Take Care with Patent Assignment Language

Written agreements discussing an employee’s obligation to patent assignment rights were insufficient to actually assign ownership in U.S .Patent No. 5,781,788, a divided Federal Circuit panel has held. Advanced Video Technologies LLC v. HTC Corp., Nos 2016-2309, 2016-2310, 2016-2311 (Fed. Cir. Jan 11, 2018) (precedential) (opinion by Judge Reyna, Judge O’Malley concurring and Judge Newman dissenting). Despite the panel’s disagreements about the law, this case provides a reminder that it is important to obtain a present and not just a future promise to assign patent rights, e.g., “I hereby do assign” and not just “I will assign.”

Of the three inventors on the ’788 patent, two of them had assigned their interests to Advanced Video, but the third, Vivian Hsiun, had declined. The patent had a complicated chain of title, being part of assets that were seized as part of a security agreement, sold back to another one of the co-inventors, who then assigned his ownership interest to a predecessor of Advanced Video. That predecessor filed the application for the ’788 patent with the USPTO, and prosecuted the patent application without Ms. Hsiun’s cooperation, she having refused to assign her interest, upon providing a declaration representing to the USPTO that it had obtained her ownership rights.

Responding to a motion to dismiss for lack of standing, based on Ms. Hsiun’s refusal to participate in the lawsuit, Advanced Video argued that there were three bases for finding that Ms. Hsiun had transferred her ownership rights. First, she had signed an employment agreement saying that she “will assign” her interest in inventions. Second, the employment agreement provided that she “will hold in trust for the sole right and benefit of the company” her interest in all inventions. Third, the employment agreement included a provision in which she agreed to “wave” claim to the Company” any claims of infringement of any patents that resulted “from any such application assigned hereunder to the company.”

The Federal Circuit agreed with the district court that none of these provisions were sufficient to transfer Ms. Hsiun’s rights to Advanced Video, and affirmed its dismissal for lack of standing.

The court’s reasoning was straightforward. First, the “will assign” language was a future and not a present assignment, and therefore could not create “an immediate assignment of Ms. Hsiun’s rights in the invention to” her employer. Second, with a detour into California law of trusts, the court concluded that even if Ms. Hsiun’s rights were in trust, “Advanced Video, as a trust beneficiary, cannot maintain a patent infringement suit” without Ms. Hsiun as a party, nor could she be involuntarily joined as a plaintiff under Federal Rule of Civil Procedure 19. Finally, the quitclaim provision at best waived rights that Ms. Hsiun did not have.

Judge O’Malley concurred, agreeing that the court’s results was compelled by controlling Federal Circuit law. She disagreed, however, with “the conclusion that a non-consenting co-owner or co-inventor can never be involuntarily joined in an infringement action pursuant to [FRCP] Rule 19.”

Judge Newman dissented, believing that the employment agreement was sufficient to transfer ownership of the invention to Ms. Hsiun’s employer.

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