A present assignment of future continuation applications

by Dennis Crouch

In Roku, Inc. v. ITC, the Federal Circuit has affirmed determinations by the International Trade Commission (“ITC”) favoring the patent holder Universal Electronics, Inc. (“Universal”). The most interesting part of the case for me is the assignment issue – whether the patents had been properly assigned at the appropriate time. This can become in cases like this because Universal has created a large patent portfolio that all claim back to original priority documents from more than a decade ago. While most of patents are attributable to both joint-inventors, some are only attributable to one or the other.  Here, though the Federal Circuit supported the simple approach of a “hereby assigns” transfer of rights that includes future continuations.  The decision is lacking though because the court does not ground its decision in any particular contract or property tradition.

As its company name suggests, Universal’s asserted patent (US10593196) claims capability for a “universal” control engine (100) that can receive wireless signals from either a smart device (tablet or computer) or an old-school remote control and then issue commands to various other media devices, such as a DVR or TV.  Universal filed a Section 337 complaint with the ITC against Roku and eventually won an exclusion order against a variety of Roku devices.  On appeal, the Federal Circuit has affirmed, rejecting each of Roku’s three primary arguments.

Ownership Rights: Roku argued Universal lacked ownership rights to assert the ‘196 patent because when Universal filed its ITC complaint, it had recently filed a petition to correct inventorship to add a Universal employee. Roku contended agreements between Universal and this employee did had not assigned patent rights.

Here, the employment agreement apparently included a promise to assign rights, rather than an actual assignment of rights.  On this point, the ITC sided with Roku that the promise-to-assign was not the equivalent of an actual assignment.

Ownership of Invention: By accepting employment with the Corporation, you hereby agree that all discoveries, designs, devices, and concepts developed by you in the course of and during your employment with the Corporation shall be the property of the Corporation.

The quote above comes from the employment agreement. Although it states that the  invention rights “shall be the property” of the employer, it does not include any language spelling out an automatic assignment of rights.

It turns out that the missing co-inventor (Barnett) was listed as an inventor in the original provisional applications and in the original non-provisional parent application. However, for an unstated reason Barnett was not initially included as a co-inventor in the ‘196 patent.  Still, the patentee produced separate assignment of rights from the parent non-provisional application that expressly included “continuations thereof.”

Brian Barnett . . . hereby sell[s] and assign[s] to Universal Electronics Inc. . . . the entire right, title and interest in and to the invention in SYSTEM AND METHOD FOR OPTIMIZED APPLIANCE CONTROL . . . , which has
been assigned application number 13/657,176, and the application for United States patent therefor, the declaration, and all original and reissued patents granted therefor, and all divisions and continuations thereof, including the subject-matter of any and all claims which may be obtained in every such patent . . . .

Appx21892. The Federal Circuit found these assignments sufficient to transfer rights  to the later filed continuation.  Here, the court found that this assignment language “constitutes a present conveyance” of the future continuations.  Although it did not state directly, the court appears to have based its contract interpretation on federal patent law as it has done in prior cases. DDB Techs., L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284 (Fed. Cir. 2008) (treating as a matter of federal law “the question of whether a patent assignment clause creates an automatic assignment or merely an obligation to assign”).

Much of the party briefing on the assignment appeal issue was whether the ITC based its decision upon the 2004 assignment or upon the 2012 assignment. During oral arguments, the judges repeatedly complained about the lack of clarity from the ITC record:

The truth is it’s quite confusing as to what the ITC did. Originally, they seemed to rely on the 2012 agreement, and yet in the final decision, they seemed to approve the ALJ’s decision, which itself is unclear but seems to rely on 2004.

Judge Dyk at Oral Arguments 2:25.  Judge Hughes likewise complained:

The commission doesn’t deserve high marks for clarity here. What it was doing is unclear.

Judge Hughes at Oral Arguments 20:51.  In his opinion, however, Judge Hughes drops the complaining and instead concluded that the ITC decision of a proper assignment was based upon the 2012 contract and therefore could be affirmed.

Domestic Industry Requirement: The second issue on raised on appeal by Roku involved the domestic industry requirement for ITC Action. If you recall, the ITC overarching mission is to protect US industry from unfair foreign competition. Thus, a prerequisite for ITC action is the existence of a related domestic industry.  The statute particularly requires an “industry in the United States, relating to the articles protected by the patent” that either already exists or “is in the process of being established.”  The statute goes on to water-down the requirement somewhat by stating that a domestic industry can be shown by the existence of “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing.”  19 USC 1337.

The ITC found Universal showed significant U.S. investments in domestic research and engineering related to its QuickSet software technology, which practices the ‘196 patent. On appeal, Roku argued Universal had to allocate expenses to specific domestic products (such as smart TV), but the Federal Circuit held investments need  only to be tied to the scope of the patents, and not necessarily whole products that are the subject of the exclusion order.

Our precedent does not require expenditures in whole products themselves, but rather, “sufficiently substantial investment in the exploitation of the intellectual property.” InterDigital (Fed. Cir. 2013). In other words, a complainant can satisfy the economic prong of the domestic industry requirement based on expenditures related to a subset of a product, if the patent(s) at issue only involve that subset. Here, there is no dispute that the “intellectual property” at issue is practiced by QuickSet and the related QuickSet technologies, a subset of the entire television. Roku does not dispute that QuickSet embodies the teachings of the ’196 patent, nor does Roku explain why Universal’s domestic investments into QuickSet are not “substantial.” Accordingly, we affirm the Commission’s determination that Universal has satisfied the economic prong of the domestic industry requirement in subparagraph (a)(3)(C) of Section 337.

Id.

Obviousness Challenge: Finally, Roku also argued that the ITC had erred in finding that the claims had not been proven obvious based upon a combination of two prior art references, Chardon and Mishra. On appeal, the Federal Circuit affirmed — noting Roku did not directly dispute the Commission’s finding that neither reference disclosed the limitation for a first media device to select between different control devices. Roku also did not challenge the ITC’s ultimate conclusions regarding secondary considerations that supported a non-obviousness finding. Thus, the Federal Circuit also affirmed.