Last year, on November 23, 2011, the USPTO announced that it was considering collecting information on patent ownership and requiring disclosure of patent ownership information throughout the patent application process. Although written comments were due by January 23, 2011, the USPTO has not issued any response to public comments. Instead, in a Federal Register Notice issued November 26, 2012, the USPTO announced that it is considering promulgating regulations that would require the disclosure of “real party in interest” (RPI) information throughout the patent application process and after grant. The USPTO is holding a “roundtable” to discuss this proposal on Friday, January 11, 2013, at its Alexandria, Virginia campus. Requests to participate in the roundtable must be submitted by Friday, December 21, 2012. Written comments on the proposal are due by Friday, January 25, 2013.Continue reading this entry
In Preston v. Marathon Oil Co., the Federal Circuit examined the terms of an employment agreement in order to determine the owner of the patents at issue. Although aspects of the agreement were interpreted under state (Wyoming) law, the decision may be relevant to many employment agreements. Continue reading this entry
In a Federal Register Notice issued November 23, 2011, the USPTO announced that it is considering collecting more information on patent ownership. Although the Notice is titled “Request for Comments on Eliciting More Complete Assignment Information,” the intent appears to be to require applicants to update the USPTO on any changes in ownership at specific stages of prosecution and with maintenance fee payments. The USPTO believes that having complete and current patent ownership information will offer several public benefits, but seems to acknowledge that it may not have the authority to require applicants to provide this information. It seeks public input on this and other issues by January 23, 2011.Continue reading this entry
In MHL Tek, LLC v. Nissan Motor Co., the Federal Circuit took a careful look at patent assignment language and determined that an earlier assignment encompassed all asserted patents, and so the later assignment to the plaintiff was ineffective, leaving the plaintiff with no standing.
The Patents At Issue
The three patents at issue name the same inventors and are directed to a tire pressure monitoring systems (TPMS) that “monitors a tire’s pressure and then transmits this information to the vehicle’s operator.”
U.S. 5,731,516 was filed May 2, 1996 as a divisional application of U.S. Patent Application Ser. No. 476,613, which was a divisional of U.S. Patent Application Ser. No. 332,200. The granted claims are directed to an “apparatus” for monitoring tire pressure.
U.S. 5,663,496 and U.S. 5,741,966 were filed June 6, 1995 (the pre-GATT deadline) as divisional applications of U.S. Patent Application 08/101,379, filed August 3, 1993 (the “Parent Application”). The claims granted in these patents relate to “systems” for monitoring tire pressure.
1. Inventors to Animatronics
Shortly after the Parent Application was filed, the inventors executed an assignment to Animatronics, Inc. which stated:
For the sum of One Dollar . . . and other good and valuable consideration, . . . [the inventors] do hereby assign, sell and set over to ANIMATRONICS, INC. . . . the entire right, title and interest, domestic and foreign, in and to the inventions and discoveries in [the Parent Application].
2. Animatronics to McLaughlin Electronics
A few months later, Animatronics executed an “Assignment of Patent Rights” to McLaughlin Electronics (ME), which stated:
Animatronics does hereby assign to [ME] the entire right, title and interest, domestic and foreign, in and to the inventions and discoveries set forth in the [Parent] Application.
with a carve out providing that the assignment
shall not cover any rights to the [Parent] Application that concern the Animatronics Proprietary Inventions . . . .
Instead, pursuant to a “Development Agreement,” ME had
an exclusive, irrevocable, royalty free license to use the Animatronics Proprietary Inventions to make, use and sell the TPMS, which license shall not preclude Animatronics . . . from using the Animatronics Proprietary Inventions to make, use and sell products other than [TPMS].
The Patent Assignment defined “Animatronics Proprietary Inventions” as
- the Communications Link
- a radio frequency transceiver and algorithm used in the Service Unit and Sensor Unit
- a peizo resistive rubber pressure sensor for use in the Sensor Unit
The Patent Assignment defined each of these terms, and defined the TPMS as including the Communications Link, the Service Unit, the Sensor Unit, and the Display Module.
