United States: Employer Lacks Right To Sue For Patent Infringement When Employment Agreement Fails To Assign Employee Inventions

Abstract

An employer lacked standing to sue for patent infringement because the employment agreement with the inventor simply provided an obligation to assign in the future, rather than an assignment that is effective without further action.  Similarly, the agreement's quitclaim and trust provisions did not rectify the situation because they did not effect a transfer or create standing to sue.

To have standing to sue for patent infringement in the United States, a plaintiff generally must have received an assignment from all of the inventors.  If any inventor has not transferred its rights to the plaintiff or has not joined in the litigation, the patent infringement suit may not proceed.

The Federal Circuit recently considered whether an employment agreement with one of the patent's inventors transferred adequate rights to create standing to sue for patent infringement.

Background

Advanced Video Technologies LLC sued a number of defendants for infringing a patent on a video codec.  The patent lists three inventors who worked for Infochips Systems Inc. when they created the invention.  Only two of the inventors assigned their interests in the patent to Advanced Video, so there was a question as to whether the rights of the third inventor were transferred to Advanced Video so that Advanced Video had standing to sue for patent infringement.

Advanced Video maintained that it obtained the third inventor's interests in the patent through a series of transfers, including an alleged transfer under provisions of a January 1992 employment agreement between the third inventor and Infochips that was in place before the patent application was filed. 

Advanced Video relied on three provisions of the employment agreement to support its position that it had obtained sufficient rights from the third inventor to have standing to sue for patent infringement: 1) a "will assign" provision; 2) a trust provision; and 3) a quitclaim provision:

I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions . . .

I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have infringement [sic] of any patents, copyrights, or mask work rights resulting from any such application assigned hereunder to the Company.

The trial court ruled that these provisions did not transfer the inventor's ownership rights in the asserted patent to Advanced Video and, because the inventor was not a party to the suit, dismissed the case for lack of standing.

The Federal Circuit Decision on Appeal

On appeal, the Federal Circuit rejected Advanced Video's claim to ownership under all three provisions of the employment agreement.

The "will assign" language provided an obligation to assign but did not create an immediate assignment.  The trust provision provided evidence that an immediate assignment did not occur, because an inventor could not immediately assign patent rights and at the same time hold them in trust.  

Similarly, the "will hold in trust" provision did not create an immediate trust under California law in which the employer received legal title to the patent rights of the inventor.  Even if the IP interests were immediately placed in trust, it would not follow that the interests were ever transferred out of trust in favor of the employer.  And even if Advanced Video were the beneficiary of the trust, under California law, the legal title and right to sue is owned by the trustee, so a beneficiary, who is not the real party in interest, may not sue in the name of the trust, and has no title or ownership interest in the trust.

Lastly, although the quitclaim provision waived the inventor's interest in any patent rights that she assigned under the agreement, because no patent rights were ever assigned, this provision was inapplicable.

A concurring opinion by one judge agreed that, under applicable precedents, the case must be dismissed because Advanced Video did not have full ownership of the asserted patent, but argued that non-consenting co-inventors should be able to be joined involuntarily to infringement suits under Federal rules allowing for the involuntary joinder of necessary parties.  The concurring opinion argued that not allowing such involuntary joinder prevents a patent co-owner from seeking a remedy for patent infringement to which they are entitled where a co-owner refuses to join an infringement suit.

A dissenting opinion by one judge argued that the co-inventor never had ownership of the patent and therefore Advanced Video did not need to acquire any ownership interest from the co-inventor.  The dissent argued that the "detailed and thorough" terms of the employment agreement placed all inventions under the ownership of the employer.  Along with the "will assign," trust, and quitclaim provisions, the dissent pointed to provisions of the employment agreement providing that invention records are the property of the company, that the employee has an obligation to assist in obtaining patents, and providing for action by the company in the absence of the employee's signature on patent documents.  The dissent stated that the majority's decision to dismiss the case was not supported "under any view of any law."

Strategy and Conclusion

General terms of employment agreements that contain provisions relating to transferring IP rights, but which do not actually transfer those rights, may prevent the beneficiary or intended owner of those IP rights from asserting them in litigation until the title of those IP rights are transferred to the intended owner.  This case illustrates the value of having employment agreements that automatically assign any inventions and resulting patents of their employees to the employer, so the employer has legal title to the patents and standing to sue for patent infringement, rather than merely create obligations to assign inventions in the future, so the employer has equitable title and the right to obtain legal title, but does not have standing to sue for patent infringement until legal title is acquired.

Further Information

The Advanced Video decision can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
23 Sep 2018, Seminar, Chicago, United States

Finnegan is a sponsor of the Intellectual Property Owners Association Annual Meeting, supporting the Women in IP Networking Brunch.

26 Sep 2018, Webinar, Washington, DC, United States

This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.

26 Sep 2018, Webinar, Washington, DC, United States

This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions