSHELL: It is best to record all patent assignments to preserve rights.