by Dennis Crouch
When I taught licensing, I turned to Ray Nimmer’s text. Nimmer & Jeff Dodd are also authors of the treatise Modern Licensing Law. Although a number of patent transfer issues are straightforward, one that continues to lay confusion is the purported assignment of ownership of patent rights covering a yet-to-be-concieved invention.
In his case against Seagate, Alexander Shukh had asked the Federal Circuit to revisit the automatic-assignment rule of FilmTec. However, that en banc request has now been denied.
Nimmer & Dodd had filed an amicus brief supporting Shukh’s now failed petition for en banc rehearing on this question of whether FilmTec remains good law and the extent that federal law (instead of state law) governs patent rights transfers. The Nimmer brief does not expressly argue for a particular answer, but does ask the courts to settle the matter.
[C]onfusion arises when dealing with agreements and assignments for inventions yet to be created. The precise issue is whether an “assignment” of future inventions, i.e., either an actual assignment or an agreement to assign, will create mere equitable property rights or will effect actual transfer of legal title, once the invention comes into existence.
Prior to FilmTec… the general rule was that, while “an agreement to assign in the future inventions not yet developed may vest the promisee with equitable rights in those inventions once made, such an agreement does not by itself vest legal title to patents on the inventions in the promisee.” Arachnid (Fed. Cir. 1991). This rule was of apparent long pedigree. . . .
In FilmTec, however, the Court held that, “[i]f an assignment of rights in an invention is made prior to the existence of the invention, this may be viewed as an assignment of an expectant interest,” and that “[o]nce the invention is made and an application for patent is filed, however, legal title to the rights accruing thereunder would be in the assignee.” Under this “automatic assignment” rule, equitable title to a future invention automatically ripens into legal ownership in an assignee, even though the “assignor” was no longer employed by the assignee when the patent application for the invention had been filed.
FilmTec has been widely criticized. In Stanford, Justice Breyer argued in dissent that the “Federal Circuit provided no explanation for what seems a significant change in the law” and that the FilmTec rule “undercuts the objectives of the Bayh-Dole Act.” Concurring with the majority, Justice Sotomayor nonetheless shared Justice Breyer’s concerns and noted that she understood “the majority opinion to permit consideration of these arguments in a future case.”
Next Stop SCOTUS?: It is unclear whether Shukh will push this to the Supreme Court, but the Court has at least acknowledged that the issue exists and potentially problematic. The problem with Shukh’s case is that we have not seen a clear explanation of the controvery – how a shift in the law gives Shukh the win.