Patent Assignment: “obligation to assign” treated differently than concurrent assignment

IpVenture v. ProStar (Fed. Cir. 2007)

IpVenture sued ProStar for infringement of its patent directed to a thermal and power management system for computers.

One of the inventors — Douglass Thomas — had been a patent attorney at HP at the time of the invention. The district court found that Thomas had an obligation under his employment contract with HP to assign rights to that company. Consequently, the district court dismissed the case for lack of standing. On appeal, the CAFC reversed.

All entities with independent substantial patent rights must be included in a patent infringement lawsuit — they are “indispensable or necessary parties” to the infringement suit.  The policy behind this judicial rule is to ensure that an accused infringer is only sued once.

Here HP has no rights for two reasons:

  1. Under contract law, HP did not have immediate ownership in the patent rights because the inventor’s employment agreement only created an “obligation to assign” the rights.  (The employment contract could have alternatively included terms such as “the inventor hereby grants all rights present and future…”).
  2. In 2005, HP agreed (via contract with IpVenture) that it did not own any rights to the asserted patent.

After disavowing any rights to the patent, HP ensured that it would not be able to sue ProStar for infringement — as a consequence, IpVenture had standing to sue without joining HP.

Dismissal vacated.

Notes:

  • Beware: Patent assignments are contracted interpreted under state law
  • There is some California state law supporting the idea that the assignment had ‘vested’ even though it was only an agreement to assign.

20 thoughts on “Patent Assignment: “obligation to assign” treated differently than concurrent assignment

  1. Jud, please don’t pay too much attention to anonymous’ comments – he gets a little grumpy when his work isn’t going well. But note that attempting to swear behind a reference that is prior art under 102(g) in litigation is much more difficult than swearing behind a 102(e) or 102(a) reference before the Office (because 102(g) cuts both ways). Anyway, this isn’t legal advice either, and we should probably get back “on topic” as Mr. Slonecker has said.

  2. It is disappointing to see a quite important issue of law reduced to a sidebar discussion of PTO search methods, etc.

    “Indispensible parties” is an issue to arises many times, and often under circumstances where its presence is not readily apparent. I have never met a client who was pleased with the prospect of becoming embroiled in litigation in which it had absolutely nothing at stake.

    Yet another important aspect of this case is demonstrating the difficulty counsel faces trying to craft allocation of rights agreements where the client actively conducts business throughout the US and elsewhere. On the one hand you would like to prepare a single form of universal applicability. On the other you are faced with the laws of many jurisdictions that widely diverge.

    These are not “once in a blue moon” issues. They arise with regularity, and knowing how to deal with them is an important part of effectively representing clients.

  3. Sorry anonymous, but when I said “as easy as you’ve presented it”

    I was referring to: “in 10 minutes…I know we couldn’t make any conclusions without much, much, much more research, but perhaps Lester’s gut feeling wasn’t far off.”

    I’m sorry I read that too quickly, because I clearly misconstrued it.

  4. Jud, do you work for the Patent Office or for the Coalition for Patent Fairness? :-)

    I assume by the “HP” patent, you mean the ’235 patent? It wasn’t an HP patent!

    The Intel application 08/660,016 which apparently has an effective 102(e) date of September 21, 1993 matured into Intel U.S. Patent 5,838,578. It did publish and was not expressly abandoned.

    And I never said the disqualification of any patent was as easy as you’ve presented. Perhaps you need to start reading just a little slower. Good day, it’s been very nice visiting with you. Ta ta.

  5. anonymous,
    I was coming from this direction: The HP application claims a priority date of early 1994, while the Intel patent you provided claims a priority date of late 1993. The Intel patent was never published, and became expressly abandoned, and would have been unknown on the priority date of the HP application. I think it could have been validly applied at some point, as the published ’578 application, but it seems possible that HP could have or would have sworn behind the earlier date. I’m just wondering if the disqualification of the HP patent is as easy as you’ve presented it.
    As to your discussion of the 1999 and 1998 dates, I completely agree.

  6. Sorry, Jud, I don’t understand the question… the ’235 application was apparently filed on July 10, 1999, and the ’578 patent published on November 17, 1998. The reference would have been easy to find with any decent computer prior to the first Office action, or by searching the “shoes” which they still had in 2000 (assuming the reference was properly classified… I haven’t checked).

    Of course, the ’235 application *should* have been re-searched (or at least the search updated ) before FAOM according to USPTO standard operating procedure, but my guess is that the organization-wide problems with WEST may have effectively precluded any such re-search or update. (If you remember, USPTO management was allowing/encouraging(?) Examiners to come in in the middle of the night and at other odd times use WEST during off-peak hours, so that WEST’s speed of retrieval wouldn’t be so painfully slow e.g. during peak hours.)

