Automatic Assignment of Future Inventions: A Serious Error of Federal Law that Requires Supreme Court Review

Guest post by Dr. Shubha Ghosh, Crandall Melvin Professor of Law and Director of the Technology Commercialization Law Program at Syracuse University College of Law

In Stanford v Roche, 563 U.S. 776 (2011), the Supreme Court ruled that the Bayh-Dole Act did not create special rules of patent ownership for universities and other recipients of federal research funding.  Traditional rules of inventor ownership and assignment, developed for for-profit entities applied to research institutes. Nothing in the language of the Bayh-Dole changed the basic rules and created a statutory automatic assignment (one analogous to work made for hire under the Copyright Act).

But what are the traditional rules for patent assignment? One issue the majority ignored in Stanford is the future interest assignment rule created by the Federal Circuit in Filmtec Corp. v. Allied Signal, 939 F.2d 1568 (Fed. Cir. 1991).  By containing the phrase “hereby assigns,” the Federal Circuit stated in Filmtec, an assignment would have priority over another that only contained the word “assigns.” An assignor stating that he “assigns” a future interest is simply conveying a promise to assign in the future. However, the magic phrase “hereby assigns” is a present assignment of a future interest.  Stanford University’s failure to include the word “hereby” in its assignment agreement lost patent rights to Roche, a competing assignee that showed the wisdom to include the word “hereby” in its agreement.

Justices Breyer and Ginsburg in dissent sharply criticized the Filmtec rule of “automatic assignment” through agreement in the Stanford case. This sentiment was echoed in Justice Sotomayor’s concurrence. All three justices, however, recognized that the assignment interpretation issue was not properly before the Court.  Dr. Alexander Shukh, a computer hardware engineer, signed an assignment to his former employer Seagate.  The assignment contained the “hereby” language sanctioned by the Filmtec decision.  Seagate, and the Federal Circuit, reads the hereby language as creating an automatic assignment of Shukh’s rights to his inventions and resulting patents. The Shukh decision does not involve priority of assignments and  goes beyond the Filmtec decision criticized by Justices Breyer, Ginsburg, and Sotomayor.  Under Shukh, the magic words “ hereby assigns” extinguishes all rights of employees in their inventions.

The Court should grant Shukh’s certiori petition. This post demonstrates that there is a serious error of federal law that requires Supreme Court review. It also shows how the Court might correct the misapplication of federal law.

The Federal Circuit created the rule of automatic assignment through agreement without any basis in the Patent Act or in the common law of assignment. Acting from its institutional law as patent law expert, the Federal Circuit seemingly adopted the Filmtec rule as one of patent assignment. But, as Professor Ted Hagelin pointed out in a 2013 article in the AIPLA Law Quarterly, the automatic assignment rule has no foundation in the Patent Act.  Section 261 speaks to writing requirements and priority rules arising from filing.  There is no mention of the magic word “hereby” as a marker between promises to assign in the future and present assignments of future interests.  Professor Hagelin recommended that Congress correct the error by amending Section 261.

But the Federal Circuit’s error is deeper than one of statutory misconstruction. Its decision confuses the relationship between patent law and contract law. The error is in the same category as the controversy over the conditional sale doctrine, a court created rule from Mallinckrodt v. Medipart, 976 F.2d 700 (Fed. Cir. 1992).  In Mallinckrodt, the Federal Circuit examined a patent owner’s power to impose conditions on its grant of rights to a licensee. Through announcing the conditional sale doctrine, the Federal Circuit ruled that a violation of such conditions constituted patent infringement rather than contract breach.  By so ruling, the Federal Circuit expanded its own jurisdiction by transforming questions of state contract law into those of patent law. A similar move occurs in Filmtec.

The usurpation of contract law by patent law is the subject of my 2014 article in the Journal of the Patent and Trademark Office Society.  My argument in that paper is grounded, in part, in Judge Pauline Newman’s criticism of Filmtec in her dissent from denial of en banc review in Abraxis v. Navinta. 672 F.2d 1239 (Fed. Cir. 2011). According to Justice Newman, patent assignments are a matter of contract law, which is in the jurisdiction of the states. Therefore, the Federal Circuit should look more closely at state law in deciding cases about patent assignments.

