Shukh Signals Petition for Certiorari in Futures-Assignment Case

In a new filing, Alexander Shukh has asked the Federal Circuit to stay its mandate pending Mr. Shukh’s Petition for Writ of Certiorari. In his unsuccessful petition for en banc rehearing, Shukh asked the following question:

Whether, in a Section 256 Correction of Inventor action, does the common interest doctrine of attorney-client privilege entitle an inventor to access and use his own invention records and communications?

The Federal rules of appellate procedure do not require stay of mandate in the situation but permitted in cases where “the certiorari petition would present a substantial question and that there is good cause for a stay.” Here, I would expect that standard has been met. In particular, in the Stanford v. Roche case, the Supreme Court openly questioned the illogic of FilmTec. I have included an excerpt on-point from the Stanford oral arguments.

= = = = =

JUSTICE GINSBURG: The whole thing that was wrong here is that Stanford, instead of drafting the agreement “I agree to assign,” should have said “I hereby assign” and then there would be no case. Is that — the Cetus agreement said “I hereby assign,” and the Federal Circuit said for that reason, even though it was second in time, it takes precedence. Stanford just said “I will assign.”

So if Stanford had instead used exactly the formula that Cetus used — “I agree to assign and hereby do assign” — would you have any case?

MR. FLEMING: …But Justice Ginsburg, your question is — is sound, which is that there is this distinction between an agreement to assign and a present assignment of future expected interests. That has been the law for decades. There are plenty of settled expectations based on that. That has not been challenged, not in the petition for certiorari, not in the opening brief of Stanford, and it only comes up in a footnote on the penultimate page of the reply brief. . . .

JUSTICE GINSBURG: We have a number of sample clauses in this record, and some say “I will assign.” Some say “I hereby do assign.” The notion that the — that answer, who is it who loses, should turn on whether one drafter says “I agree to assign” and the other says “I hereby assign” does seem very odd.

MR. FLEMING: That’s a distinction, Justice Ginsburg, that goes back to the Federal Circuit decision in Arachnid by Judge Giles Rich, who is a notable authority on the patent act. He relied on the Curtis treatise from 1873. But if that were an issue that the Court wished to reconsider, I think –

JUSTICE SCALIA: Is that patent law or is it regular contract law? Doesn’t it apply in other fields as well? I mean, I’m — I’m not aware that this is a peculiar doctrine applicable to patent law.

MR. FLEMING: No, not in particular. An agreement to assign is specifically that. It’s an agreement to do an assignment in the future.

JUSTICE SCALIA: To do it in the future. If somebody else gets an assignment before that agreement is — is executed, the assignment prevails.

JUSTICE GINSBURG: Then we’re talking about nonexistent property; property that may never, in fact, exist?

MR. FLEMING: That comes from the FilmTec decision, which relied on Justice Storey’s decision in Mitchell, and it’s used, again, by universities like Caltech and MIT that rely on the validity of a present assignment of future expected interest. I mean, I know that the issue of the interpretation of agreements to assign was addressed in the cert petition in ProStar v. IP Venture, which this Court denied cert on three terms ago. But if this Court were to wish to reconsider that doctrine, I would submit it can be done in an appropriate case where there is an amicus briefing on that issue. That’s not been considered here at all.

JUSTICE GINSBURG: So in the future, the universities would be protected against a third party simply by changing the form of contract with their employees to say “I hereby assign,” so we would have no continuing problem?

MR. FLEMING: I — they — they would be protected from this particular constellation of facts that came up in this case. There might be other problems –

JUSTICE BREYER: Yes, and then your clients would be out there arguing, oh, but you, see you can’t assign a future interests in the fruits from black acre; I mean, you can promise to do it, but black acre isn’t even around yet. And so when somebody ran in and got those fruits, well, then now we have a fight; and in law the second person wins, and in equity maybe the first person can get an injunction. I don’t know. But I guess people would raise that kind of argument, wouldn’t they?

MR. FLEMING: The point, Justice Breyer, is that all these questions are resolved in the exactly same way when we’re not talking about a federally funded invention.

65 thoughts on “Shukh Signals Petition for Certiorari in Futures-Assignment Case

  1. 12

    Choice of law issue.

