Omni Medsci Inc v. Apple Inc: Who Has The Standing To Sue For Patent Infringement, The University Or The Professor’s Company?

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Since the Supreme Court approved the Federal Circuit’s formulation in 2011, the words necessary to effectuate an assignment of intellectual property from an employee to an employer has been clear. See Bd. of Trustees of Leland Stanford Jr. Univ. v. Roche Mol. Sys., Inc., 583 F.3d 832, 842, aff’d, 563 U.S. 776 (2011). To constitute an express grant and thus an assignment by operation of law without further action, the language of the grant must be a present, not future, conveyance of rights. Examples of language considered a present conveyance from the Federal Circuit are “agrees to grant and does hereby grant” (FilmTec Corp. v. Allied Signal Inc., 939 F.2d 1568, 1570 (Fed. Cir. 1991)), and “agrees to and does hereby grant and assign” (DDB Techs. LLC v. MLB adv. Media L.P., 517 F.3d 1284, 1290 (Fed. Cir. 2008)). In contrast, language denoting a future assignment (“will assign”) is construed as an agreement to agree, requiring additional acts to effect the transfer of rights. The difference between a present and future assignment of intellectual property rights can be critical, as a recent Federal Circuit case, Omni Medsci Inc. v. Apple Inc, 2021 WL 3277220 (Fed Cir. Aug. 2, 2021), illustrates.

While employed as a professor at the University of Michigan’s College of Engineering, Dr. Islam developed and filed patent applications which he then assigned to his company, Omni Medsci. Omni Medsci thereafter sued Apple for infringing those patents.

Notably, at the time Dr. Islam joined the University of Michigan faculty, he signed an employment agreement that included an agreement to abide by the University’s Bylaws. Regarding the University’s ownership of intellectual property, those Bylaws stated:

1) Patents and copyrights issued or acquired as a result of or in connection with administrations, research, or other educational activities conducted by members of the University staff and supported directly or indirectly (e.g. through the use of University resources or facilities) by funds administered by the University regardless of the source of such funds, and all royalties or other revenues derived there from, shall be the property of the University (emphasis added).

2) Patents, copyrights, and property rights in computer software resulting from activities which received no support direct or indirect, from the University shall be the property of the inventor or creator thereof, free of any limitation which might otherwise arise by virtue of University employment. (emphasis added).

In the case of both University supported activity and “independent activity, paragraph 5 provided that the rights “shall be owned as agreed upon in writing”. (emphasis added).

Arguing that the University, and not Omni Medsci, owned the patents-in-suit, Apple moved to dismiss Omni Medici's infringement complaint for lack of standing. Both the district court and the majority of the Federal Circuit found the language in the bylaws to state future intentions and not a present assignment by Dr. Islam to the University, and therefore denied Apple’s motion to dismiss. Omni Medsci, Inc. v. Apple, Inc., 18-CV-00134 (E.D. Texas Aug. 14, 2019), aff’d, 2021 WL 3277220 (Fed Cir. Aug. 2, 2021). As the presumptive owner of the patents, Dr. Islam had the right to assign his rights to Omni Medisci. Left undecided was the University’s equitable ownership of the patented technology based on its financial support to Dr. Islam in connection with the inventions.

In its determination that there was no present assignment to the University, Judge Linn, writing for the majority of the Federal Circuit, did not rely solely on the use of the term “shall” in the Bylaws. Rather, the Court found the language to be ambiguous and therefore considered other language in the relevant paragraphs of the Bylaws. Because paragraph 1 discusses the “conditions” governing assignment, it suggests a future determination. Neither paragraph 4, which uses language identical to paragraph 1, nor paragraph 5, which uses similar language, could be construed as a present assignment from the inventor. With respect to paragraph 4, Dr. Islam would not be assigning his rights to himself. Paragraph 5 contemplates a future determination of ownership before an assignment. Accordingly, the Court held the language in paragraph 1 must also refer to a future assignment. Further supporting the Court’s conclusion, Judge Linn noted that the University’s Technology Transfer Form “implementing the bylaws” includes the text “hereby assigns our rights in the invention” (emphasis added). This undermines Apple’s argument that no further action was needed to effectuate the assignment after the agreement to the Bylaws.

Judge Newman dissented, raising a seemingly obvious point. If the University policy transferred ownership from Dr. Islam to the University, how could Dr. Islam assign the patent applications to his own company? There is no answer to her question in the majority opinion.

Takeaways

What does the decision teach aside from the need for an employer to use explicit present conveyance language in a grant? The case underscores the need to be as specific as possible in any document that references an intellectual property assignment. The Court analyzed the language in other sections of the Bylaws as well as in the technology transfer form in reaching its determination. Also, because the Bylaws’ language concerning university financial support was ambiguous (e.g., “supported directly or indirectly”), there was a dispute about what constitutes university funding and thus university ownership. In any such discussion, the types of financial support that will be determinative should be identified. Finally, in light of the recent Supreme Court decision in Minerva Surgical, Inc. v. Hologic, Inc.,141 S. Ct. 975 (2021), the University should consider having employees execute confirmatory patent assignment documents after patent issue, attesting to the validity of the claims (and offering additional compensation) to avoid a possible later attack on the patent’s validity by the assignor.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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