United States: Judge Zobel Sorts Out Patent Ownership Issues On Summary Judgment

US SolarTech, Inc. v. j-Fiber, GmbH, C.A. No. 06-10293-RWZ, 2013 WL 1755212 (D. Mass. Apr. 24, 2013) (Zobel, D.J.) [Patent Ownership]

US Solar Tech, Inc. ("Solar Tech") claims to be the owner of four U.S. patents. Defendant j-Fiber, GmbH ("j-Fiber") responds that it is a co-owner of these patents. The District Court (Zobel, D.J.) granted Solar Tech's summary judgment motion as to sole ownership of three U.S. patents. It also granted j-Fiber's cross-motion for summary judgment of co-ownership of one patent, but denied j-Fiber's cross-motion for summary judgment on its claim of shop rights.

In 2005, SolarTech purchased all of FiberCore, Inc.'s ("FiberCore") assets—including the patent assets—in bankruptcy. j-Fiber, however, claims that it is a co-owner of the patent assets because in 2004 it purchased ownership interests from FiberCore's wholly-owned subsidiary, FiberCore Jena GmbH ("FC Jena"). The question presented was (a) whether any interest in the patent assets belonged to FC Jena and, thus, was sold to j-Fiber or (b) whether, instead, the patent assets belonged entirely to FiberCore and now to SolarTech.

In determining ownership of the patent assets, the rights in an invention generally belong to the inventor and inventors may assign these rights to a third party. An assignment recorded with the U.S. Patent and Trademark Office is presumed valid, placing the burden on the challenger to rebut the validity of the assignment. Furthermore, while an employee generally owns the rights to her invention, where an employee is hired to invent something or solve a particular problem, the property of the invention related to this effort may belong to the employer based on an express or implied contract.

Here, the patent assets have several inventors. j-Fiber asserted that two inventors, Danilov and Guskov, were implicitly employees of FC Jena. FC Jena paid for Danilov and Guskov's salaries as well as their travel and living expenses. They were also members of FC Jena research teams, and FC Jena had an agreement with another subsidiary of FiberCore to "refund" all expenses arising from Danilov and Guskov's employment contract. But, as SolarTech established, Danilov's and Guskov's employment agreements were expressly with FiberCore, not FC Jena.

The Court found that, even in a light most favorable to j-Fiber, Danilov and Guskov had express employment agreements with FiberCore and thus were employees of FiberCore and not FC Jena. Judge Zobel held that where an employee is hired explicitly by a parent company, no jury could find that they were at the same time implicitly hired by its wholly-owned subsidiary. Thus, j-Fiber failed to produce enough evidence to rebut the assignment of the '580, '240, and '775 patents from Danilov and Guskov to FiberCore. Accordingly, FiberCore was the sole owner of those three patents and SolarTech is the successor-in-interest to them. As to one of the patents, the '275 patent, a co-inventor—Hammerle—was undisputedly an FC Jena employee. Thus, the Court found that j-Fiber, as the successor-in-interest to FC Jena, is at least a part owner of the '275 patent.

j-Fiber alternatively asserted that it is entitled to an ownership interest in the patent assets based on theories of conversion and fraudulent conveyance. To succeed on either theory, j-Fiber must show that it is the rightful owner of the property at issue. The Court determined that such a finding is simply duplicative of the sole ownership question and thus dismissed both claims.

Finally, j-Fiber asserted that it is entitled to shop rights over all of the patent assets. The shop right doctrine provides that an employee who uses his employer's resources to conceive an invention or reduce it to practice must afford to his employer a nonexclusive, royalty-free nontransferable license to make use of the invention. j-Fiber asserted that FC Jena obtained shop rights in all the patent assets because Danilov, Guskov, and Hammerle used FC Jena's resources and facilities to create their inventions and reduce them to practice.

The Court determined that one of the key aspects of the shop right doctrine is that the rights are non-transferable except when transferred as part of a complete succession to the entire business. Here, the Court ruled that j-Fiber did not succeed FC Jena's entire business, but rather only bought certain assets. Thus, even if FC Jena did have shop rights in the patent assets, j-Fiber could not acquire any shop rights by purchasing FC Jena's intellectual property assets. Therefore, the Court denied j-Fiber's cross-motion for partial summary judgment.

In conclusion, the Court held that wholly-owned subsidiaries cannot implicitly employ an explicit employee of the parent company and thus j-Fiber failed to produce enough evidence to rebut recorded assignments to the patent assets. It also held that, to succeed on a claim of shop rights, a successor in interest must be the successor in interest to the entirety of the business.

Originally published October 8, 2013.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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