    What law applies in a breach of contract suit involving an invention and an assignment, the law of the state or the Federal Circuit law, and why?

  2. 11

    I wonder why Seagate is resisting Shukh’s request to be named as a co-inventor. If Shukh is obligatated or did assign, then Seagate winds up being the assignee and in the same economic position as it now is.

    Why the fight? Are there other facts that make this worth spending so much in attorneys fees, or is it an ego contest?

  3. 9

    Well, this is the way the law is.

    In the law, most questions have only two possible answers, “P wins, D loses” or “D wins, P loses.” Inevitably, the law must give radical changes in outcomes on very, very fine changes in facts.

    In almost every other area of life, a small change in inputs results in a small change in outputs. However, in any area where outputs are quantized at discrete levels, you get this weird small-change-in-input-large-change-in-output behavior. (Another example is binary floating point arithmetic.)

    The difference between “I agree to assign” vs “I hereby assign” is not illogical, it’s one of the very few logical places to effect the transition.

    1. 9.1

      And as Fleming points out, what’s the practical alternative, especially in situations where its not clear that there is a patentable invention, until after the employee leaves the company? (I used to run into that with some frequency when I was in-house — it is not rare.) The practical reality is that the system has to allow “I hereby assign future inventions” to have effect.

      1. 9.1.1

        If the patentable invention does not exist until after the employee is separated from the company, then there is no obligation to assign as a practical alternative. Otherwise the company has no incentive to take care of inventive employees and they will be laid off or otherwise ignored in merit evaluations since their inventive contributions have been devalued by contracts of adhesion. This aspect necessarily turns on equity in that the employee should not leave just to cart off an invention but neither should a company be able to take an employee for granted. In other words, the duty of good faith in such assignment agreements should requires a heightened and clear adherence with fair play if future inventions are to be covered. I have encountered situations where the employee has been laid off summarily with significant financial losses while valuable inventions in the future are claimed to be assignable all the same even with the proverbial dollar being negative. This is also an unfair result that is corrected only if the company recognizes the need to retain and incentivize the employee.

    2. 9.2

      David, then you believe that there is no distinction and should be no distinction between equitable title and legal title?

        1. 9.2.1.1

          So, you sell a business, call it BookFace, with a rep and warranty that you are transferring good and sufficient title to all intellectual property of the company. At the time the agreement is executed, a particular invention of an ex-employee has not been reduced to practice. Subsequent to the sale of the business, the ex-employee reduces the practice, invests heavily in his business and becomes, for the sake of argument to illustrate the point, FaceBook. The invention is the way FaceBook makes money and provides much of its value. FaceBook filed and apparently owns the patent by assignment from the inventor/founder.

          BookFace II discovers the facts and sues for breach of contract alleging it did not get good title to the FaceBook invention. Assuming no statute of limitation problems, who wins the breach of contract suit and why?

          Assume here that NY Law applies and that FaceBook has good legal title under NY Law.

          1. 9.2.1.1.1

            The question is not well-formed —

            Many of the operative facts are missing —
            — what does the employee agreement say — what is the scope of the assignment?
            — what was the state of conception as of the date of the employee’s separation?
            — what is the scope of the assignment (is it an asset deal or a stock deal)?
            — what is the scope of the rep? “All assets used by the business,” sufficient rights to use or actual transfer, etc.

            And there are two red herrings, “reduced to practice” and “FaceBook has good legal title.” The relevant ownership issue is BookFace II’s title.

            1. 9.2.1.1.1.1

              1. Hereby assigns “inventions” made while employed.
              2. State: complete invention — described in a notebook left at BookFace.
              3. Scope: asset assignment.
              4. Rep.: good and legal title to intellectual property of the company whether listed in the schedules or not.

              Red Herrings. Reduced to practice — first built and tested at FaceBook.

              Law. Under NY Law, FaceBook owns 100% of legal title to the invention and patent, BookFace only equitable to the invention.

              1. 9.2.1.1.1.1.1

                What’s the scope of the asset assignment? The most common assignment in an asset deal is “all assets used in the business that are owned by [assignor], and right to use all assets used in the business to which [assignor] has right to transfer.”

