It's the New Year: Review Your Assignment Agreements or Risk Losing Your Future Intellectual Property Rights | Newsletters

It’s the New Year: Review Your Assignment Agreements or Risk Losing Your Future Intellectual Property Rights

Patent and Technology trial lawyer Stan Gibson discusses how assignment agreements must be carefully drafted to make sure future rights are properly conveyed.

At the close of 2011, the Federal Circuit once again issued an opinion that reemphasizes the importance of reviewing assignment agreements. In a recent unpublished decision, Gellman v. Telular Corporation, et al., Case No. 2011-1196 (Fed. Cir. ), the Federal Circuit held that an assignment clause did not transfer future intellectual property rights and dismissed a patent infringement action for lack of standing.

In Telular, the plaintiff Tobi Gellman brought an action for infringement of a patent on which her late husband was named as a co-inventor. The plaintiff was the trustee of her husband’s trust ("the Lebowitz Trust"), which the plaintiff claimed was the sole legal owner of the patent. However, on the patent-in-suit, Mr. Lebowitz was only one of the named co-inventors. The other co-inventor, Mr. James Seivert, was also deceased and, therefore his heirs or assignees were presumptive joint owners with the Lebowitz Trust.

Because it is well-established that a patent infringement case cannot proceed without the participation of all legal owners, the district court dismissed the action for lack of standing because the plaintiff could not establish that it had a proper assignment from the co-inventor or the co-inventor’s heirs. Plaintiff contended that Mr. Seivert was the employee of Mr. Lebowitz and that the terms of his employment included full transfer of any rights to any resulting inventions.

On appeal, the Federal Circuit affirmed the district court’s dismissal finding that the evidentiary record was thin and unsupported. The plaintiff was not able to produce any signed writing describing the terms of the employment, but instead offered an agreement for consulting services (that was unsigned) that purported to set up Mr. Seivert as a consultant to a company owned by Mr. Lebowitz. In addition, plaintiff submitted cancelled checks that were purportedly made payable and cashed by companies associated with Mr. Seivert. Based on this evidence, plaintiff contended that the unsigned agreement transferred away the rights to the patent-in-suit.

In particular, the plaintiff relied upon the following provision in the unsigned consulting agreement:

"[A]ny and all ideas, discoveries, inventions, [etc.] … developed, prepared, conceived, made, discovered or suggested by [Mr. Seivert] when performing services pursuant to this Agreement … shall be and remain the exclusive property of Cellular Alarm. [Mr. Seivert] agrees to execute any and all assignments or other transfer documents which are necessary, in the sole opinion of Cellular Alarm, to vest in Cellular Alarm all right, title, and interest in such Work Products."

The Federal Circuit first noted that the lack of a signed agreement, although troubling, is not fully dispositive. The Patent Act requires that all assignments of patent interests be in writing. "But there are means of transferring patent ownership beyond assignment, and not all of them require a writing." Nonetheless, the Federal Circuit determined that it did not need to reach this issue because, even assuming that the unsigned agreement was enforceable, there were problems with the language of the assignment. "[N]either the cited language nor anything else in the Unsigned Agreement is sufficient to confer standing in this case."

The plaintiff asserted that the Unsigned Agreement conveyed full legal title to Mr. Lebowitz for any invention by Mr. Seivert because the Unsigned Agreement provided that such an invention "shall be and remain the property" of Mr. Lebowitz’ company. Plaintiff’s position was that in order for the invention to "remain" it necessarily had to have been fully conveyed previously. The Federal Circuit disagreed.

The Federal Circuit found that the language was not so clear. The Federal Circuit focused on the word "remain" and found that "Mr. Seivert’s contributions to inventions "remained" in equitable status until such a time as Mr. Seivert "’executed any and all assignments or other transfer documents which are necessary . . . to vest in Cellular Arm all right, title and interest’ in such inventions." Thus, the Federal Circuit concluded that the most that the Unsigned Agreement could do is create an obligation for Mr. Seivert to assign to Cellular Alarm.

The Federal Circuit then found that "[w]hile it is possible for an employee to assign any and all of his right to future inventions, this court has consistently required that present assignments of future rights expressly undertake the assigning act at the time of the agreement, and not leave it to some future date." Here, the assignment was left to a future date (at best) and therefore was not effective to assign the rights without a further agreement.

The Federal Circuit found that the same logic applied to Ms. Gellman’s claim that she had standing under the "hired to invent" doctrine. The Federal Circuit noted that, although some courts have held that invention of an employee hired to make that invention belongs to the employer, "this doctrine is expressly equitable and creates only an obligation for the employee to assign to his employer." Thus, the "hired to invent" argument also could not work because there was no express agreement to assign future inventions.

Accordingly, the Federal Circuit affirmed the district court’s dismissal for lack of standing.

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This case is yet another reminder that assignment agreements must be carefully drafted to make sure that future rights are conveyed. The Federal Circuit has now determined on several occasions that language reflecting that rights will be assigned in the future is not effective to convey those rights when they come into existence and instead will require a separate, written assignment. And, of course, it can be very difficult to obtain those rights many years later, particularly if the inventor is deceased or has become hostile. Accordingly, it is important to draft assignment agreements using the language of "assign, and do hereby assign" to convey existing rights and rights that may come into existence in the future.

The "assign, and do hereby assign" is the only language that the Federal Circuit has repeatedly held is sufficient to assign rights in the future without some additional assignment agreements. Accordingly, it is a best practice to review all assignment agreements (old and new) to make sure that they use the "assign, and do hereby assign" (rather than, the disfavored "agree to assign," for example) to make sure that future rights and inventions will be assigned as they come into existence.

Gellman v. Telular Corp, Case No. 2011-1196 (Fed. Cir. Nov. 30, 2011)