'; No wiggle room with patent assignment rights

No wiggle room with patent assignment rights

April 4, 2018 Chicago Daily Law Bulletin

A company brings a patent infringement action and asserts ownership of the patent based on assignments from two inventors and an obligation to assign by a third based on an explicit employment agreement. The obligation to assign is recognized by the U.S. Patent and Trademark Office, and the company’s predecessor is given the right to prosecute an application directed to the invention without the third inventor’s participation. The company’s predecessor is later identified by the Patent Office as the assignee on the face of the issued patent. A Delaware Chancery Court subsequently assigned the patent to the company by a quitclaim deed pursuant to Delaware bankruptcy laws. Upon filing suit, the company’s complaint is challenged based on a lack of standing to assert the patent because there is no separate document assigning rights in the invention from the third inventor to the company or its predecessors in interest.

This fact pattern was addressed in Advanced Video Technologies LLC v. HTC Corporation, et al., decided January 11, 2018, by the Court of Appeals for the Federal Circuit, which found the employment agreement inadequate to convey rights in the patent to the company. As a consequence, the company cannot exclude others from practicing the patented invention as provided by the U.S. Patent Laws.

It was noted by one of the judges on the panel who heard the appeal that the employment agreement has standard terms that many employers rely upon to ensure their ownership of inventions developed by their employees. The employment agreement included an obligation to assign and a trust provision which provided that the employee would hold all developments and inventions in trust for the sole right and benefit of the company. There was also a waiver and quitclaim of rights to patents assigned under the agreement. Other provisions of the employment agreement provided for ownership by the company of all documents and property created by the employee. The Federal Circuit agreed with the district court that the future tense “will assign” language in the employment agreement did not in itself effect an assignment. Nor did the trust provision permit the company to bring suit.

The Federal Circuit noted that under California law a trust beneficiary generally is not the real party in interest and may not sue in the name of the trust and, perhaps more importantly, the beneficiary has no legal title or ownership interest in the trust assets. Thus the company, as a trust beneficiary, did not have standing to maintain its suit where the trustee/employee was not a party. Finally, the quitclaim provision of the employment agreement was said to merely waive the co-inventor’s rights to patents that were assigned; because the district court and Federal Circuit found that no patent rights were ever assigned, the quitclaim provision was held to be inapplicable.

Nor was Rule 19, Fed. R. Civ. P., available to the company to join the third inventor, either as an involuntary plaintiff or a defendant. Significantly, the Federal Circuit had previously explained that the right of a co-owner “to impede an infringement suit brought by another co-owner is a substantive right that trumps the procedural rule for involuntary joinder.” Indeed, one of the judges who participated in the Advanced Video Technologies appeal wrote that he was bound to apply the law of the circuit which prohibits joinder in this case, and thus concurred in the result. But in a separate opinion, he set out his views that it is incorrect that a non-consenting co-owner or co-inventor can never be joined in an infringement action. The concurring opinion sought to demonstrate that there is no rule of substantive patent law which holds that one patent co-owner can never involuntarily join another, and argued for en banc review of the question whether a co-owner’s mere reluctance to join suit can prevent enforcement of another co-owner’s rights. In the meantime, a party asserting a patent right must have every owner in the action.

In view of the Advanced Video Technologies case, an employer’s contract manager is well advised to consider including an immediate assignment of all employee inventions – such as “will assign and do hereby assign” – in employment contracts, as well as a robust further assurance clause, and should follow up when a patent application is filed to obtain a recordable assignment document from each employee/inventor. Before a company brings a patent infringement action, the company should certainly confirm that it has standing to sue, and if an employee/inventor declines to execute an appropriate assignment document, to move for specific performance of the further assurance clause.