Hint: The standard employment agreement you have been using that includes an assignment of IP provision might not be sufficient.
In the United States, employers don’t own an employee’s or consultant’s inventions unless the employee/consultant signs an agreement transferring his or her ownership of an invention to the employer.[1] The agreement transferring the employee’s ownership rights is called an “assignment.” And if a patent names more than one inventor, the inventors jointly and equally own the patent, even if one inventor contributed the lion’s share of the invention and the other inventor(s) made much smaller contributions. Absent an assignment from each inventor, each inventor can separately sell or license his or her interest to whomever he or she chooses.
Having full title to a patent is important for a number of reasons. First and foremost, a company’s intellectual property is often its most valuable asset, so it’s important to make sure it has actually obtained the necessary agreements to transfer the rights in its employees’/contractors’ inventions to the company. A patent also can’t be enforced against an infringer unless all owners join the lawsuit. And lack of full ownership will impair a company’s ability to sell or license a patent to others.
But just making sure you have an “invention assignment” agreement for each inventor is not enough. The specific language and timing of the agreements matter. For example, in the recent Federal Circuit Court of Appeals decision, Advanced Video Technologies v. HTC Corp.,[2] the patent infringement suit was dismissed because the company did not obtain a proper assignment from one of the three employee inventors. Two of the inventors signed an agreement transferring their rights in the patent to their employer, but the third inventor did not. The third inventor, however, did sign an employee agreement a few years before the patent application was filed which included an invention assignment section that provided the employee “will assign” all of her inventions to the company. The patent was then transferred a number of times, but an express present assignment from the third inventor (such as I hereby assign my entire right title and interest in US Pat. No. XYZ to company) was never obtained. The Federal Circuit, applying well-established precedent, held the company did not, in fact, fully own the patent because it never obtained the third inventor’s ownership rights in the patent. Instead, the standard employee invention assignment agreement the company had used was merely a promise to assign at some point in the future. As a result, the case was dismissed. The company would first need to bring a state-law based claim to enforce the employee invention assignment agreement and formally obtain the third inventor’s ownership.
Instead of a promise to assign in the future, the agreement could have included a present assignment of the future invention by also providing the employee not only will assign, but hereby assigns his or her ownership interests in a future invention. Such present assignment language has been upheld by the Federal Circuit and the Supreme Court as effective to transfer the employee’s rights in a future invention to the company without the need for a further assignment. See Board of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Systems, Inc., 563 U.S. 776 (2011); see also FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1572-73 (Fed. Cir. 1991).
Using employee invention assignment agreements that only include a promise to assign in the future also leaves open the possibility of the employee transferring his or her rights in an invention to a third party before he or she assigns to the employer, which is what happened in the Stanford Supreme Court case cited in the preceding paragraph.
In addition to having the right language in an employee invention assignment agreement, which employees should be required to sign on their first day of work, a company should also have each inventor sign another assignment agreement for each patent application that specifically lists the patent application, for example, by title and application number, so there is no question the patent at issue was transferred and so the assignment of the specific patent application can be recorded with the US Patent and Trademark Office.
Besides having the right language in an assignment agreement, timing also matters. In upcoming articles we will discuss how proper timing is important for ensuring the employee’s assignment is valid and for ensuring the validity of priority claims in corresponding international applications.
[1]There is a narrow exception for employees that are “hired to invent,” but this rarely applies and should not be relied on. Absent an assignment, an employer may also be entitled to a license to an employee patented invention under the Shop Rights doctrine, which is not the same as owning the patent.
[2] Case Nos. 16-2309, 2310, 2311 (Fed. Cir. Jan. 11, 2018).