3. Inventors & Animatronics to MHL Tek
Many years later, in 2007, after the relationship with ME went sour, the inventors and Animatronics signed documents purporting to assign all three patents to MHL Tek.
The District Court Decision
MHL brought suit to enforce the patents against a number of defendants.
The district court determined that MHL lacked standing to enforce the ’496 and ’966 patents because the rights to those patents had been assigned to ME before they purportedly were assigned to MHL.
The district court determined that the ME assignment did not encompass the ’516 patent because it was not related to the Parent Application, and so allowed MHL’s claims on that patent to proceed on the merits, but granted the defendants’ motion for summary judgment of non-infringement.
The Federal Circuit Decision
The Federal Circuit noted that MHL’s standing turns on the scope of the Patent Assignment to ME.
MHL argued that the ’496 and ’966 patents fell under the carve out provision of the Patent Assignment, and so were not assigned to ME.
On the other hand, the defendants argue that the ’516 patent was encompassed by the Patent Assignment because it relates to “inventions and discoveries set forth in the [Parent] Application,” even though the ’516 patent and the Parent Application are not related.
The Federal Circuit agreed with the defendants, and found that MHL did not have standing to enforce any of the patents.
With regard to the ’496 and ’966 patents, the Federal Circuit looked beyond the common words used in the Patent Assignment carve out and the patent claims, and considered the subject matter at issue. Because the claims did not cover the carve out subject matter as it was defined in the Patent Assignment, the patents were not encompassed by the carve out, and so were assigned to ME.
The treatment of the ’516 patent is more interesting. The Federal Circuit noted that the Patent Assignment did not limit its reach to patents related to the Parent Application, but instead referred to “the inventions and discoveries” set forth in the Parent Application. The court therefore framed the issue as “whether the inventions claimed [in the '516 patent] are the ‘inventions and discoveries’ set forth in the Parent Application.”
[S]o long as the written description of the Parent Application “reasonably conveys to those skilled in the art” . . . the invention claimed in the ’516 patent, the ’516 patent was assigned to Animatronics and then to ME.
The court compared the subject matter of independent claim 1 of the ’516 patent to the specification of the Parent Application, and determined that it indeed was adequately disclosed, and so was encompassed by the Patent Assignment. (The ’516 patent includes two other independent claims and other dependent claims that the court did not discuss.)
The Federal Circuit rejected MHL’s arguments that this subject matter was carved out of the Patent Assignment, under an analysis similar to that applied for the ’496 and ’966 patents.
Thus, the Federal Circuit found that the Patent Assignment effectively assigned all three patents to ME. As a result, the subsequent assignments to MHL had no effect, and MHL had no standing to enforce the patents.
When Were The Assignments Recorded?
Because the Federal Circuit did not dicuss the recordation of the assignments, I assumed that they were recorded at the USPTO in order of their execution. However, it appears from a review of the USPTO’s on-line assigment database that while the assignment from the inventors to MHL were recorded in 2007, the 1993 assignments from the inventors to Animatronics and from Animatronics to ME, and the 2007 assignment from Animatronics to MHL, were not recorded until 2009, after the district court litigation.
Dusting off what I remember from my first year law school property class about recording property transfers, I wonder why MHL did not invoke 35 USC § 261:
An assignment, grant, or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
Perhaps other circumstances prevented MHL from being a “subsequent purchaser . . . without notice.”
In Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., the Supreme Court upheld the basic principle of U.S. patent law that rights to an invention vest initially in the inventor(s), and affirmed the Federal Circuit’s determination that the Bayh-Dole Act does not upset the rule of inventor ownership.
The Patents At Issue
The patents at issue (U.S. 5,968,730, U.S. 6,503,705, and U.S. 7,129,041) relate to polymerase chain reaction (PCR) assays for monitoring the effectiveness of antiviral therapy in the treatment of AIDS.
