Patent Ownership Rights: Structuring Assignment and...

Patent Ownership Rights: Structuring

Assignment and Employment ContractsKey Provisions, Implications for Litigation, Recent Court Treatment

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THURSDAY, MAY 3, 2018

Presenting a live 90-minute webinar with interactive Q&A

Eman Ahmed-Fakhry, Senior Counsel, Hospital Therapies Department,

Mallinckrodt Pharmaceuticals, New York

Anne Elise Herold Li, Counsel, Crowell & Moring, New York

Robert Schaffer, Partner, Troutman Sanders, New York

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Crowell & Moring | 4

Advanced Video Technologies LLC v. HTC CorporationTime to Check Your Agreement ProvisionsAnne Elise Herold Li, Crowell & Moring

[email protected]

Eman Ahmed-Fakhry, Mallinckrodt Pharmaceuticals

[email protected]


The views and opinions expressed by Eman Ahmed-Fakhry do not necessarily reflect the official policy or position of any agency of Mallinckrodt Pharmaceuticals


Employment agreements and IP• Most employment agreements have IP

assignment rights

• Companies rely on these to capture intellectual property of all types – patents, trademarks, copyrights, trade secrets, know-how.

• But in-artful drafting can create pitfalls


• Patent Infringement lawsuit

• Issue under discussion:

Does Advanced Video have standing?

• The `798 patent lists three co-inventors

• The invention was created while the co-inventors were all employed with a predecessor in interest to Advanced Video.

Background


• Under review, the employment agreement involves 3 important provisions:

• Assignment provision

• Trust provision

• Quit-claim provision

• Did these provisions effectuate an assignment of intellectual property that is sufficient to convey those rights to the employer?

Background


• Two of the three co-inventors signed formal assignments which transferred their ownership interests during patent prosecution.

• The third did not, so the company relied on the employment agreement and used regular patent office procedures to continue.

• No challenge by her at this time• No mention of this issue in

numerous transfers of the rights

Background


• Provision under review:

I agree that I will promptly make full written disclosure to the Company, willhold in trust for the sole right and benefit of the Company, and will assign tothe Company all my right, title, and interest in and to any and all inventions,original works of authorship, developments, improvements or trade secretswhich I may solely or jointly conceive or develop or reduce to practice, or causeto be conceived or developed or reduced to practice, during the period of time Iam in the employ of the Company.

Assignment and Trust Provision


• Assignment Provision:

• The Court stated that “[t]he ‘will assign’ language alone does not create an immediate assignment of [the inventor’s] rights in the invention to [the company].”

• The “will assign” provision was only a promise to do something in the future, but did not mean that the employee had already effectuated an assignment.

Court’s Disposition – Not an Assignment


• Trust Provision

• According to the Court, even if the interests were placed into a trust, “ it does not follow that that these interests were automatically, or ever, actually transferred out of trust in favor of [the company].”

Court’s Disposition – No Trust Created


• Provision under review:

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

Quitclaim Provision


Quitclaim – Nothing to disclaim

• The Court stated that the language in the quitclaim provision “waives [the inventor’s] rights to interests in any patent rights that she assigned under the agreement.”

• Since no patent rights were ever assigned to Advanced Video, the quitclaim provision has no application.


Privileged Material Protected by Attorney-Client Privilege & Attorney Work Product

Recommendations

I hereby assign to the Company all my right, title, and interest

in and to any and all inventions, original works of authorship,

developments, improvements or trade secrets which I may

solely or jointly conceive or develop or reduce to practice, or

cause to be conceived or developed or reduced to practice,

during the period of time I am in the employ of the Company

any derivative works.


Privileged Material Protected by Attorney-Client Privilege & Attorney Work Product

Recommendations

If the Company is unable to secure your signature on any

document for the purpose of securing intellectual property

rights from a government authority, either here or abroad,

following its reasonable efforts to do so, then you hereby

irrevocably designate and appoint the Company and its

duly authorized officers and agents as your agent and attorney

in fact, to act for and on your behalf and stead to execute any

documents and to do all other lawfully permitted acts in

connection with the foregoing.


