Decoding Patent Ownership beginning with Core Principles

by Dennis Crouch

In a recent decision, the Federal Circuit vacated a district court’s grant of summary judgment that an inventor, Dr. Mark Core, had automatically assigned a patent associated with his PhD thesis to his then-employer and education funder TRW.  Core Optical Techs., LLC v. Nokia Corp., Nos. 23-1001 (Fed. Cir. May 21, 2024). The key issue was whether Dr. Core developed the patented invention “entirely on [his] own time” under his employment agreement. The majority opinion written by Judge Taranto and joined by Judge Dyk held the contract language was ambiguous on this point and remanded for further factual development to determine the parties’ intent.  Judge Mayer dissented.

Although not discussed in the court’s decision, the appellant brief includes a suggestion that the Federal Circuit should “narrow or overrule” the automatic assignment law seen in FilmTec Corp. v. Allied Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991), and its progeny.

Whether a present assignment of future inventions automatically conveys legal title to those inventions when the inventions come into being, or instead merely conveys equitable title and requires a separate written instrument to transfer legal ownership.

The general rule in US patent cases is that an employer can construct an employment agreement that automatically conveys title to inventions and a right-to-patent from the inventor to the employer using certain “hereby assigns” language.  By an apparent magical operation the language causes title to transfer immediately at the moment of invention. This issue was discussed by Justice Breyer in his Stanford v. Roche dissent where he explained that present assignment of non-existent inventions is not something that actually works to convey legal title.  Rather, such a statement creates only an equitable interest in the future invention and thus require a further written instrument to transfer legal title.  In its briefing, the patentee argued that FilmTec is a an improper federalization of state law and, in fact, is contrary to prior state case law that did not create an “automatic assignment” of inventions that were not yet foretold at the time of the employment contract. The brief writes that “[u]nder important principles of federalism, this Court should follow its pre-FilmTec cases and set aside its special patent rules in favor of the well-established body of state common law for interpreting contracts.”

The opinion dismisses this argument based on precedent: “we are bound by Filmtec; we cannot overrule that holding without en banc action.” Quoting Shukh v. Seagate Technology, LLC, 803 F.3d 659 (Fed. Cir. 2015).

Because Core won a remand in the case already, he will have a strategic choice as to whether to pursue this issue either en banc to the FedCir or on petition to the Supreme Court.

= = =

Core’s U.S. Patent No. 6,782,211 claims improved optical signaling by using cross-polarization interference cancellation (XPIC). Dr. Core conceived of the invention while pursuing a Ph.D. at UC Irvine through TRW’s fellowship program from 1993-1999.  During that time, Core remained a salaried employee at TRW with reduced hours (being paid for the reduced hours) but then also had the TRW fellowship that paid for an additional monthly stipend as well as tuition and fees.

In 2019-2020, Dr. Core’s company, Core Optical, sued several defendants for infringing the ‘211 patent, including Nokia, AVDA, and Cisco Systems. The defendants moved for summary judgment that Dr. Core had automatically assigned the patent to TRW under a 1990 invention agreement, such that a later transfer to Core Optical was ineffective. The district court agreed and granted summary judgment that Core Optical lacked standing to pursue the infringement action.

On appeal, the Federal Circuit focused on paragraph 9 of the agreement, which exempted inventions “developed entirely on [the employee’s] own time” from automatic assignment to TRW. The court found this language was “capable of more than one reasonable interpretation” and did not unambiguously resolve whether Dr. Core’s Ph.D. research was “entirely” his own time.

9. Non-TRW Inventions. I understand that this Agreement does not require me to assign to TRW my rights to an INVENTION for which no equipment, supplies, facility, or trade secret information of TRW was used and which was developed entirely on my own time, and (a) which does not relate (1) to the business of TRW or (2) to TRW’s actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by me for TRW. Nevertheless, I shall disclose to TRW those INVENTIONS referred to in this paragraph 9 to enable TRW to determine if it has an interest therein.

The court noted that while Dr. Core had substantial freedom in when to work on his Ph.D., his research was funded by and accountable to TRW through the fellowship. Critically, “TRW conditioned the receipt of a substantial benefit (Dr. Core’s monthly stipend, PhD tuition, and fees), in part, on Dr. Core’s performance of his PhD research, itself of benefit to TRW.” This supported Nokia’s view that the fellowship time was at least partly “TRW time.”  However, the court found Core Optical’s competing interpretation – that only Dr. Core’s “on-the-clock” hours working on TRW projects counted as “TRW time” – was also plausible. The court thus held the contract was ambiguous, explaining:

The contract language, “entirely on [his] own time,” allows either perspective, though the first would support Core Optical and the second would support Nokia. That ambiguity was not resolved by other documents governing TRW’s relationship with Dr. Core.