The Agreements At Issue
One of the named inventors, Mark Holodniy, was a Research Fellow at Stanford, but did some work at Cetus (as a Stanford employee) to learn PCR techniques. For his position at Stanford, Holodiny executed a “Copyright and Patent Agreement” where he “agree[d] to assign” all inventions resulting from his employment. In order to work at Cetus, he executed a “Visitor’s Confidentiality Agreement,” which stated that he “will assign and do[es] hereby assign” inventions made “as a consequence of [the] access” he was granted at Cetus. Holodiny’s work eventually resulted in the patents at issue, which were assigned to Stanford.
Stanford’s HIV research was supported by an NIH grant, which brings the inventions at issue under the Bayh-Dole Act (35 USC 200-212).
The Ownership Dispute
Before the patents were granted, Roche obtained rights to Cetus “PCR business,” including the agreements with Stanford and its researchers. Roche began marketing HIV detection kits, which Stanford alleged infringed the patents. Roche asserted that it could not be sued for infringement because it had rights to the patents. Although the district court disagreed, the Federal Circuit reversed, based on its interpretation of the agreements and the Bayh-Dole Act. The Supreme Court considered and upheld the decision on the Bayh-Dole Act issue only.
The Transfer of Ownership
In accordance with basic principles of U.S. patent law, an invention initially vest in the inventor(s), absent an agreement to the contrary. Under Federal Circuit case law, a contract with “agree to assign” language reflects “a mere promise to assign rights in the future, not an immediate transfer of expectant interests.” On the other hand, a contract with “do hereby assign” language does effect “a present assignment of . . . future inventions.” Thus, the agreements at issue here resulted in the following transfer of ownership:
Execution of Stanford Copyright and Patent Agreement: no effect
Execution of Cetus Visitor’s Confidentiality Agreement: transferred future rights to Cetus
Invention by Holodniy and others: rights vested in inventors, Holodniy rights immediately transferred to Cetus
Roche purchase of Cetus PCR business: transferred Cetus rights to Roche
Holodniy assignment of patent rights to Stanford: no effect because his rights already were transferred to Cetus
The Bayh-Dole Act
Stanford argued that because the patents resulted from research supported by an NIH grant, the Bayh-Dole Act prevented Holodniy from being able to transfer his rights to Cetus.
As summarized by the Supreme Court, the Bayh-Dole Act (35 USC 200-212) was enacted in 1980 in order to “promote the utilization of inventions arising from federally supported research,” “promote collaboration between commercial concerns and nonprofit organizations,” and “ensure that the Government obtains sufficient rights in federally supported inventions.” The Bayh-Dole Act permits a grant recipient to “retain title to any subject invention” as long as certain conditions are met. When the grant recipient elects to retain rights, the granting Federal agency has a “a nonexclusive, nontransferrable, irrevocable, paid-up license to practice . . . [the] invention.” If the grant recipient does not elect to retain title to the invention, the agency can entertain requests from the inventor to retain rights to the invention.
Stanford argued that specific language used in the Bayh-Dole Act (such as the “retain” language highlighted above) indicates that the grant recipient, and not the inventor, is the primary owner of inventions supported by government funding. The Supreme Court disagreed, finding the language to be too indirect, particularly when viewed in contrast with other statutes that expressly provide for government ownership of certain federally supported inventions (such as certain nuclear inventions, certain aeronautics/space inventions, and certain energy inventions). Because the Bayh-Dole Act does not include such express language, the Supreme Court determined that it did not upset “the fundamental precepts of patent law and deprive inventors of rights in their own inventions.”
The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.
Safeguarding Ownership Of Inventions
This Supreme Court decision largely maintains the status quo regarding the ownership of inventions, but this case as a whole serves as a reminder of the importance of seemingly routine employment and collaboration agreements, and the IP risks associated with multi-entity collaborations. Employers should keep careful track of the agreements their employees execute with other entities, and should closely review any terms relating to IP ownership. As this case demonstrates, an inventor may have the ability to transfer IP rights to another entity without the consent or authority of his employer.