The judge’s point is particularly salient when one remembers that the Federal Circuit was created as an expert patent court.  It was given jurisdiction to hear some non-patent matters when these matters are related to patent cases.  Patent assignments are one obvious example of when the Federal Circuit has jurisdiction to consider state matters.  But, as Judge Newman points out, jurisdiction to hear a case does not mean authority to create new law, as the Federal Circuit arguably did in Filmtec and in Stanford. Instead, the Federal Circuit should look to other authorities to address non-patent law matters. For contract law matters, what state courts and legislatures have said about assignments generally would be relevant.  Furthermore, state law provides a stable and predictable source of authority for actors engaged in the business practice of negotiating patent assignments and other contracts.

The core problem is that the court has ignored the Erie doctrine. Under the Supreme Court’s 1937 decision in Erie v. Tompkins, a federal court ruling on a matter of state law under its diversity jurisdiction must apply the law of the state from which the dispute arose.  Which state law to apply is a matter of choice of law principles.  What the federal court cannot do is create its own federal common law in lieu of the state statutory or common law. As the Court affirmed in Butner v. United States, 440 U.S. 48 (1979),  the Erie doctrine applies to a court’s supplemental jurisdiction over state law claims attendant to a federal question. By creating its own federal common law of contracts, the Federal Circuit reveals a fundamental error in its understanding of the federal court system.

State law offers a different analysis of patent assignments from what the Federal Circuit adopts. Justice Breyer, in his Stanford dissent, cited a treatise on patent law by George Ticknor Curtis from 1873 that discusses patent assignments.  Curtis addresses how state law treats assignments and cites a Massachusetts case from 1841 dealing with patent assignments.  Relevant to the issues in Stanford, the assignment involved the present assignment of an invention that had not been made yet.  The court analyzed the assignment as it would any contract, identifying the terms of the document as a key to the expectations of the parties. State law precedents perhaps offer an alternative to the questionable Federal Circuit jurisprudence, at least with respect to patent assignments.

One related area in state law is that of security interests, a part of debtor-creditor law.  In entering into credit agreements, creditors ask for security in the form of collateral for a loan. The collateral may be a legal interest that is not in existence at the time of the loan.  An example would be the future sales or proceeds from a debtor’s business. Another example would be inventory remaining at the end of an accounting period.  These future interests are analogous to the future inventions or patents that I have been discussing.  Rights can be claimed in these properties that are nonexistent at the time of the contract formation between creditor and debtor.

Security interests provide the most common situation in which conflicting obligations arise.  Debtors often take multiple mortgages, hypothetic future proceeds to multiple creditors, and take multiple loans out on the same collateral.  As long as the value of the collateral can cover all the debts, then there is no problem in general.  However, if not all creditors can be satisfied, priority rules are necessary.  In the case of future interests, the law does not fall back on simple rules like first in time because there are multiple interests involved.  A creditor does not want to run the risk of not receiving any return on the debt.  The legal rules of priority allow the creditor to investigate the collateral and through such due diligence identify competing claimants on the collateral.  Priority rules, consequently, depend not only on the timing of the contract, but also on recording and notice requirements.

The case of conflicting patent assignments bears some similarity to the law on intangible future interests in creditor-debtor law.  Both entail rights in property that has yet to come into being.  The main lesson from creditor-debtor law, which is largely a matter of state law, is that many interests are implicated and therefore simple rules are not satisfactory.  The Federal Circuit has arguably adopted too simple and misguided a rule in the Filmtec.  The Supreme Court has confounded the error in the Stanford decision by ignoring the issue of automatic assignments. One way to correct course is by granting Shukh’s petition for certiori and restore the proper balance between federal patent law and state commercial law.

52 thoughts on “Automatic Assignment of Future Inventions: A Serious Error of Federal Law that Requires Supreme Court Review

  1. 11

    In my view, the article unfairly blames the Federal Circuit for the “usurpation” of contract law by patent law. This issue goes back well before the creation of the Federal Circuit.