Core Optics at *14. Absent a clear meaning, the court held “inquiry beyond the language of the contract is needed” to determine the parties’ intent, likely requiring factual findings inappropriate for summary judgment.  The court identified several avenues for this inquiry on remand, including:

  • Evidence that TRW and its successor Northrop Grumman long failed to assert ownership of the ‘211 patent, despite apparent knowledge of Core Optical’s rights.
  • Evidence that Dr. Core’s former TRW manager told him TRW had no ownership interest in the patent.
  • Potentially relevant “evidence of custom, usage, and practice” for employer-funded education programs in the industry.
  • Application of the contra proferentem principle to construe ambiguities against TRW as the drafting party.

Although some aspects of patent assignment agreements are governed by federal patent law, they are almost entirely a creature of non-patent law.  Here, this California based contract is governed by California law of contracts.

Under California law, the interpretation of ambiguous contract language is a question of fact requiring inquiry into the parties’ intent. Although contract interpretation is ordinarily focused on the four corners of the written device, when a contract term is “reasonably susceptible” to more than one interpretation, the court may consider extrinsic evidence to determine the mutual intent, including “the object, nature and subject matter of the contract” and the “subsequent acts and conduct of the parties.” City of Atascadero v. Merrill Lynch, 68 Cal. App. 4th 445 (1998). This allows courts to resolve ambiguities by examining the broader context and practical construction of the agreement.  The court’s remand here is somewhat similar to its 2008 DDB decision.  DDB Techs., L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284 (Fed. Cir. 2008). In DDB, the court held a clause assigning inventions “related to” or “suggested by” the employee’s work was ambiguous and remanded for factual development allowing extrinsic evidence of the parties’ intent.  At the same time, the decision departs somewhat from the several California cases, including Cubic Corp. v. Marty, 185 Cal. App. 3d 438 (1986) (invention developed with employer funding was not made “entirely” on employee’s own time); Dimmig v. Workmen’s Comp. Appeals Bd., 495 P.2d 433 (Cal. 1972) (employee’s time was in “course of employment” when attending classes reimbursed by employer – in the context of a workers compensation claim).  Of interest, the California code also uses the “own time”

Writing in dissent, Judge Mayer argued that the undisputed facts established that Dr. Core did not develop his invention “entirely on his own time” as a matter of law. The dissent emphasized that “TRW Inc. paid for Mark Core to get a Ph.D. while he was working for TRW” and that “Core received a prorated salary and a stipend from TRW, as well as full-time benefits and full-time pension accrual, while he completed his Ph.D. program.” The dissent also noted Dr. Core’s admission that his Ph.D. dissertation was “essentially identical” to his later patent application.  Given TRW’s substantial financial support and the close relationship between the fellowship research and TRW’s business, the dissent saw no genuine ambiguity and would have affirmed summary judgment for Nokia.

There are a few things Dr. Core could have potentially done to strengthen his claim to ownership of the invention, although it is not clear that TRW would have been on board:

  1. Explicitly clarify in writing with TRW that inventions developed during his Ph.D. research would remain his own property and not be subject to the invention agreement. This would help avoid ambiguity about whether the fellowship time counted as “own time.”
  2. Refrain from accepting the TRW fellowship funding, tuition payments, and stipend, and instead fund his Ph.D. entirely on his own. This would help establish that his research was done on his “own time” without any TRW resources.
  3. Ensure that none of his Ph.D. research was done during his TRW working hours or using any TRW facilities or equipment. Strictly separating his TRW work from his Ph.D. research would help show it was done on his own time.
  4. Obtain written acknowledgment or agreement from TRW after disclosing the invention that the company had no ownership stake and was not claiming rights under the invention agreement. This could help combat any later claims by TRW.  However, it may have also required an assignment-back.

Of course, some of these actions may have been impractical or infeasible given Dr. Core’s lower-level employee situation and TRW’s fellowship program.

Dr. Core might have needed a formal assignment back from TRW to fully secure ownership of the ‘211 patent, even if TRW initially disclaimed any ownership interest. Under the “automatic assignment” doctrine recognized in cases like FilmTec Corp. v. Allied-Signal Inc., 939 F.2d 1568 (Fed. Cir. 1991), an employer can obtain immediate ownership of employee inventions that fall within the scope of an invention assignment agreement. So if Dr. Core’s inventions were found to be automatically assigned to TRW under the agreement, even a formal disclaimer of ownership by TRW might not have been legally sufficient to transfer title back to Dr. Core. He may have needed a written assignment from TRW to cure the break in the chain of title and ensure his ownership was fully perfected.  That is what many universities do in situations where the University determines that it does not want to pursue ownership rights — it then formally assigns rights back to the researcher-inventor.