• Instruct new hires not to use documents or information from previous employer.

• Conduct new hire training on the importance of protecting your company’s assets. Be sure to cover obvious topics, such as following computer access policies and your company’s data encryption system, and less obvious topics, such as the possibility of accidental trade secret disclosure from holding business discussions in public places.

• Separate out trade secret agreements and training from the piles of paperwork and training that new employees receive so that they are not glossed over or disregarded as “just another piece of paper to sign.”

Key Takeaways: for arriving employees


• If the new employee’s position at your company is going to be substantially similar to his or her previous position, consider initially assigning the employee to different projects. Also consider temporarily modifying the new employee’s job responsibilities.

• Periodically review the new employee’s work to confirm that he or she is not utilizing confidential and proprietary information belonging to previous employers.

• Require confidentiality and non-disclosure commitments from employees.

Key Takeaways: for arriving employees


• Conduct an exit interview -- ask the right questions:• “Do you have any company documents or materials at home?”• “Have you returned all flash drives containing company information?”• “Have you stored any company documents in the cloud?”• “Do you understand that your non-disclosure obligations remain in effect?”• Ask about the new job: new employer, position, duties, and responsibilities.

• Disable employee’s access to computer systems and networks• Investigate prior to exit interview whether employee has taken, forwarded, or retains any

company documents or files and ask for its return• Review employee’s projects to ensure that all property has been returned• Utilize a written agreement with the employee to clarify the ownership and use of the

company’s resources and IP• Consider using an exit interview certification• Inform the employee that the company expects departing employees to conform their conduct

accordingly and instruct the employee to provide a copy of the agreement to his or her new employer.

Key Takeaways: for departing employees

Patent Assignments & Employment Contracts:

Litigation Fallout

Robert Schaffer, Partner

[email protected]

Troutman Sanders, LLP

Strafford Webinar • May 3, 2018

OWNERSHIP:GUIDING PRINCIPLES

• Assignments are contracts, governed by local law

• Patent infringement is governed by federal law

• Federal court applies local law as needed

• Standing via assignment is a federal question

• All patent owners must join infringement suit

• Intensly fact-specific (many dissents)

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• Under US law, inventions (and patent rights) are jointly owned by all inventors,

unless assigned by an employment agreement or separate contract.

• Ownership by assignment is a question of state law. Bd. of Trustees Leland

Stanford Jr. Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832, 841 (Fed. Cir.

2009), aff’d, Bd. of Trustees Leland Stanford Jr. Univ. v. Roche Molecular Sys.,

Inc., 131 S. Ct. 2188.

• Whether a contract is “a present assignment of patent rights, or an agreement

to assign rights in the future,” is a question of federal law. Id. See also, DDB

Techs., L.L.C. v. MLB Advanced Media, LP., 517 F.3d 1284, 1290 (Fed. Cir. 2008).

• Federal patent law preempts state contract law because this question “is

intimately bound up with the question of standing in patent cases.” Id.

Patent Ownership Through Assignment

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• “I agree to assign or confirm in writing” is a promise to assign in the future.

Stanford, 583 F.3d at 841-842. (Later steps must perfect the assignment.)

• “I will assign and do hereby assign” is a present assignment of a future

interest. Id. (“Do” has already happened and supersedes “will”.)

• A present assignment of a future right automatically (“by operation of law”)

vests legal title in each assigned invention as it comes “into being.” Id.

• Previous promise of future assignment, or later assignment to another, is void.

• Promise to execute assignment documents is consistent with present

assignment of a future interest (may or may not be necessary).

• The Supreme Court affirmed Stanford on other grounds. Justice Breyer

dissented, arguing that “slight linguistic differences” should not thwart the

original intent of the parties regarding assignment. 131 S. Ct. at 2203.