    In Farmland Irrig. Co. v. Dopplmaier, 48 Cal. 2d 208, 308 P.2d 732, 113 USPQ 88 (1957), the California Supreme Court held that the issue of assignability of a patent license was a matter of state law, although federal cases are “of course” persuasive authority. The court went on to state that under California law, “we do not find it necessary or wise to establish a fixed rule, peculiar to patent licenses, that such contracts are not assignable unless made expressly so. There is no reason to exempt these contracts from a general rule adapted to facilitate the freest possible transfer of valuable contract rights, while at the same time respecting the parties’ intentions.”

    Numerous regional circuit decisions contradict the Farmland Irrigation decision. They not only hold that the question of assignability of patent licenses is a matter of federal law, and not state law, but they also hold that nonexclusive patent licenses are not assignable unless expressly made so. See, e.g., PPG Industries, Inc. v. Guardian Industries Corp., 597 F.2d 1090 (6th Cir. 1979); Unarco Industries, Inc. v. Kelley Co., 465 F.2d 1303 (7th Cir. 1972).

    The Federal Circuit’s Filmtec decision merely extended this long line of pre-CAFC regional circuit authority to the issue of automatic assignments of future inventions.

  2. 10

    I agree with his points about the Federal Circuit’s obligation to defer to state contract law and about the use of “magic words” and phrasing when it’s clear that the clauses are meant to cover the same thing.

    However, the author also seems to be suggesting that employers should not be able to contract to own future inventions. That’s ridiculous.

    1. 10.1

      when it’s clear that the clauses are meant to cover the same thing.

      Or when it is clear that the clauses are NOT meant to cover the same thing, right?

    2. 10.2

      Lionel, the question is what the assignee gets, and equitable or legal assignment.

  3. 9

    I can see when one is the owner of property within the USA and wants to assign it to another, then US law governs the transaction. But, here, Dennis at #6 tells us that the international aspect is important.

    But is it though?

    Take the UK for example. There, the patent statute fixes ownership of a patentable invention, as between employee and employer, ab initio. Crudely, when those employees who are paid to invent duly do invent, what they invent is never their property but, rather, from the instant of conception, belongs instead to the employer.

    It is different in Germany but never mind. Instead, consider the case of a UK employer who has filed in its own name, as owner of the invention, UK priority then PCT a year later. Now though, UK Owner enters the USPTO national phase. What has domestic US law got to say about rightful and effective ownership of the Invention, when there is no separate Instrument of Assignment but just a Contract of Employment between Employer and the named Employee Inventor?

    Anything or nothing?

    1. 9.1

      Max, if this were completely statutory, I would say that naming inventors could be made optional. If the law of England did not require the naming of inventors, and we had a treaty with England to allow English patent applicants to file in the US, then I think that would be OK.

      But we have a constitution. We require that exclusive rights be secured to inventors. That means, they have to be the applicants. What happens after that, well patents and applications can be assigned.

      Thus regardless of English law, only English inventors may apply for a patent in the US. The right of priority issue is an aside.

      Now, within the constitution, I think an inventor may validity assign the right to file an application to another, but he has to be named as the inventor and the validity of the patent depends on the named inventor being the inventor of the subject matter. Moreover, there is the issue of whether the company/applicant naming other than the inventor had a right to file in the first place.

      1. 9.1.1

        …hence the “scrivining” influences of Big Corp in the AIA and the “transition” to not just prosecuting but filing by the juristic person that reflects the “it takes a village” mantra (that is, Big Corp).

        One needs to be aware of the dots before one can connect the dots. ;-)

      2. 9.1.2

        But Ned, I thought the AIA allowed the patent application at the USPTO to be filed in the name of the employer/owner of the invention. Are you saying not?

        In any case, although the EPC allows anybody to file the application, only the inventor (or assigns or successors in legal title to the inventor) has any right to be granted the patent right.

        Under the EPC, if it comes to a tussle for ownership, between the inventor and some other party, it falls to be decided under the law in the jurisdiction where the invention was made. Presumably that principle applies also, before the courts of the USA?

        1. 9.1.2.1

          35 U.S.C. 118 Filing by other than inventor.
          [Editor Note: Applicable to any patent application filed on or after September 16, 2012. See 35 U.S.C. 118 (pre-AIA) for the law otherwise applicable.]
          A person to whom the inventor has assigned or is under an obligation to assign the invention may make an application for patent. A person who otherwise shows sufficient proprietary interest in the matter may make an application for patent on behalf of and as agent for the inventor on proof of the pertinent facts and a showing that such action is appropriate to preserve the rights of the parties. If the Director grants a patent on an application filed under this section by a person other than the inventor, the patent shall be granted to the real party in interest and upon such notice to the inventor as the Director considers to be sufficient.