Core Optics presents the unusual situation of a third-party infringer (Nokia) collaterally attacking Dr. Core’s ownership over two decades after the invention was made, based on an employment agreement to which Nokia was not a party. In non-patent realms, courts are usually reluctant to permit such third-party challenges to title except in extraordinary circumstances, given the need for settled expectations and certainty of ownership in our property law system. Allowing a third party to dredge up a long-dormant ownership dispute could unfairly prejudice the patent owner and disrupt the reliance interests of others in the market. This is particularly concerning when the employer itself apparently never asserted ownership during the lengthy intervening period, as seems to be the case with TRW here.

The situation arguably raises the question of whether an “adverse possession” type of principle should apply to patent ownership, preventing a belated ownership challenge by a third party after an extended period of unchallenged possession by the patent holder. The “open and notorious” exercise of ownership by Dr. Core and Core Optical, and TRW/Northrup Grumman’s prolonged acquiescence, could be viewed as creating a presumption of ownership that a third party should not be able to belatedly contest absent compelling evidence of a defect in title. While adverse possession doctrines are not widely recognized in patent law, the strong policy interest in settled and certain ownership after long periods of unchallenged patent rights may justify a similar approach here. At the very least, Nokia should bear a heavy burden in challenging Core Optical’s title so long after the invention, particularly if TRW/Northrup Grumman is not itself asserting any ownership claim.

I expect that cases challenging these principles will continue to arise as we move further into AI-assisted innovation. Inventions generated solely by AI without any human contribution are not eligible for patent protection (as of 2024). Rather, for an invention to be patentable, it must be conceived by a human inventor or group of human inventors.  But, the threshold level of human contribution required for an AI-assisted invention to be patentable remains somewhat unclear. If an AI system contributes significantly to the conception of an invention, but a human plays some role in guiding or directing the AI, it may be difficult to determine whether the human contribution is sufficient to meet the inventorship standard. This uncertainty could lead to more frequent disputes over inventorship and ownership, particularly as AI becomes more sophisticated and capable of generating novel and non-obvious innovations.  As with this case, these challenges would all likely occur as third-party collateral challenges to ownership (and patentability).

= = =

Arguing counsel: Lawrence Hadley for Core Optical Technologies, LLC and Linda T. Coberly for all defendants, including Cisco Systems, Inc., ADVA Optical Networking SE, et al.

34 thoughts on “Decoding Patent Ownership beginning with Core Principles

  1. 7

    “Core Optics presents the unusual situation of a third-party infringer (Nokia) collaterally attacking Dr. Core’s ownership over two decades after the invention was made, based on an employment agreement to which Nokia was not a party.”

    Unfortunately, that situation is not too unusual. Apple tried the same tactic in the recent Omni MedSci v. Apple case. There, third-party infringer Apple argued that the employment agreement between the inventor (a professor) and the University of Michigan automatically assigned the professor’s inventions to U-M years after the invention was made. The Federal Circuit agreed with the professor that U-M employment contract did not automatically assign patent right to U-M.

  2. 6

    Some reality check on the ongoing scam known as “AI”. The similarities to the “self-driving” car scam are (of course) obvious and not coincidental.

    link to theverge.com

    1. 6.1

      Google’s mess is hardly a reality check, Malcolm.

      Sure, that one is yuck, but that’s hardly representative of the breadth, diversity and emerging technosphere related to the (very broad) spectrum called “AI.”

      As with any tech that you appear to be antagonistic to, you are more than welcome to abstain.

      1. 6.1.1

        “from telling users to put glue on their pizza to suggesting they eat rocks.”

        Not weird at all, that’s just the AI telling the user to fudge off.

        in other news it was already known that many of the best platforms hired 3rdies (third worlders) to go through and manually get rid of g arba ge. A friend of mine in LA is a professional AI assistant (lol). He literally has an AI overlord.

      2. 6.1.2

        “you are more than welcome to abstain”

        Gee, thank you for nothing. I will continue to trash the (LOL) “tech” and also the gullible (or worse) dillwads who promote it until it actually works for the purposes that its proponents (wrongly) suggest it does. I figure I have a solid twenty five years ahead of me at least before we get close to that point.

        1. 6.1.2.1

          So then, what happened for that just over a year sabbatical that you took after you hit the fifteen year mark?

      3. 6.1.3

        “emerging technosphere”

        ROTFLMAO

        Looks like the latest shipment of techbro crack made it to Billy’s corner this week.

        1. 6.1.3.1

          Nah – just you being you.

          Say, “La Vee.”

    2. 6.2

      In other news, it’s 2024 and this platform still blocks the word “gar bage”. I think AI could sort this out.

