An unbroken chain: the importance of securing patent ownership
Ownership of patent rights often is overlooked. The lack of an unbroken chain of title from the true inventors to the current owner can devalue, or completely impair, a US patent. Unfortunately, ownership issues usually do not arise until financing or a licensing agreement is sought and third party review of a US patent uncovers a deficiency, putting cloud over its title. In an extreme case, lack of complete title to a patent can be the deciding factor in infringement litigation. Court decisions in 2015 highlighted some of the pitfalls and lessons surrounding patent ownership.
In the US, each inventor has an undivided, equal ownership interest in a patent. Without a pre-existing agreement to the contrary, such as an employment agreement, each co-inventor of a US patent can exploit the patent without accounting to the other co-inventors. Although a seemingly straightforward and easy best practice, obtaining a specific, written patent assignment from each inventor of a first-filed patent application in a patent family can be elusive. Without a complete, unbroken chain of title, an independent ownership interest of a co-inventor (or co-owner) can frustrate the intentions of the other co-owners.
For example, in StemCells v Neuralstem, the US District Court for the District of Maryland in July 2015 dismissed a long-standing patent infringement lawsuit because an omitted co-inventor was an indispensable party but did not join the litigation. Here, the defendant successfully asserted that, despite an agreement regarding ownership among the ultimately determined co-inventors, the omitted inventor did not expressly assign his rights to the patents, as the other two co-inventors had. Accordingly, the omitted co-inventor retained an ownership interest in the patents-in-suit and was able to determine the fate of the litigation, frustrating the rights of a down-chain owner of the patents.
Aside from whether the inventorship determination was correct, the decision highlights the importance of securing a specific assignment from all possible inventors of a claimed invention. That is, the inventorship and consequent ownership interests in an invention should be fully considered, especially where non-employees are involved. Named inventors can be removed if later determined not to have contributed to a claimed invention. In contrast, the ownership rights of an omitted inventor might not be available later.
Failure of an employee to expressly assign his or her rights to an invention to the employer can often be backed up with an appropriate employment agreement, but not always. In Personalized User Model and Konig v Google, the lack of an express assignment from an inventor, Yochai Konig, to his employer, SRI International, prevented Google from obtaining an ownership interest from SRI to patents asserted against Google. In a backdoor attempt to quash the infringement lawsuit, Google found no help from the employment agreement between Konig and SRI because it appeared to contain only a promise to transfer his rights, not a present, express assignment.
Further, the breach of contract claim concerning the broken promise in the employment agreement, which could have allowed SRI and ultimately Google to secure the ownership rights, was time-barred by the state’s statute of limitations. Thus, Konig was found to hold an ownership stake in the patents and the lawsuit continued.
“The decision highlights the importance of securing a specific assignment from all possible inventors of a claimed invention.”
Interestingly, whether an employment agreement can properly assign a future, unconceived invention is being discussed in the US courts. As asserted in Shukh v Seagate Technology, under traditional property law only equitable title to a not-yet-conceived invention should be conveyed under an employment agreement, but legal title would only be present after conception of the invention and a separate, affirmative act required to transfer it.
Under the current law in Filmtec Corporation v Allied-Signal, an employment agreement that includes a present assignment of future patent rights is an automatic, complete assignment of those yet-to-be-in-existence inventions to the employer. While Justice Stephen Breyer’s dissent in Roche v Stanford (2011)questioned this logic, he also realised that the issue was not actually being heard by the court.
A petition by Shukh to the US Court of Appeals for the Federal Circuit for the entire court to reconsider and overturn its ruling in Filmtec was denied. Whether this case will be heard by the US Supreme Court including Breyer has yet to be decided. However, overturning the validity of a present assignment of future patent rights in an employment agreement would be a very cloudy day for many patent portfolios reliant on such a transfer of rights.
Although not at issue in the past year, another often overlooked aspect of patent ownership is when US (federal) government money is used to develop an invention. Under the Bayh-Dole Act, a contractor that develops an invention using federal government money generally has a duty to report to the granting federal agency the invention and whether a patent application was filed to protect it. In addition, the contractor must elect title to the invention from the government including providing a confirmatory instrument (patent licence) acknowledging the non-exclusive rights held by the federal government. Failure to comply with these requirements can result in the federal government owning the patent.
To that end, in Campbell Plastics Engineering & Manufacturing v Brownlee (2004), the failure of the contractor to report the inventions according to the terms of the funding contract resulted in a defendant escaping potential infringement liability because the patentee did not have standing to assert the patents. That is, the federal government held title to the patents-in-suit because of a violation of the terms of the contract. Although an onerous result, it should be a lesson to ensure compliance with the funding contract requirements.
In sum, to avoid surprises a company should prioritise obtaining a specific, written assignment from each named inventor of a patent application to show a complete chain of title. A good-faith attempt at identifying and securing the rights of all possible inventors should be undertaken. A properly drafted patent assignment can capture the ownership of nearly any application that claims priority to it including international applications under the Patent Cooperation Treaty and utility, divisional and continuation applications.
Where federal funding is used to develop an invention, the requirements necessary to retain title to the patents should be fulfilled in a timely manner. Otherwise, when patent ownership is ignored or not diligently pursued, the consequences can be deleterious.
Michael Brodowski is a partner at Burns & Levinson. He can be contacted at: mbrodowski@burnslev.com