          1. 9.1.2.1.1

            Is “applied for and granted to” the real party of interest enough of a legal title, Ned?

            Do you read “real party of interest” as ONLY the inventor when you should be reading that entity as the Corp…?

        2. 9.1.2.2

          Max, the assignee may file, but the inventor still must be named. The patent must issue to the real party in interest.

          So, Inventor A (not the inventor actually) assigns to C, C files, naming A. B, however, is the inventor. B has not assigned to C. I think that patent is invalid. What do you think?

          1. 9.1.2.2.1

            The US patent, you mean? Ned, of what value to anybody is my opinion on the validity of a US patent?

          2. 9.1.2.2.2

            How do you know that B is the inventor? On B’s word alone? What if B is a malcontent?

            Does B have to prove that he is the inventor? Does Corp have to prove A is the inventor, or does Corp have to prove anything at all?

            How does any of this place the patent as invalid? Especially when you consider that the very purpose of the AIA in this exercise was to eliminate what was posited as a far TOO harsh penalty?

            Ned, we have discussed all of this previously.

            1. 9.1.2.2.2.1

              anon, if you have been to law school, you know you have to answer the questions, not raise strawmen or hypotheticals and instead answer those.

              1. 9.1.2.2.2.1.1

                Coming from the person who has not answered my questions, Ned, your pointing a finger at me with four of them pointing back at you.

                Are you then four times “not a lawyer”…?

                Cut the CR@P baseless ad hominem. I have said before and I will say again: I am an attorney.

              2. 9.1.2.2.2.1.2

                Further Ned, the items I raised are neither strawmen nor hypotheticals and relate to the case presented involving your former firm.

                Since you obviously know this, your deflection is even more apparent.

                Maybe instead of spending sooo much time and effort deflecting the questions and comments presented to you, you stop, think, and engage those topics.

                Just a thought to – you know – make the “ecosystem” better with actual dialogue (read that as two way and not one way monologuing).

                Want to give it a try Ned? It might involve you recognizing that your desired end points are not what you might want to protect as current controlling law, but that’s not really a bad thing.

  4. 8

    Prof. Ghosh states that

    By containing the phrase “hereby assigns,” the Federal Circuit stated in Filmtec, an assignment would have priority over another that only contained the word “assigns.” An assignor stating that he “assigns” a future interest is simply conveying a promise to assign in the future. However, the magic phrase “hereby assigns” is a present assignment of a future interest. Stanford University’s failure to include the word “hereby” in its assignment agreement lost patent rights to Roche, a competing assignee that showed the wisdom to include the word “hereby” in its agreement.

    Filmtec nowhere states that “hereby assign” are magic words. Indeed, “hereby” appears only once – in the recitation of the assignment language at issue.

    The actual issue is whether an assignment purports to be a present assignment of future interests (inventions), or a promise to assign future interests. The former type of assignment automatically vests the assignee with ownership as of the invention’s creation, while the former requires an additional act – the inventor’s actual assignment once the invention actually exists.

    1. 8.1

      David, under the common law, when one assigns a future interest, the assignment is equitable, not legal.

      1. 8.1.2

        Ned, I believe that characterizing the assignment of a future interest as equitable versus legal does not entirely answer the question. The real issue is what it takes to transform the equitable ownership interest into a legal ownership interest.

        In the case of an agreement to assign in the future, the assignee only has an equitable ownership interest until another assignment agreement is executed once the invention is made.

        In the case of a present assignment of a future invention, the assignee has at the outset an equitable ownership interest in the future invention. Under Filmtec, once the invention is made, the prior “present” assignment means that the assignee’s equitable interest is automatically transformed into a legal interest, without the need for a further written assignment by the assignor.

        I think that is the distinction Filmtec was trying to draw. Whether that is in fact supported by common law (or state law) is yet another issue.

