Companies
often ask what language to use in their employment contracts to make sure that
the titles of the inventions by their employees are transferred to the
company. My answer has always been
“hereby assigned,” at least for now.
The rule
that the “hereby assign” language in an employment contract immediately
transfers the title of an employee’s invention to the company originated from a
1991 Federal Circuit ruling. In Filmtec
Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991), the Court
held that the “hereby assign” clause results in an automatic assignment of
rights from an employee to the employer.
This language should be contrasted with an “agree to assign” clause,
which, according to the Supreme Court in Stanford
v. Roche, does not shift legal title until the inventor actually does
assign after inventing.
In Stanford
v. Roche, Dr. Holodniy executed an agreement with Stanford in 1988. The
agreement contained “agree to assign” clause.
Later, Dr. Holodniy executed another agreement with Cetus that contained
“hereby assign” language. While under
the obligation of both agreements, Dr. Holodniy made a scientific discover,
which resulted in a highly valued patent.
Standford and Cetus ended up in a court fight vying for the ownership of
the patent. Following Filmtec decision, the Supreme Court
sided with Cetus with the reasoning that Standford’s earlier agreement did not
actual transfer the title of the invention while Cetus’ later agreement
transferred the title upon signing.
However,
the change may be in the air—there are some strong backers in asking the court
to review the current rule. In his dissenting opinion in Stanford v. Roche,
Justice Breyer challenged the Federal Circuit rule. Relying upon history and
tradition, Justice Breyer wrote that the initial “hereby-assign” employment
contract as creating equitable title in the invention whose legal title does
not automatically transfer. Justice
Breyer’s position is consistent with the rule before Filmtech in 1991, when the patent law appears to have long
specified that a present assignment of future inventions (as in both contracts
in Standford v. Roche) conveyed equitable, but not legal, title. Under this rule, both the initial Stanford
and later Cetus agreements could have given rise only to equitable interests in
Dr. Holodniy’s invention. And as between these two claims in equity, the facts
that Stanford’s contract came first and that Stanford subsequently obtained a
postinvention assignment as well should have meant that Stanford, not Cetus,
would receive the rights its contract conveyed.
So stay
toned. For now, for companies/employers,
make sure that your employment contracts include “hereby assign” language;
whereas, for employees, before you sign that employment contract, ask
yourself--do you really intend to assign all your future inventions immediately
to your employer?
Thanks for
reading.
Connie