                If it isn’t used in the assignor’s business, it’s not clear that FaceBook even has equitable title.

                Once the assignment is recorded by FaceBook and three months elapse, it’s not clear that BookFace II has any claim to legal title.

                When the facts you gave are supplemented with the most-likely additional facts, there’s no problem to solve.

                1. Oops, two corrections —

                  If it isn’t used in the assignor’s business, it’s not clear that *BookFace II* even has equitable title.

                  Once the assignment is recorded by FaceBook and three months elapse, it’s not clear that BookFace II has any claim to *any title whatsoever.*

                  Your hypothetical is a good illustration of how legal and equitable title can split.

                2. David, under Stanford v. Roche, District Court, Roche, still had to sue to obtain title or co-ownership, and that was barred by the SOL. So, in effect, it really did not have legal title.

                  There is a bit of disconnect here still.

                3. David, the recording statute does not affect earlier “assignments.” So the assignment to BookFace, being prior, is not cut off by the recording statute.

                4. David, I would argue in defense that BookFace II only got equitable title that became legal title when the invention was complete. That way, there was no breach of the rep and warranty.

  4. 8

    Beyond what the Supremes ultimately determine the law IS, I’m more curious as to what others think the law should be. On one hand, the ability to assign not yet conceived inventions would be convenient to businesses and their attorneys. On the other hand, I see a moral issue with respect to binding inventors to assign their too be conceived inventions.

    1. 8.1

      Which moral issue is that?

      Is it the same type of moral issue in which an employer is faced (all the time) when that employer promises a certain (future) wage amount for (future) hours worked?

      1. 8.1.1

        It’s interesting (yet perhaps not surprising) that others are perplexed by the very mention of a moral consideration to this issue. I can think of several issues that arise under a legal framework that allows employers to generally take future inventions of their employees.

        1. 8.1.1.1

          The only “perplexed” item here is what is the moral issue that YOU see.

          This is pretty standard real world stuff…

          1. 8.1.1.1.1

            Anon – In virtually every Supreme Court case, public policy, natural law, and morals take a front seat to deciding what the law should be. You lecturing to us on the singular consideration of what the law as currently written says ignores much of this other “stuff”. Instead of blasting me for raising the question of “what do you think the law should be”, you could provide some constructive input or move along.

            1. 8.1.1.1.1.1

              I invented that,

              Here’s a little constructive input:

              Maybe you don’t want to be so quick to point fingers, as YOU were the one that first threw out the word “perplexed,” while not explaining what YOU thought was perplexing.

              Some of us actually see the situation quite clearly, thank you.

              Now move along, or not.

        2. 8.1.1.2

          Mr. I, do you distinguish between inventions and patents? Do you distinguish between works of authorship and copyright?

      2. 8.1.2

        I see a difference in kind between an employer promising pay for hours worked and promising pay for the assignment of future inventions: whether an employee worked or not (and therefore whether he is or was entitled to pay) is far easier to verify than whether or not an employee invented something as part of his employment (and therefore whether or not the employer owns the invention). Nevertheless, like most others in this sub-thread, I find no moral issue with assigning yet-to-be-created inventions to an employer. I am, however, beginning to find anon’s deliberate density of skull to be wearisome (though not as wearisome as Mooney, whose comments I don’t bother to read.)

        1. 8.1.2.1

          Consider the case where an invention is conceived but not fully. Possibly an embodiment but not the practically claimable form of the invention. The employee is laid off. Now, the invention was conceived while being an employee so should it be assignable if the employee perfects it after being laid off–including while working for another employee or does the act of laying off the employee also cut off the right to enforce the assignment of a invention perfected in the future? Or should it turn on whether the invention was in the scope of employment with the laying off being evidence that it was not? Or should equity be considered to evaluate whether the employer acted in good faith in laying off/firing/separating the inventor?
          This has practical consequences with big pharma in particular outsourcing inventive stages of development to startups that are expected to fail with the successful ones being picked up. However, the success may not be recognized or funded until after the employee has been roughed up in this new marketplace with each bounce in employment progressively making employee contributions worth less due to preexisting obligations to assign potentially already conceived inventions.

          1. 8.1.2.1.2

            Rattan,

            Are you aware that mere conception is not enough?

