Watch out for the “hereby assigned” language in your employment contract

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

cwan@patentonomy.com

Omitted inventor--the employee inventor can sue for reputational injury

As an inventor myself, I imagine that I would be unhappy if being omitted as an inventor to an invention and its resulting patent knowing that I’ve made important inventive contribution to the invention.  I am sure that any reasonable inventor would feel the same.  However, have you ever wondered if there are any recourses for you if you are employed by a company, made an important inventive contribution to the company’s blockbuster product and somehow being skipped over as an inventor on the patent?  Wonder no more--In Shukh v. Seagate Technology, LLC, No. 14-1406 (Fed. Cir. Oct. 2, 2015), the Federal Circuit answered that reputational injury can confer standing in correction of inventorship claims under 35 U.S.C. § 256.

Dr. Shukh is a former employee of Seagate fired by Seagate in 2009.  After his firing, he was unable to land a new job.   He was named as an inventor on seventeen of Seagate patents and claimed that Seagate failed to list him as an inventor on six other patents and four pending patent applications.  Then, Dr. Shukh filed several claims against Seagate including a claim to correct inventorship. 

The problem is that Dr. Shukh had already assigned-away his ownership rights to the patents to the company as part of his employment agreement.  In order to have the standing to sue, Dr. Shukh has to hang his standing on his alleged reputational harm due to Seagate’s failure to list him as a co-inventor on six different patents.  The district court granted summary judgment for Seagate and dismissed Dr. Shukh's claims, finding that an alleged reputational injury did not confer standing.

On appeal, the Federal Circuit held that “concrete and particularized reputational injury can give rise to Article III standing.”  Noting that “being considered an inventor of important subject matter is a mark of success in one’s field, comparable to being an author of an important scientific paper,” the court reasoned that “[p]ecuniary consequences may well flow from being designated as an inventor.”   This is particularly true when the claimed inventor is employed or seeks to be employed in the field of his or her claimed invention.  For example, if the claimed inventor can show that being named as an inventor on a patent would affect his employment, the alleged reputational injury likely has an economic component sufficient to demonstrate Article III standing.

The court found that there is a question of material fact as to whether Dr. Shukh’s omission as a named inventor on the disputed patents caused him reputational injury.  Specifically, Dr. Shukh presented evidence such that a trier of fact could conclude that this omission injured his reputation in at least two ways: first, it harmed his reputation as an inventor in the field of semiconductor physics, and second, it contributed to his reputation for poor teamwork due in part to his accusations that others were stealing his work. Moreover, Dr. Shukh presented evidence from which a trier of fact could conclude that these reputational harms had economic consequences—namely, that Dr. Shukh was unable to find employment after he was terminated from Seagate.

Based on these issues of fact, the Court reversed the district court's grant of summary judgment and remanded the inventorship claims to the district court.

The practical implications: for the employers/companies, the company should always make sure the correct inventorship in its patent filings—it is always much easier to obtain necessary title transfer documents (assignments) when the inventors are working for you; for the employee/inventors, you now can sue your previously employer for ignoring your contribution to their blockbuster product.

Thanks for reading.

Connie

cwan@patentonomy.com

No, you can’t collect royalty on an expired patent

The owner of the patent has the right to stop anybody else from using the patented invention without permission (i.e., without a license from the owner), but only during the patent life term and not after the patent expires. Patent owners often agree to let others use the invention if the users pay “royalties” to the patent owner.  Sometimes, the user might even agree to pay royalties that continue even after the patent expires.   One example may be that the owner has many patents and the user wants to cover all of them with one contract. Another example may be that the arrangement might allow the user to make smaller payments in early years in return for larger payments in late years.   The Supreme Court held more than fifty years ago in its 1964 decision Brulotte v. Thys Co. that users cannot agree to pay royalties after the patent expires.   If they sign a contract to pay those royalties, the contract is invalid.   

This “no royalty beyond patent term” is reaffirmed by the Supreme Court in Kimble v. Marvel Enterprises, Inc. (March 31, 2015), in which the court hold that that a patent holder cannot charge royalties for the use of his invention after its patent term has expired.

So, no, you can’t charge a royalty after your patent expires.  Your patent license agreement needs to terminate when the last patent expires.

Thanks for reading.

cwan@patentonomy.com