      1. 6.2.1

        George Carlin (or perhaps his ghost) might way in on that.

  3. 5

    Given the historic justification for adverse possession of putting land to productive use, along with the transient nature of intellectual property, I don’t think it would be appropriate to apply it in the area of patent ownership.

    1. 5.1

      The term of time for adverse possession is (if I recall correctly) a State controlled item, with most terms 21 years.

  4. 4

    I guess Dennis is never going to give up his obsession with machines being “inventors”, in spite of the fact that it’s literally impossible for them to be “inventors” in the U.S. (because only humans can be “inventors”).

    On the other hand, he’s got some of the least intelligent and most corrupt people in government anywhere representing his home state so anything is possible.

    1. 4.1

      Simians cannot be photographers, because they cannot have a copyright of a photograph.

      Oh wait.

      1. 4.1.1

        He put “inventors” in quotes – meaning he used the term of art.
        Simians can be photograhers. They can’t be “authors.”

        1. 4.1.1.1

          Yes – you will notice (in contrast), that I did not use quotation marks.

          1. 4.1.1.1.1

            “Classic” Billy.

            1. 4.1.1.1.1.1

              Who is Billy?

    2. 4.2

      MM bruh, we all know AI can be an inventor.

      Let’s get to the important part, did you find your person yet?

      link to youtube.com

      1. 4.2.1

        Find his person?

        Come now 6, you know very well that Malcolm’s type is the big “Hairy Bear” type (you know, like Gene Quinn).

        1. 4.2.1.1

          LOL You two belong to same gym or something?

          1. 4.2.1.1.1

            Nah – but we do both have fun making fun of you.

            1. 4.2.1.1.1.1

              I was referring to you and Big Allegedly Hairy Gene, not you and 6.

              1. 4.2.1.1.1.1.1

                Nah, you and Gene are more the ‘pair.’

        2. 4.2.1.2

          I actually did not know that MM was bearsaxual. But I have little doubt that he chose manbear in the man or bear question that was going around lately. lololol. MM and gene as a couple would be the world. I could just see gene out at the weed compound.

          link to washingtonpost.com

  5. 3

    BTW, in September 2023 NYS enacted S5640 which [like CA here] does Not allow invention assignments to assign to the employer ALL the inventions created by the employee – creating some required exceptions [and thus potential owership disputes like this one].

  6. 2

    Unfortunately, this Fed. Cir. decision does not resolve the important legal issue of whether invention ownership agreements in employment contracts are to be interepreted under state contract law [as logically assumed here] rather than some kind of Fed. Cir. independent view of contract law as some Fed. Cir. cases suggest and some do not. Because, as stated in this decision, “The 1990 invention agreement does not specify which State’s law governs its interpretation. J.A. 3515. But the district court applied California contract law, noting that both parties had cited California case law as the relevant authority in their summary-judgment briefs. See Decision,at *10 n.6. On appeal, no party has challenged the choice of California contract law, so we follow the district court in that respect.”

    1. 2.1

      Has there been anything since DDB Tech v. MLB Advances Media?

      I don’t get the attempted link in the original post to AI -irrelevant.

      Challenging ownership after a ling period is not unusual – you make the challenge when sued for infringement. It is a great argument to claim ownership lies elsewhere as in DDB Tech. Other cases include Wellcome v Barr and probably every ongoing pharmaceutical case in the US where a couple of cents of federal funding may have been spent.

      1. 2.1.1

        It is a great argument to claim ownership lies elsewhere as in… every ongoing pharmaceutical case in the US where a couple of cents of federal funding may have been spent.

        Far from a great argument, this seems like the sort of frivolous nonsense liable to get a an award of attorneys’ fees for the other side. Stanford v. Roche, 583 F.3d 832, 844 (Fed. Cir. 2009) makes clear that title remains with the patent applicant unless and until the government asserts its rights to ownership under Bayh-Dole. Unless you have a document in hand showing that in this instance the government did assert its right (hint: no one has such a document in hand), then you are just wasting the court’s time raising such an argument.

  7. 1

    Links to the briefs…?

    (Wondering if the seminal Supreme Court case Stanford v. Roche is referenced)

    FYI:

    link to supreme.justia.com

    1. 1.1

      In Stanford v. Roche potentially applicable CA contract law was apparently not even argued by Stanford. [Reportedly one Justice wondered why in the oral argument.]

      1. 1.1.1

        I was aiming more for the “beginning with Core Principles” of the thread title.

        1. 1.1.1.1

          One would think a primary “Core Principle” would be clearly settled law as to which state or courts statutes and case law of contract law, especially employment law, applies to invention and patent contracts?

          1. 1.1.1.1.1

            That is secondary to the Lockeian nature at the genesis of the right.

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