            There is no prize for that – you need more.

          2. 8.1.2.1.3

            Rattan —

            I think your hypothetical is a very useful one to think about.

            “Conception is the touchstone of inventorship,” but on the other hand, Conception is “the formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.” Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376, 231 USPQ 81, 87 (Fed. Cir. 1986). I think your case turns on individual facts — on the day the employee terminates, which side of that line was the invention on, and what’s the scope of the assignment in the employee agreement?

            It seems to me that with those two facts, the case comes out the right way.

            I disagree with Ned, at 8.1.2.1.1 — your facts are quite different than Stanford v Roche. The assignment to Roche was based on a relationship other than employment (a Materials Transfer Agreement) that had not terminated, and the assignment to Stanford was no more than a promise to assign.

            1. 8.1.2.1.3.1

              David, I think the primary point I was trying to make is that the facts are like Stanford v. Roche to the extent that the “hereby assign” language applied in that case to conception, if I recall the facts correctly. In that case Roche still won even though the invention was later reduced to practice at Stanford.

              Which raises an interesting issue about what happens in a contest between two assignees having “hereby assigns” language where the invention is conceived at the one and reduced to practice at the second.

    2. 8.2

      I Invented That,

      Anon beat me to it, but here are my comments. By statute, copyrights have been automatically assigned to employers since 1906. See comment 4 et seq. in the last Filmtec post.

      Could you explain the moral issue? Say I hire you to make your best efforts to dream up something new in your area of expertise that my company can offer to customers in our market niche. I provide whatever facilities you need. To keep it simple, assume no conflicts with previous employers and you have never thought about anything in my line of business. Problems?

      1. 8.2.1

        Troubled – your fact scenario raises an initial question that should be discussed here in further detail. Was the person hired to invent or hired a more general occupation? In my view, there’s a big difference between being hired as an engineer and being hired specifically for the purpose of inventing.

        1. 8.2.1.1

          That is actually a great question – especially in light of the tendency to make the US PHOSITA to be “naturally inventive” in the KSR mode – whatever that means.

          1. 8.2.1.1.1

            Anon – I agree with you here. U.S. law consistently assumes things like “ordinary creativity” and that people having a high level of skill in the art also have a more refined view of what is obvious in that field. Both are not inherent in my view.

        2. 8.2.1.2

          IIT: In my view, there’s a big difference between being hired as an engineer and being hired specifically for the purpose of inventing.

          But regardless of your view, someone who wishes to be hired “to invent” or “hired to engineer” should be free to contract away his/her ownership to any inventions he/she might make during the course of their employment. As long as there is some consideration (e.g., wages), there isn’t any obvious “moral” problem with that scenario. Now, if your concern is premised on an alleged lack of viable alternatives for creative workers to succeed in the system, there’s likely many vastly more effective solutions to that problem out there than “make it more dificult to assign IP rights.”

          1. 8.2.1.2.1

            MM – you couldn’t be more wrong here. There are literally a million rules and regulations that an employer cannot ask their employee to contract away. Same with virtually every facet of law from consumer protections to criminal justice.

    3. 8.3

      I invented that, Consider the recording statute. If the inventor assigns the invention to, for example Stanford, who then records, one should be able to rely on the ownership of Stanford without more. Allowing interlopers such as Roche to claim legal title later throws a monkey wrench into the recording statute.

      I also think that allowing the likes of Roche to be an owner when it does not satisfy the terms of 35 USC 152, which requires two things for an assignee to receive ownership of a patent, a recorded assignment and that the inventor sign the application, also violates federal law.

      Regardless that it helps big companies, FilmTec is not even consistent with the Federal statutory scheme.

      1. 8.3.1

        You are in the weeds and blaming the wrong party Ned.

        Blame Stanford for their poor drafting (PLENTY of universities knew how to correctly draft agreements of the kind at issue).

      2. 8.3.2

        Ned – I’m trying to start a discussion about what people think the law should be, not whether a particular formality is followed.

        1. 8.3.2.1

          The law should be? It should be that which is the most open and transparent to all.

          1. The inventor must sign both the application and an assignment of the application, and that assignment must be recorded to be effective.

