Ownership of IP by UK branches of foreign companies

What is a branch company? What is a subsidiary company?

A UK branch company is an extension of a foreign company, registered at Companies House. It is not a separate legal entity from the foreign company. Any obligations or activities of the branch company are ultimately the responsibility of the parent company. An advantage of a UK branch company is that the foreign company has full control over operations in the UK.

A subsidiary company, on the other hand, is a separate legal entity than the foreign company, and is incorporated in the UK. Whilst it may be owned or controlled by the parent company, the subsidiary company is legally capable of owning its own assets, employing its own employees, and entering contracts independently from the parent company.

This article only considers the ownership of IP such as patents, trade marks, registered design rights, unregistered design rights, and copyright. Other comparisons relating to taxation, regulation, and liability, are outside the scope of this article.

IP ownership

Branch company employment: If an inventor or designer works for a UK branch company of a foreign company, and the IP was unquestionably created in their course of duties as specified in the relevant legislation, the logical conclusion is that the resulting IP would be automatically owned by their ultimate employer: the foreign company. This is because the branch company is not a separate legal entity than the foreign company. The foreign company can then directly file UK patent applications, UK registered design applications, and benefit from copyright and design right ownership.

Subsidiary company employment: However, if the inventor or designer is employed by a UK subsidiary company, the IP is likely to be automatically owned by the subsidiary company instead. This is because the subsidiary company is a separate legal entity from the foreign parent company. Therefore, if the foreign parent company wishes to hold IP in its own name, an assignment would likely be required from the subsidiary company to the parent foreign company.

Practicalities

Despite UK legislation setting out circumstances in which IP is automatically owned by an employer, confirmatory assignments to the intended owner of the IP are always advisable, and sometimes necessary. Furthermore, these IP assignments must be carefully worded to correctly identify their employer, taking into account whether the company’s UK entity is a branch company, a subsidiary company, or the foreign company itself.

It is also advisable for employment contracts to be professionally reviewed and optimised in line with UK case law, when UK inventors and designers are employed. UK case law on inventorship and employee ownership differs from US law, for example.

Please note that if the foreign company uses the same employment contract wording or assignment wording for its UK designers and inventors as those employed locally, the contracts may be at least partially unenforceable under UK law.