Patents: The Difference Between Ownership vs Inventorship

I want to add my business partner/friend/cousin/mother as an inventor so they own part of it, can I do that?

Generally speaking, the short answer is no, but that is a question we receive frequently, i.e, who owns this thing?

The answer, however, comes down to understanding that there is a difference between ownership and inventorship when asserting rights to patent applications and issued patents, and this is an important distinction as it is the owner of the patent itself (which may not necessarily include the inventor) who has the rights to sell, license, and assert any other rights of the patent application or issued patent.

Patent Inventors

This is a legal designation in the eyes of the USPTO. Either you are an inventor or you are not. Did you add elements to the invention that are found in the patent, and more specifically in the claims of the patent? If the answer is yes, then you are an inventor and there is no way around that fact. Importantly, not including an inventor on a patent application or adding a person as an inventor who is not one is considered fraud on the USPTO and can invalidate your patent. So no, you can’t add your friend, cousin, mom, or child simply because you want them to have ownership of the patent rights.

Patent Ownership

Generally, the inventor is the owner of the rights that come along with a patent application or issued patent unless they are transferred to another party. Moreover, each inventor owns 100% of the rights provided by an issued patent. Thus, if you have two inventors, each has the right to sell, license, or use these rights regardless of whatever the other inventor does with them. As you can easily imagine, this can cause problems if, for example, one inventor wants to use it and one wants to sell it. However, there is a way out of these problems – both where the inventor wants to include non-inventors or where there are multiple inventors – because a patent, like any other real property, is a right that can be transferred or encumbered through licenses and contracts.

The rights that we are discussing here can be dealt with like any other property right. They can be sold or licensed to a company, folded into an inventor-owned business, and even inherited by your heirs. If an inventor wants to include non-inventors (family, friends, or business partners) in the ownership of their invention, the easiest mode is to form a business in which the rights of each member are clearly defined. This may be done, perhaps, most easily by way of an LLC or S-Corp. A business formation not only allows the inventor to include others as owners in the invention but can be used to potentially shield the inventor from lawsuits down the road which are related to the making and selling of the invention. An additional advantage of forming a business entity to hold the rights is that it allows the owners of the entity to spell out, ahead of time, the rights and responsibilities of each person who owns an interest in the business entity as well as a detailed explanation of how to divide up the entity, along with any acquired patent rights, should any partners wish to be divested.

To protect the transfer of rights, ownership and assignment rights are recorded at the USPTO so that the world is on notice as to who truly owns the invention.

A Note From Attorney Sean Kaufhold:

I am often asked if the inventor can go forward when they have not formed a business, have not come up with a name/logo, or have not figured out how to manufacture the invention. You do not need these things, as they are not related to the process of obtaining the patent itself. You are advised to form a company if you have more than one inventor or owner, but if you are alone, you can always take care of those additional steps at any point in the process (or not at all). I typically direct clients to a business attorney who can help them determine which type of legal entity best suits their needs.