        1. 8.1.2.1

          Pilgrim, From Curtis, §170: link to books.google.com

          Ҥ 170. The statutes, however, which authorize the assignment
          of an invention before the patent has been obtained, appear to embrace only the cases of perfected or completed inventions.”

          35 USC §261 “…Applications for patent, patents, or any interest therein, shall be assignable in law…”

          Patent Act, 1836, Section 11. “And be it further enacted, That every patent shall be assignable in law…”

          Patent Act, 1837, Section 5, “And be it further enacted, That any patent hereafter to be issued, may be made and issued to the assignee or assignees of the inventor or discoverer, the assignment thereof being first entered of record”

          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.”

          Further from Curtis:

          “There can, properly speaking, be no assignment of an inchoate or incomplete invention, although a contract to convey a future invention may be valid, and may be enforced by a bill for a specific performance.”

          Unless the inventor cooperates in filing the application, the remedy for the performance of contractual obligation is the well-known remedy of specific performance. This remedy is of course subject to statue limitations, which in California is four years for breach of contract. In other words, a putative owner has four years from the date the inventor refuses to cooperate in order to file his suit for specific performance.

          More from Curtis.

          “But the legal title to an invention can pass to another only by a conveyance which operates upon the thing invented after it has become capable of being made the subject of an application for a patent. This is apparent from the provisions of the statute which require the specification and the application to be made in the name of the inventor. A contract to convey a future invention, or an improvement to be made upon a past invention, cannot alone authorize a patent to be taken by the party in whose favor such contract was intended to operate.”

          The statute in this regard has remained unchanged since first enacted. What Curtis says here was well understood law for well over 100 years until Filmtec. Filmtec changed this law without citation to authority or any explanation. It is as if the people who wrote the case were unfamiliar with the law as it stood, the statutes as they were written, and expectation interests of the patent community. Obviously, the change in the law favored big companies. They did not complain. It would take a guy like the inventor here with a valiant attorney to challenge the powers that the Federal Circuit represents faithfully.

          I would like to emphasize again, that the Federal Circuit here changed the law that has stood for well more than 100 years without explanation. In doing so, the court violated the law itself, particularly the statutory requirement expressed in §261 upon which Curtis himself rested his opinion with respect to the corresponding statutes of his age.

          1. 8.1.2.1.1

            I do not want to get into the whole topic of equitable remedies, but the remedy of equitable performance requires the plaintiff to prove that the underlying contract was supported by adequate consideration and was otherwise fair. Equity will not support injustice.

          2. 8.1.2.1.2

            The statute in this regard has remained unchanged since first enacted.

            Expressly no longer true with the AIA, Ned.

          3. 8.1.2.1.3

            A contract to convey a future invention, or an improvement to be made upon a past invention, cannot alone authorize a patent to be taken by the party in whose favor such contract was intended to operate.”

            This is the part that the AIA expressly changed.

            1. 8.1.2.1.3.1

              anon, it might help everyone if you would do more that simply say that you are wrong and I am right, or the equivalent. The information provided in your post is not useful to anyone.

          4. 8.1.2.1.4

            Thanks, Ned. This is interesting and enlightening.

            As an aside, there are a few things about Filmtec that have always bothered me:

            1. Filmtec was an appeal from a preliminary injunction. Everyone cites Filmtec for its “automatic assignment” holding, but the court itself stated: “It is important to keep in mind that the issue before us is not who should ultimately be held to have title to the patent, but whether, in view of the state of the title, it can be said that FilmTec has a reasonable likelihood of success on the merits of that issue, sufficient to warrant the grant of the preliminary injunction.”

            2. Filmtec was authored by Judge Plager in 1991 — the same time frame he wrote VE Holdings (changing venue law) and the original panel opinion in Aukerman (eliminating presumption of laches), so arguably somewhat of an iconoclastic phase.

            3. The beneficiary of the “automatic assignment” in Filmtec was the US government. I wonder if the result would have been the same if the putative assignee had been a private party.

            1. 8.1.2.1.4.1

              Pilgrim, thanks for the summary regarding Plager.

              So, what happened to the title issue on remand? Well the DC held that the government had legal title, and the Federal Circuit affirmed based upon “the controlling provisions of the Saline Water Conversion Act, the FNERDA, or the Contract. Section 9(a) of the FNERDA clearly provides that title to any invention made or conceived under a FNERDA contract “shall vest” in the United States.”

