Patent Assignments and Ensuring Security: Case Study
The Problem
A prominent and long-standing Ontario-based construction company came to us with an interesting dilemma – a key supplier of construction equipment was in trouble and our client wanted to know if there was a way they could help out their supplier.
Our client was purchasing key construction safety supplies from the supplier, and relying on those supplies for a competitive advantage, especially when it came to worker safety.
As a leading Canadian construction company, our client wanted to continue to maintain their stellar worker safety conditions.
The supplier, however, started to face financial difficulties.
The supplier continued to struggle and eventually came to our client to express their financial concerns.
Our client struggled to figure out if there was a way they could help their supplier, and once our client learned that the supplier had filed various patent applications in relation to various pieces of equipment, our client came to Pnc IP Group with lots of questions.
We came to learn that there were both patent applications and patent grants, not only in Canada, but also in the United States, China, and India.
Our client wanted to provide a financial loan to their supplier and wanted to know if they could do something using the patent applications and grants as a financial security.
We explained that our client could make a loan in a security agreement, and register that security against those patents in various jurisdictions.
There was a critical caveat, however, which was that at that time the Canadian Patent Office (and many Patent Offices around the world) did not offer any true mechanism for registering or enforcing security agreements.
The Solution
We set to work to find out a way to allow our client to transact a secured loan, while making any security take effect against patent applications and patent grants in countries that didn’t necessarily recognize or provide enforcement mechanisms for security agreements against patents (such as in Canada).
Pnc IP Group had the international connections to make this all happen, but it was going to be a challenge trying to harmonize different countries following different laws in relation to patents and security agreements.
Pnc IP Group carved out a hybridized solution that allowed our client to hold a realistically enforceable security against their supplier in Canada, while simultaneously accounting for jurisdictions that didn’t have true security agreement registries and enforcement mechanisms.
Our solution involved executing a series of patent assignments (with a reversionary ownership clause upon completion of conditions in the security agreement) and registering those patent assignments in certain jurisdictions in absence of the security agreement.
The Outcome
The supplier was happy and satisfied to learn that they still had every opportunity to re-acquire their patents (which our client would maintain in effect), and in the short-term, the supplier was able to acquire a loan from our client.
In turn, our client took over control of the patent applications and grants, ensuring their supplier would stay in business.
This arrangement also afforded our client a new revenue stream as our client took over licensing and enforcement rights in relation to those patents.
Both our client and their supplier were thrilled with the end result, and their business relationship and cooperation continues to this day.
Contact Pnc IP Group today to learn more about our Patent services.