Our business is to create for our clients valuable property
 and contractual rights in their ideas.
February 2016

(951) 395-9910

John J. Connors
Patent Attorney


EDITORIAL

The monthly topic of our newsletter brings to your attention recent decisions, new rules of practice, reports and other subjects relating to intellectual property that we believe of interest to our clients. (We invite you to make suggestions on the topics to be addressed). The most active new area of patent law is the filing with the Patent Trial and Appeal Board (PTAB) petitions to review issued patents. About eighty percent (80%) of the petitions filed have been granted. The PTAB is a new bureaucratic review body within the United States Patent and Trademark Office and its decisions are appealable to the Court of Appeals for the Federal Circuit (CAFC), which also is the appeal court for all patent cases before the federal district courts.  Decisions of the CAFC are appealable to the United States Supreme Court.  Currently in Cuozzo Speed Technologies LLC v. Lee, U.S. No. 15-446, cert. granted Jan.15. 2016, a PTAB ruling concerning how to construe claims, broadly or more narrowly, is pending before the United States Supreme Court.  We will be reporting in greater detail on this important case as it progresses.
 
John J. Connors
Patent attorney
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Congressional Watch
A New Era In Patent Law 
 
The main objective of this newsletter is to alert you to the rapidly changing legal environment in United States patent law.
 
The 2013 American Invents Act (AIA) made sweeping changes in the United States patent law. In the early 1990's Global Corporations began lobbying Congress to change the United States patent law to conform to the international model based on the 19th Century German patent law.  The AIA is the desired result of their lobbying efforts.

Over the course of the next few decades, these changes will affect the way commercially valuable ideas are developed and protected.  Will these AIA changes be good for society as a whole? Or will these AIA changes primarily assist the economically powerful? Several of these AIA changes are now being challenged in the courts, and we anticipate that the United States Supreme Court will be making determinations as to the constitutionality of many of these changes.
 
Those adversely affected by these AIA changes are now lobbying Congress to enact legislation that will alleviate hardships caused by these changes.  A major concern of our clients is the negative impact post-grant patent office proceedings have on the ability of startup companies to raise capital to launch a business based on a patented invention. It may be virtually impossible to persuade an investor to risk capital if the patent's validity can be challenged in such proceedings.  Especially since a lawsuit seeking to stop a competitor from selling the patented invention can be stayed until the issue of validity is decided, which could be many years. Consequently, the AIA post-grant proceeding in the United States Patent and Trademark Office are a disincentive to invest in  startup companies based on a patented invention. 
 
CLICK HERE IF YOU WISH TO SUPPORT LEGISLATION PREVENTING A PATENTED INVENTION OF A SMALL ENTITY FROM BEING CHALLENGED IN POST- GRANT PROCEEDINGS IN THE UNITED STATES PATENT AND TRADEMARK OFFICE.
 

Connors and Associates Staff

Thomas Connors, John J. Connors, Beth Ellison and Brady Connors

MONTHLY TOPIC

The Validity of Patent Assignment Provisions

This month's newsletter examines ownership of the title to a patent in the context of employment relationships. The validity of assigning such rights in a contract has important ramifications for many proprietary industries. The underlying issue is whether an automatic assignment provision of future inventions to an employer is essentially a transfer of title to the employer. Employers prefer this type of provision because it eliminates the hassle, expense and legal obstacles involved in obtaining an assignment to an invention once the employee is no longer affiliated with the company. 

   
Under current law, as set forth by the U.S. Court of Appeals for the Federal Circuit over 20 years ago, if an employee/patentee "hereby assigns" future inventions in an employment contract, then this serves as a valid transfer of property rights to the employer. The U.S. Court of Appeals for the Federal Circuit recently revisited this issue in 2015. In the case of Alexander Shukh vs. Seagate Tech . , the petitioner alleged that the contractual assignment of a potential future invention does not in fact confer title to that invention to the employer. This argument is rooted in traditional concepts of property law that state that current sales of future goods simply present a contract to sell, as provided under the Uniform Commercial Code (UCC). Thus, an automatic assignment provision would not be sufficient to convey ownership rights; rather an independent contract at the time of invention would be necessary to grant legal title to the property (the invention) to a third party. In October, 2015, the federal circuit upheld its previous decision, but the matter is likely to be further reviewed on appeal. 


The specific language of the automatic assignment provision has been viewed as the determinative factor in characterizing the assignment. In one Federal Circuit case (DDB Technologies, LLC v. MLB Advanced Media, L.P.) a former employee argued that his interests in a number of patents had not been assigned to his former employer. The Court focused on whether the clause actually established an "automatic assignment" or simply an "obligation to assign" (as the petitioner in in the Alexander Shukh case alleged). The contractual language provided that the employee "agrees to and does hereby grant and assign" all rights in future inventions in the course of his employment. According to the Court, this language represents an explicit assignment of rights in the invention, such that no additional action is mandated after the creation of the invention and title is assigned by operation of law.     
Myron S. Steeves, Dean of Trinity Law School, and John J. Connors

Automatic assignment provisions are fairly standard in certain industries. If the current legal status of such agreements is overturned, how would employers structure their employment contracts? First, contracts that contain automatic assignment clauses would be deemed void. In all likelihood, employers would be required to negotiate individualized assignment provisions with each employee for each invention that the employee participated in developing. To preserve their legal rights, employers might consider executing a separate patent assignment agreement with the inventor/employee when the invention is created. Given existing challenges to this rule in the courts, it may be prudent for employers to consider how to implement these changes in the near future.


In the context of employment agreements, employers and employees should diligently review the language in their automatic assignment provisions to be certain that the language reflects their understanding of their individual rights to the title of future patents. While current law treats such clauses as an automatic transfer of title, the inconsistency between federal law and common law property principles suggests that there may be further scrutiny of this holding in the future. My office can provide thorough and up-to-date legal advice tailored to your concerns about intellectual property rights. 

Contact us at (951) 395-9910 or visit my website at www.inventorbeware.com

 

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