              FilmTec Corp. v. Hydranautics, 982 F.2d 1546, 1550 (Fed. Cir. 1992)(FilmTec II, written by Lourie, with Nies, C.J. and Skelton).

              Ultimately, it held that this statute vested title in the government. Very reminiscent of Stanford v. Roche and the Bayh-Dole Act which has the same language.

              The holding of the Supreme Court in Stanford is inconsistent with the holding of the Federal Circuit in Filmtec — where the Supreme Court held that Bayh-Does does not by law vest title in the government. So it does look that FilmTec II is also in error.

        2. 8.1.2.2

          Pilgrim, more on equitable assignments:

          Bispham, George Tucker. The Principles of Equity: A Treatise on the System of Justice Administered in Courts of Chancery. Banks Law Publishing Company, 1902. link to books.google.com

          See especially §165 at page 235:

          “165. The principles upon which assignments and equity are based, especially those which have for their subject property to be acquired in futuro, have been discussed with great care and learning, during the last few years, and the highest English courts.

          It has been decided by the courts of common-law that assignment of future acquisitions, as for example the future freight, earnings, and profits of a ship, was void at law, while in equity to same assignment will be upheld. But the opinion has been expressed, and for some little time continue to prevail, that the equitable right would be imperfect and incomplete unless there was a subsequent possession or some act equivalent to it, for the purpose of perfecting title; or, in other words, that the maximum of Bacon in regard to legal assignments, “[a Latin phrase],” was applicable also to equitable assignments, and the latter, equally with the former, will be incapable of enforcement, and less there was a “novus actus interveniens.”

          1. 8.1.2.2.1

            I think that your “word play” (or perhaps more accurately, your “concept play”) suffers from a too extenuated reach back into history and does not reflect the evolution of doctrines and legal conditions (such as the merger of the courts of law and equity).

            In other words, you appear to apply too much of a “sound byte” approach, relying too much on snipped here and there historical items.

            Your view would be more impactful if you were able to integrate the sound bytes and use legal notions a bit more current.

            Just saying.

  5. 7

    “Automatic” assignments are only as automatic as the terms in their contracts. In Stanford, the relevant terms were “agree to assign” (Stanford) v. “hereby assign” (Roche). The difference is a promise to assign in the future (Stanford) v. present assignment (Roche).

    Stanford has a policy stating “Unlike industry and many other universities, Stanford’s invention rights policy allows all rights to remain with the inventor if possible.” This is apparently a recruiting or retention incentive for Stanford to attract top researchers who might otherwise work at other institutions. Consequently, “agree to assign” is a deliberate choice by Stanford, not an unfortunate failure to use “magic” words. Stanford should have been aware of the consequences of its “agree to assign” language since the Federal Circuit has repeatedly held the same or similar language to constitute an agreement to assign in the future, IpVenture, Inc. v. Prostar Computer, Inc., 503 F.3d 1324, 1327 (Fed. Cir. 2007) (“agree to assign”); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1580-81 (Fed. Cir. 1991) (“will be assigned”).

    Moreover, after obtaining the inventor’s agreement to assign, Stanford obtained a subsequent assignment of the parent patent application three years after it was filed. This fact further shows that Stanford was aware that its “agree to assign” language itself did not constitute a present assignment. Unfortunately for Stanford, the inventor assigned his invention to Cetus (Roche) in the interim and Stanford’s subsequent assignment was void.

    FilmTec did not establish any “new” patent law regarding assignments, and was not relied upon by the Supreme Court’s majority opinion. Breyer’s irrelevant dissent simply complains, without explanation, that FilmTec created a new rule that distinguishes between equitable claims, but in fact, FilmTec followed traditional contract principles in considering an expectant claim to be equitable in nature.

    Far from upending traditional principles of contract law and Erie v. Tompkins, Stanford and FilmTec actually follow such principles and should be studied more carefully for their lessons in the consequences of particular contract terms in patent assignments, employment agreements and government contracts.

    1. 7.2

      Steve, in my view, FilmTec treated an equitable assignment as a legal assignment.