Do Assign / Will Assign – The Standford Case (2009)

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• “will assign to the Company” is a promise to assign in the future. Advanced

Video Techs. LLC v. HTC Corp., 879 F.3d 1314, 1317-1319 (2017).

• “will hold in trust” is consistent with a future assignment. Id. (no chain of

transfer from trust to plantiff). In California, a trust beneficiary may not sue. Id.

• A quitclaim to “assigned” rights does not cover future “assignable” rights. Id.

• Failure to assign is a breach of contract. Id. Beneficiary may need state law

claim to acquire title – but note statute of limitations.

• Contrary to the Advanced Video dissent, inference of intent does not trump an

unfulfilled promise to assign. No standing to sue. Id.; see also IpVenture, Inc. v.

Prostar Comput., Inc., 503 F.3d 1324, 1327 (Fed. Cir. 2007).

• Change of verb tense to “assigned hereunder” did not matter. Employer did

not execute documents as “agency with an interest” under relevant terms.

Do Assign / Will Assign – The Advanced Video Case (2017)

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• Assignment provisions are governed by application state or foreign law.

• Other countries may vest patent rights in corporations (patent “applicant”).

• Can assignor execute an assignment with no assignee signature?

• Yes in Illinois. 23-25 Bldg. P’ship v. Testa Produce, Inc., 381 Ill. App. 3d 751, 756,

886 N.E.2d 1156, 1163 (1st Dist. 2008)(if facts show acceptance). Elsewhere?

• If the assignee or other term is ambiguous, local law controls.

• Some courts use “integration” and “four corners rule” to find ambiguity.

• If term is ambiguous, extrinsic evidence may help establish intent.

• An ambiguous assignee probably means the employer (fair, customary usage).

• Form agreements may implicate extrinsic evidence to decide specific intent.

• Third party rights may implicate extrinsic evidence, e.g. collaboration partners

(companies and universities).

Local Law Considerations – Interpretation Tools

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• United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933). Title to a patent

can pass only by assignment. Agreements to assign are specifically enforced.

Rights and obligations regarding employee invention spring from employment

contract. Persons employed to make inventions are bound to assign patents.

General employment does not require assignment. Courts are reluctant to

infer agreement to assign. Employment to do research is not to invent.

Different rights do not apply to the US government. Id. at 187-189, 193.

• Vapor Point LLC v. Moorhead, 832 F.3d 1343 (Fed. Cir. 2016). Employer may

have shop rights (equitable) but not legal title and standing. Unsigned contract

may be binding if practiced; but assignment clause must be explicit.

• Westerngeco L.L.C. v. Ion Geophysical Corp., 791 F.3d 1340 (Fed. Cir. 2015)

Inventor testimony may prove an obligation to assign, without copy of

agreement (dicta). Assignment filed in USPTO is sufficient for standing.

Chain of Title & Standing to Enforce Patents – The Last 10 Years

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• Preston v. Marathon Oil Co., 684 F.3d 1276 (Fed. Cir. 2012). In Wyoming,

second employment agreement can supplement first agreement by adding

obligation to assign, without new consideration. “Invention” included

reduction to practice; vague conception prior to employment not excluded.

• Abbott Point of Care, Inc. v. Epocal, Inc., 666 F.3d 1299 (Fed. Cir 2012). In New

Jersey, consulting agreement that fails to explicitly incorporate relevant

provisions of earlier employment contract does not require assignment.

• Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359 (Fed. Cir. 2010). Under

"promise to assign" cases, a subsequent written agreement is necessary to

consummate assignment, which is effective when executed.

• FilmTec Corp., 939 F.2d 1568 at 1573 (inventor "agrees to grant and does

hereby grant"); Speedplay, 211 F.3d at 1253 (employee “hereby conveys,

transfers, and assigns” inventions that "belong exclusively” to employer).

Chain of Title & Standing to Enforce Patents – The Last 10 Years

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Patent Ownership Rights: Structuring Assignment and...

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