What if a tech company’s patents are excluded from the sale?

If a sale excludes the patents, the seller keeps them. The buyer gets whatever else is in the deal, but not ownership of the patented inventions. An exclusion is not a licence. If the buyer needs to use the patents, ask for a licence as a separate written agreement. Whether the exclusion matters depends on whether the product the buyer is paying for actually uses the patented inventions.

What a patent gives its owner

Under section 42 of the Patent Act, a patent grants the patentee and the patentee’s legal representatives the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used, for the term of the patent, subject to the Act. The Act defines legal representatives to include transferees and others claiming through the patentee. A buyer who has not received a transfer is not a transferee. Ask for the list of excluded patents and applications by number, and compare it with how the product works.

If the buyer needs the patents later

Section 49 of the Patent Act says the Commissioner of Patents shall, subject to the regulations, record the transfer of a patent on the request of the patentee or, on satisfactory evidence of the transfer, of a transferee. It also says a transfer that has not been recorded is void against a subsequent transferee if the transfer to the subsequent transferee has been recorded. A buyer who later obtains a transfer can ask for it to be recorded for that reason. CIPO points to Chapter 6 of its Manual of Patent Office Practice (MOPOP) for how transfers are recorded.

Know-how that is not patented

CIPO says a trade secret can be any business information that derives its value from its secrecy, and notes that, unlike with a patent, the details never have to be disclosed publicly. It lists non-disclosure or confidentiality agreements among the ways to keep that information secret. If the buyer is acquiring source code, designs or process knowledge, confirm in the agreement what the seller is selling, what it keeps, and what confidentiality duties continue after closing.

• Which patents and applications are excluded, by number?
• Does the product the buyer is acquiring use any of them?
• If there is a licence, is it exclusive, for what field and for how long?
• Can the licence pass to a later buyer of the business?