  7. Anonymous,
    How would the Examiner have known of your reference on the priority date of the HP application and applied it during examination?

  8. It is helpful in considering this matter to be mindful of the fact that California has a specific provision in its laws governing the rights to inventions between employees and employers. See: California Labor Code Section 2870.

  9. Thanks, anonymous. I appreciate your effort and the learning experience.

    I, too, rely upon my gut feelings, but only to get started. I consider unsupported opinions as noise in the blogosphere.

  10. Well, JAPA, in 10 minutes using a tool that the Examiners were not permitted to use in 2000 (though it existed), I found this:

    link to v3.espacenet.com

    “In response to an interrupt, the processor unit may take steps to cool the temperature of the microprocessor, and the microprogram programs a new threshold temperature. For example, the processor may turn on a fan or reduce the clock frequency. The new threshold temperature is slightly higher than the current threshold temperature so that the processor unit may further monitor the temperature of the microprocessor.”

    I know we couldn’t make any conclusions without much, much, much more research, but perhaps Lester’s gut feeling wasn’t far off. (P.S. I use gut feelings too, and this post does not constitute legal advice.)

  11. lester thinks Claim 1 is Obvious. Great, then he should have no trouble identifying the invalidating prior art and forwarding it to the Prostar attorneys. I am sure they would appreciate the help.

    But, if the conclusory statement is based on a gut feeling, he should contact the PTO. I hear they are looking for examiners.

    I am always amused by blog commenters who, after a few minutes of review, proclaim that a patent is invalid. It is really amusing when the assertion is made after a court case involving lots of money and lots of attorneys trying their best to invalidate the patent. Granted, litigation is just starting in this case and the validity of the patent is indeterminate. But, the conclusory assertion is still amusing.

  12. … and if I remember correctly, that was also the time when an internal directive from management was circulated through the corps warning them against making “contentious rejections”. Go figure.

  13. Lester, the patent was filed on July 10, 1999 and issued on April 10, 2001, which means it was likely searched by the Examiner on the “WEST” computer system.

    The WEST computer system was called “the computer from hell” in the November 19, 1999 issue of the Washington Post.

    (At its introduction, you couldn’t even see a complete full page of a patent at a time on WEST… you had to scroll from the top part of the page to the bottom part of the page.)

    Understanding the tools the Examiners were forced to use should give you some understanding of why the quality was very low during that period.

    A little USPTO history (including the WEST fiasco) is given at:

    link to nipra.org

  14. Not sure what claims of pat no. 6,216,235 are asserted. Hope it’s not claim 1, which seems, umm, patently obvious.

    1. A computer system, comprising:

    a microprocessor, said microprocessor operates in accordance with a clock signal having a controllable frequency

    a fan; and

    a thermal management controller operatively connected to said microprocessor and said fan, said thermal management controller operates to thermally manage said microprocessor in accordance with one of a first cooling mode and a second cooling mode, the first cooling mode involving use of said fan for cooling said microprocessor, and the second cooling mode involving reduction in the controllable frequency of the clock signal for cooling said microprocessor,

    wherein said fan has multiple speeds of operation, and

    wherein, with the first cooling mode, said thermal management controller causes said fan to operate at higher of the speeds as needed to provided additional thermal cooling.

  15. mmmbeer… I disagree. I don’t think HP made the argument. I think it was the defendants. Specifically, the fact that HP had previously disclaimed the invention.

    Had they not done that, then maybe it would be different. I think the defendants were hoping that would not be enough.

  16. This is a legitimate argument: if the plaintiff doesn’t own the patent, then they can’t sue in their own name without joining the patent owner.

    HP’s agreement was merely an agreement to assign things that were invented and not a present assignment of expectant interest. The drafter of the agreement (who obviously took a stab at plain language drafting) obviously missed the difference between merely agreeing to agree to do something and doing something.

  17. To Anon:

    District Court is a crap shoot.

    Everybody knows that…All you need is the money to get through it.

  18. Um, it is hard to infer that the defendants were making a straw-grasping argument when they had won at the district court.

  19. To Anon,

    I agree. But, I think the Defendants were probably looking for anything to get a dismissal and this issue stuck. Besides, assume HP doesn’t care about the patents and standing wouldn’t be proper, then the Defendants would be sitting pretty.

    My guess is the Defendants are open-and-shut infringing and they were grabbing at anything.

  20. I don’t have time to read the details of the contract, but shouldn’t this have been “obvious” under privity of contract principles? The co-defendants can’t rely on the terms of an HP-Thomas contract; if Thomas breached his contract with HP (by not assigning), HP might have actions against Thomas, but third parties (the co-defendants) can’t really do anything about it.

    How did the DC judge support his finding that a contractual obligation was self-executing with the force of law with regard to third parties? I guess s/he’s not a fan of ‘efficient breach’ theories?

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