    2. 7.3

      Steve, much of what you say is undoubtedly true, but the point being missed is that the Fed. Cir. in Stanford v Roche made no reference to, and simply ignored, the controlling CA state employment contract statutes or state contract case law in deciding this case. [It may not have even been argued by Stanford attorneys below, and was definitely not argued at the Sup. Ct.] See, e.g., the Jan./Feb. 2011 ABA IPL “LANDSLIDE” magazine article starting on p.24 with extensive legal research on this case, as well as inconsistencies and conflicts in other Fed. Cir. cases with basic Sup. Ct. principles on the [normal, unless Federally essential] utilization of state law as required by Erie v. Tompkins.
      You may recall that a Fed. Cir. panel not that long ago even had the chutzpah to think they could take over a Texas attorney malpractice case if it involved a patent, and received a unanimous Sup. Ct. reversal.

      1. 7.3.1

        Paul, we agree the law of assignments of titles is common law, State Law, under Erie, not statutory. The Federal statute permits patents and applications to be assigned in law.

        35 U.S.C. 261 Ownership; assignment.

        Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing. …

        The statute on its face requires a legal assignment, not just that it be writing. So even if there was some doubt, the statute expressly requires that patents and applications be assigned legally according to the common law.

        The fact that the Federal Circuit seemed oblivious to the requirements of the common law and of the statute itself, and treated equitable assignments as legal, and consistently ignored state law to the contrary, is why the Supreme Court needs to take this case and reaffirm not only Erie, but the requirements of the statute itself.

        1. 7.3.1.1

          ng. So even if there was some doubt, the statute expressly requires that patents and applications be assigned legally according to the common law

          Expressly…?

          You are doing that over-reading thing again, Ned

  6. 6

    The internationality of invention is also an important element to all of this. Most US applications filed today are stemming from inventions that took place in foreign (non-US) jurisdictions. For those situations, we are not talking about the federalist concerns but instead questions of when the foreign law determines ownership and when those ownership rights are defined by US law.

    1. 6.1

      Dennis, this is where the problem we face here becomes constitutional in nature. We secure inventor’s exclusive rights. It is quite possible elsewhere that the law might give patents to companies regardless of naming inventors or having them sign the application. What to do then?

      Foreign law cannot override, I think, the requirements of the constitution that patents be granted to inventors. A proper chain of title from the inventor to the applicant will always, I think, be required.

    2. 6.2

      I disagree that any notion of internationality is important here.

      We are talking about a property that is US sovereign based.

      Are you thinking that somehow treaties have abrogated the very nature of the US patent…?

  7. 5

    This implicates an issue that I am familiar with because I was involved in a number of cases where issues like this were involved.

    First, how is one to know what the invention is until it is written down and claimed? Prior to that time, no one knows clearly what the invention is, and its metes and bounds. That is why historically we have required that a patent application be drafted and the assignment refer to that patent application either by title or by serial number.

    Similar situations arise when a company hires an employee and he is asked to identify prior inventions of his that are his “separate property.” But what are these? Are they written down? Who is to know what they are? We have had a employees identify work they did for the company as their separate property and demand royalties. And you begin to ask yourself is how a big company would get itself into this kind situation. That is why I revised our standard contracts to specify that the only kind of invention that could be maintained by the employee as a separate property would be inventions that were actually filed as patent applications. That eliminated a lot of the problems in this area.

    Similarly, trade secrets. We hired employees from other companies and got sued because we were allegedly using trade secrets of the former company. But how will we know what was a trade secret and what was not a trade secret when that former company had never written it down from a time prior to the lawsuit and identified it as a trade secret. In the end, all the company would contend was that the skill and knowledge of the employee gained at the former employer was a trade secret. That is why I think that trade secret law must require some documentation of what a company believes the trade secret before it can impose obligations on an employee, otherwise they are simply claiming his skill and knowledge as their property.

    Similarly NDA’s with respect to approaches by “inventors” who would want us to review their inventions. We required them first file a patent application. Otherwise, and we personally experienced this, the inventor would later claim that what we were doing in reality was his invention and unless we had documented clearly what he disclose to us, who is to say that he was not right.

