Problems may arise when a patent is invented by two or more parties without addressing the issues of control or ownership of the patent.  The issue is that each of the inventors can exploit the patent without sharing any profits with the other inventors.  Also, any one of the inventors can dedicate the patent to the public destroying the value of the patent.  Accordingly, ownership issues of a patent should be clarified sooner than later since the relationship between the parties might sour over time complicating amicable resolution.  To do so, the co-inventors or co-owners can enter into an agreement to jointly exploit the invention or assign the invention to a corporation in which ownership, control and profits are resolved through distribution of the corporate shares.

The following case illustrates a different type of co-ownership issue other than between co-inventors, specifically, ownership issues arising out of marriage and divorce.  Under California law, any personal property including patent rights acquired during marriage is community property.  In Envosys v. Nextel (Fed. Cir. Aug. 3, 2010), one of two co-inventors was married at the time the invention was conceived.  Accordingly, the invention belonged to (1) the husband and wife as community property and (2) the other co-inventor.  The husband and wife divorced.  After the divorce, the husband and the other co-inventor assigned the patent to Envosys which sued Nextel for patent infringement.

Nextel contended that the ex-wife still owned part of the patent and that the lawsuit should be dismissed since the wife was not a party to the lawsuit.  The logic is that since all of the owners of the patent were not part of the lawsuit, specifically, the wife, the lawsuit should be dismissed.

The Court disagreed with Nextel.  According to the divorce papers, the husband and wife filed documents stating that “We have no community assets or liabilities.”  Hence, the ex-wife had no ownership interest in the patents at issue.

Although there was a “happy” ending to this case, it still illustrates the importance of allocating ownership interest in a patent as early as possible because other situations might arise downstream that could complicate amicable resolution of the matter.

I invite you to contact me with your patent questions at (949) 433-0900 or James@OCPatentLawyer.com. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.

The following case illustrates the problems associated with companies that do not have invention assignment agreements or with relying upon a sub-contractor that does not have the proper invention assignment procedures in place.  General Electric (“GE”) manufactures jet engines.  GE attempted to manufacture the blades with composite material.  However, the blades were subject to failure.  As a result, GE outsourced engineering and manufacturing of the composite blade to a division of Chromalloy Gas Turbine Corporation (“Chromalloy”).  Chromalloy appointed Teets as the chief engineer for the project.  Unfortunately, Chromalloy did not have an Invention Assignment Agreement in place with Teets.  Eventually, Teets invented a new process for fabricating a durable composite blade which GE purchased for its engines.  A patent application was filed.  Later, Teets asserted that he, not Chromalloy owned the invention rights in the process for fabricating the composite blade.  The lower Court held that Chromalloy at least had “shop rights” in the invention.  As such, at the least, Chromalloy could continue to sell the new composite blades to GE.  Upon appeal, the Federal Circuit held that Chromalloy had more than just “shop rights” but also owned the patent rights.  Although the Teets did not expressly assign the invention to Chromalloy, the Court construed an implied-in-fact contract to assign the invention to Chromalloy based on the particulars of the employment relationship.  Teets v. Chromalloy Gas Turbine Corporation, 83 F.3d 403 (Fed. Cir. 1996).

Based on this case, it is important to set up proper procedures and documentation to clarify ownership of intellectual property rights cases not only in the employment context but also when hiring a sub-contractor.  Employers should implement procedures to obtain invention assignment agreements from employees.  It may also be important to ensure that your sub contractors have proper invention assignments from its employees to prevent any delays in production if one of the sub-contractor’s employees objects to intellectual property ownership issues.

Should you have any questions, please feel free to contact me.

The following case illustrates a different scenario in which patent assignments arise, specifically, conflicting agreements.  A Researcher working for Leland Stanford Junior University (“Stanford”) executed a patent assignment agreement wherein the Researcher agreed to assign any inventions to Stanford.  Stanford and Cetus were jointly developing ways to determine the efficacy of antiretroviral drugs for HIV infected patients.  During the joint research work, the Researcher also executed a Visitor Confidentiality Agreement containing an invention assignment clause which assigned all inventions of the Researcher to Cetus.  Hence, Stanford’s agreement was in conflict with Cetus’ Visitor Confidentiality Agreement.

The different language used in the patent assignment clauses of the conflicting agreements was one of the key factors in deciding that Cetus owned the invention instead of Stanford.  In the patent assignment for Stanford, the Researcher promised that he “will” assign inventions to Stanford which is an assignment in the future.  In contrast, in Cetus’s Visitor Confidentiality Agreement, the language included the phrase “does hereby assign” which is a present assignment.

As a result of the joint research, Stanford ultimately filed a patent application on subject matter invented by the Researcher.  After filing the patent application, the Researcher executed a patent assignment document  which was subsequently recorded at the Patent Office.  The Court held that title or ownership of the invention still vested in Cetus.  At the time of filing the patent application, the “does hereby assign” language contained in Cetus’ Visitor Confidentiality Agreement immediately vested title in Cetus by operation of law.  The later assignment from Researcher to Stanford was ineffective.  Stanford v Roche 2008-1509, -1510 (Fed. Cir. Sept. 30, 2009).

Based on this case, it is important to understand the difference between the “will assign” language and the “does hereby assign” language that are typically found in invention assignment agreements.

I also invite you to contact me should you have any questions.