          1. 8.3.2.1.1

            Ned – I am assuming from your response that you favor the ability for an employer to obtain assignment of an employees future inventions not yet conceived? My question is whether this should even be a viable option. I see arguments on both sides.

            1. 8.3.2.1.1.1

              No. I favor a hard and rule that thr inventor sign an assignment naming the patent application by application number or have any assignment filed with the application that the inventor also signs.

            2. 8.3.2.1.1.2

              Also, until that time, the assignee only has equitable title at best and no standing to sue in court, and no ability to convey title to a defendant in a lawsuit or what happened in Stanford v. Roche.

              1. 8.3.2.1.1.2.1

                Your view of the Stanford matter is notoriously OFF, Mr. Heller.

                Feel free to dive back into the archives to refresh our conversations.

  5. 7

    Amazing it took all the way to a Sup. Ct. oral argument for highly relevant fundamental legal questions to be asked that should have been raised early-on in the in the Stanford v. Roche litigation below.

    1. 7.2

      Paul, Here is the district court case on the assignment issue. BOARD OF TRUSTEES OF LELAND v. ROCHE MOLECULAR, 487 F. Supp. 2d 1099 (N.D. Cal. 2007). link to scholar.google.com

      Ricardo Rodriguez, Michelle S. Rhyu, Stephen Cassidy Neal, Cooley Godward Kronish LLP, Palo Alto, CA, Anthony J. Patek, Attorney at Law, San Francisco, CA, for Plaintiff

      “”[T]he question of who owns the patent rights and on what terms typically is a question exclusively for state courts.” Jim Arnold Corp. v. Hydrotech Sys., 109 F.3d 1567, 1572 (Fed.Cir.1997); see also MyMail, Ltd. v. Am. Online, Inc., 476 F.3d 1372, 1376 (Fed.Cir.2007). However, this rule has exceptions: the question of whether contractual language effects a present assignment of patent rights, or an agreement to assign rights in the future, is resolved by Federal Circuit law. “Although state law governs the interpretation of contracts generally, the question of whether a patent assignment clause creates an automatic assignment or merely an obligation to assign is intimately bound up with the question of standing in patent cases. We have accordingly treated it as a matter of federal law.” DDB Techs., L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284, 1290 (Fed.Cir.2008) (citations omitted).”

      Id. at 841

      “In contrast to the CPA, the VCA’s language of “do hereby assign” effected a present assignment of Holodniy’s future inventions to Cetus. E.g., Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed. Cir.2000) (interpreting “shall belong” as a present assignment); FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1572-73 (Fed.Cir.1991). Therefore, Cetus immediately gained equitable title to Holodniy’s inventions.

      “Once the invention is made and an application for patent is filed, however, legal title to the rights accruing thereunder would be in the assignee …, and the assignor-inventor would have nothing remaining to assign.” FilmTec, 939 F.2d at 1572. “Ordinarily, no further act would be required once an invention came into being; the transfer of title would occur by operation of law.” Id. at 1573. Stanford filed the parent application to the patents-in-suit, Serial No. 07/883,327, on May 14, 1992, and there can be no dispute that Holodniy conceived his contribution to the invention by that date. Therefore, Cetus’s equitable title converted to legal title no later than the parent application’s filing date.”

      I see no evidence in the decision that Stanford even argued that the Federal Circuit decisions (DDB Techs and FilmTec) were improper under Erie RR v. Thomkins.

  6. 6

    USPTO IT systems are down, reports they may be down through the weekend (due to lots of people on vacation, etc., and the scope of the downage). Is there any precedent for this? Will filings due today count on Monday, or do I have to paper file?

  7. 5

    Either Dr. Shukh or I am confused on the common interest (a/k/a joint defense) attorney-client privilege doctrine. This is a shield preventing disclosure to third parties. Here, Dr. Shukh and his former employer are adverse. He seems to be invoking this as a sword to obtain information. Can anyone explain?

  8. 4

    As I have pointed out before, 35 USC 152 requires the inventor to actually sign the application of the record owner before he can own it. This requirement overrides such state law to the contrary that would vest ownership in an application without the inventor actually signing the specification. That is why historically, if the inventor did not cooperate, one had to sue them for a court to order they sign.