    All this goes to show is that in dealing with inventions and ideas that ambiguity only leads to lawsuits. It is essential for the protection of the rights of both parties that the invention be reduced to a specification, and actually filed in United States patent and trademark office before the subject matter can be discussed or transferred from one party to another.

    I think the same should be required of trade secrets. Whatever is to be specified as a trade secret has to be in writing.

    1. 5.1

      “First, how is one to know what the invention is until it is written down and claimed?”

      One can’t. I’ve been telling you that for years. But according to you, even after it is written down and claimed a judge, a patent examiner, and/or even you, can decide for yourself what “the invention” is despite what is written down and claimed. So what good is filing an application if “the invention” is whatever a judge, or a patent examiner, or Ned Heller decides what “the invention” is regardless of what is written down and claimed?

      1. 5.1.1

        AAA JJ, I can only say that I think either you misunderstood me or Judge Dyk. I think our “dispute” arose in the context of the whether the claim itself was the invention, or whether it could only claim what was disclosed in a manner provided by 112(a). There has long been a dispute in the Federal Circuit whether the claim should be interpreted literally, in which case, the claim can read on subject matter not disclosed, or in a manner consistent with the specification. Philips, while acknowledging the requirement to look at the specification, ultimately ignored it in the construction of the claim before it and effectively granted the patent owner a claim to an invention he did not invent.

  8. 4

    I would add IPVenture v. ProStar Computer to the mix, in which the Fed Cir found that its precedent trumped California state law, despite many earlier decisions stating that interpretation of assignments is a matter of state contract law (other than the requirement of a writing, which is Federal). The “gotchya” game of poorly written assignments is absurd when the manifest intent has always been to make a transfer of the IP regardless of “hereby assign” vs. “will assign” language.

    1. 4.1

      The manifest intent of “going state by state instead of federal” is the opposite of the (perceived) “gotcha,” because it is at the state by state level that greater diversity in the manner of alienating one’s personal property flourishes.

      Careful drafting will always be required when diversity is permitted.

      Further, the Stanford drafters had plenty of good examples available to draft their own agreements, as the situation was not an unexpected one and many tech transfer agencies (most all other tech transfer agencies) drafted perfectly well.

  9. 3

    These issues are both real and ridiculous. All U.S. patents should be assigned using a standardized and statutorily approved assignment agreement. Given that participation in the U.S. patent system is global – how are we still reliant on individual state laws?!?!

    This standard agreement would have many benefits – not only to patentees, but also to the the public and the courts. The public and the courts would be able to actually determine who owns the patents – assuming also that we required recording of the assignment to be effective. Imagine a world where we know who owns patent rights?!?!

    Specifically, this standardized assignment agreement should include simple fill-in-blank and check-box features on a single piece of paper, including: (1) whether the assignment includes the right to sue for prior infringement, (2) whether the assignment is for the entire U.S. or a portion thereof, (3) whether the assignment is for a fraction of the entire interest, and (4) whether the assignor also obtains the right to future improvements (CIP).

    It is beyond belief how complex the simple concept of transferring ownership has become. For example, a person could argue that agreements that purport to transfer the rights in: “[insert title of patent]” are arguably invalid or are potentially construed as a license if the title of the invention is “A method for X” and if the patent includes any non-method claims. This is because a patentee cannot assign part of a patent beyond a % interest in the entire patent.

    Problems also arise from forgetting to transfer the right to sue for prior infringement, which must be expressly stated in the assignment agreement.

    A simple single page form should be able to capture all options, and recording of that single page should be mandatory.

  10. 2

    This post is so poorly written it’s difficult for me to assess the value of the content.

  11. 1

    The article makes a needed good point that the Fed. Cir. has been ignoring state contract law. As pointed out many times on this blog they are ignoring the controlling cases of Erie v. Tomkins et sec to generate invalid “federal common law of contracts” without statutory authority.
    However, that does not necessary lead to a conclusion that employee contracts for future inventions are invalid.

    1. 1.1

      Paul, Agreed.

      This has been a hot button issue for me for some time because of the injustice it works on employees, particularly, ex employees.

      At a minimum, I think the law should require the inventor assign the patent application after it is drafted just and refer to it by title, or by application number.

      Assignment of inventions? That should get one nowhere without the cooperation of the inventors.

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