A recent Federal Circuit decision discussing the effect of an
Employee Intellectual Property Assignment Agreement upon the
ownership of inventions made by the employee (Preston v.
Marathon Oil Co., Nos. 2011-1013, -1026 (Fed. Cir. July 10,
2012) (decision here)) offers a number of practice pointers.
Marathon Oil had filed suit against Preston, its former employee,
claiming ownership of a patent obtained by Preston on an invention
made while Preston was employed by Marathon. The Federal Circuit
held that Marathon Oil was the rightful owner of the patent. The
useful lessons would appear to be as follows:
1. Refer to the IP
Assignment Agreement in the Offer Letter.
In this case, Preston had executed his IP Assignment Agreement
with Marathon Oil after he had accepted the written offer of
employment and started work. One of the questions at issue in the
case was whether Preston's continued at-will employment
constituted sufficient consideration to support the IP Assignment
Agreement. The Federal Circuit certified this question to the
Wyoming Supreme Court, which held that continued employment was
sufficient consideration under Wyoming law. However, this issue
could have been avoided entirely if the offer letter had referred
to the IP Assignment Agreement and made it clear that the offer was
contingent upon execution of the agreement. If appropriate in the
circumstances, we would recommend taking this step.
2. Made OR Conceived:
The invention in question was a baffle system (see image on
left) used to improve the extraction of methane gas from coal in a
coal bed methane gas well. Preston claimed that he retained
ownership of the invention because he had conceived of the idea
before his employment began, even though the invention was first
made during the course of his employment.
The IP Assignment Agreement assigned to Marathon all inventions
"made or conceived" by Preston during the term of his
employment that related to Marathon's business or that were
created using Marathon's confidential information, equipment,
supplies or facilities. The Federal Circuit held that the invention
could not be excluded from the scope of the IP Assignment Agreement
based on Preston's prior conception for two reasons. Firstly,
even if the invention had been conceived beforehand, it was
nevertheless made during his Marathon employment, and the plain
language of the IP Assignment Agreement specified that it applied
to inventions that were "made or conceived" during
employment. Secondly, Preston was not able to demonstrate that he
had actually conceived of the invention beforehand; the evidence
suggested he had no more than a vague idea of it.
3. Use a Present
Assignment, Not Just an Agreement to Assign
Preston had obtained a patent on the subject invention by filing
a patent application in his own name after leaving Marathon's
employ. The District Court had held that Preston was in breach of
the IP Assignment Agreement for failing to assign this patent to
Marathon. However, the Federal Circuit determined that there was no
breach, because Marathon already owned the patent. Preston had
assigned it under the IP Assignment Agreement – the
language used was that the employee "does hereby assign to
Marathon all Intellectual Property, and Employee agrees to execute
such other documents as Marathon may request in order to effectuate
such assignment". The language of present assignment avoided
the need for a further document to be signed by Preston to effect
4. Exclusions Should
Employee intellectual property assignment agreements often allow
an employee to specify any prior inventions invented outside the
scope of employment, so as to avoid disputes just like this one. In
this case, the Marathon Oil IP Assignment Agreement included a
provision that allowed the employee to list unpatented inventions
and unpublished writings that were not owned by Marathon. Preston
listed "CH4 Resonating Manifold". Preston contended that
the invention in issue was a "CH4 Resonating Manifold".
The court held that, even if the patented invention were a CH4
Resonating Manifold, there was insufficient evidence to demonstrate
that anything had been developed by Preston sufficiently for it to
constitute an invention, and as such Preston had not validly
excluded anything from the scope of the IP Assignment Agreement.
This case certainly demonstrates that employers should not allow
employees to cite exceptions to IP Assignment Agreements unless the
exception is described sufficiently clearly for it to be identified
if ever a dispute were to arise.
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