    FilmTec did not consider the statute nor the law. It just announced a new rule regarding legal title unheard of in English common law, and arguably, contrary to the statute to boot. Making things up — pulling thing out of thin air.

    Seem to happen a lot with this court.

    1. 4.1

      As I have pointed out before (as well), Ned, the AIA changes what is and what is not required from the actual (person) inventor.

      Shall I point out as well (with the “oh noes” Malcolm might not be able to connect the dots), that “without deceptive intent” was removed wholesale from the statute in the AIA changes as well (going hand in hand with this “ease” of not paying attention to the actual person of the inventor)….?

      1. 4.1.1

        anon, I agree that you have said this before, “The AIA changes what is and what is not required from the actual (person) inventor.”

        But still you have not actually been more specific.

        Still waiting.

    2. 4.2

      Ned, I just read 35 usc 152 because your allegation is alarming. Forgive me if I am being dense, but it seems like a signed oath/declaration is sufficient to satisfy section 152. What am I missing?

      1. 4.2.1

        35 U.S.C. 152 Issue of patent to assignee.
        Patents may be granted to the assignee of the inventor of record in the Patent and Trademark Office, upon the application made and the specification sworn to by the inventor, except as otherwise provided in this title.
        (Amended Jan. 2, 1975, Public Law 93-596, sec. 1, 88 Stat. 1949.)

        The owner of a patent is the inventor/applicant unless the inventor

        1. Assigns the application (not the invention) to an assignee; and

        2. The inventor signs the application which is the subject of the recorded assignment.

        There is nothing in here that allows anybody but the inventor or his assigns of the patent application, not of the invention, but of the patent application, to actually have ownership of the patent.

        One cannot actually own an invention. One can only own the right to file a patent application. Federal law requires for an assignment of an application/patent to be effective that it be recorded and that the inventor sign the specification.

        I think the Federal Circuit has gone off the deep end here in a big way. Not only has it failed to follow traditional common law about assignments, not only has it failed to consider prior Supreme Court case law on point, but it’s holding seems dramatically inconsistent with the requirements of the statute.

        1. 4.2.1.1

          Hmm. I guess what I was questioning was why you think the “specification sworn to by the inventor” language could not be satisfied by a standard inventor declaration. You appear to be suggesting that this language requires an inventor to sign the application itself, but I don’t know where your stance comes from. I know that doing so was a historical best practice that no longer seems to exist, but I don’t have any insight into why that was a best practice (perhaps in relation to this statutory language?), why that practice has fallen out of favor, or if the language of 35 usc 152 has some case law significance I am not aware of.

          Based on my reading, a standard inventor declaration filed before issuance should satisfy 35 usc 152, and the USPTO currently requires declarations before issuance already.

          1. 4.2.1.1.1

            E, I am not disputing that a signed declaration is not effectively signing the application.

            I am disputing that one can assign an invention to a first party and then have that purported assignee own a patent filed by the inventor and assigned to second assignee who has recorded. It violates

            BOTH

            35 USC 152

            and

            35 USC 261.

            261 reads

            “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.”

            The inventor owns the right to file and he owns the patent unless he assigns the application to another after or contemporaneously with filing. Assignment of inventions has nothing to do with who owns a patent.

            1. 4.2.1.1.1.1

              Assignment of inventions has nothing to do with who owns a patent.

              That’s not possible.

              Just saying.

        2. 4.2.1.2

          Two items…

          1) “May… granted to” – permissive and says NOTHING about other options (not preclusive, either before or after grant)

          2) “except as otherwise provided in this title” Gee Ned, that’s awfully not specific, the whole Title and all… ;-)

  9. 2

    Dennis, the problem is that substantive contract law is state law as a constitutional matter.

    Erie RR v. Tompkins.

    Seagate has principle place of business in California, but I suspect the inventor here probably was located either in Minnesota or Colorado. There is also the matter of the employment contract that probably would specify that the law of California controls.

    Shukh is barking in the right direction, but up the wrong tree.

  10. 1

    I am struck by the amount of “wishful thinking” of some members of the Court…

    Just as I was when the selfsame Minority first came out in the Stanford decision.

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