Federal Circuit Affirms That Obligation-To-Assign Term In Employment Agreement Is Not Sufficient To Give Employer Standing To Sue For Infringement
On January 11, 2018, the United States Court of Appeals for the Federal Circuit issued an opinion affirming the district court’s decision that an obligation to assign, without an actual assignment, does not transfer ownership in a patent. Advanced Video Technologies LLC v. HTC Corp., appeal nos. 2016-2309, 2016-2310, 2016-2311. Ownership in a patent initially vests with the named inventors, each of whom is a co-owner of a pro rata undivided interest in the patent. Because each inventor owns a pro rata undivided interest, he or she may take actions without approval of any other co-owner. For example, the inventor may make or sell a product covered by the patent, non-exclusively license others to make or sell such a product, or transfer by assignment ownership to a third party. Where a patent is co-owned by more than one party, Federal Circuit jurisprudence requires that all co-owners must be joined to confer standing to bring a lawsuit against an alleged infringer.
The patent at issue listed three inventors that, at the time of the invention, were employed by a company named Infochips. It was undisputed that two of the inventors assigned their ownership rights. However, the third inventor, Ms. Hsiun, refused to assign her rights. The defendants (HTC, Blackberry and Motorola) argued that plaintiff Advanced Video lacked standing because Ms. Hsiun—a co-owner of the patent at issue—was not a party to the lawsuit. Advanced Video countered that Ms. Hsuin’s employment agreement with Infochips (of which Advanced Video now owns the rights) transferred her ownership interests. Advanced Video focused on three provisions in the agreement. First, that Ms. Hsuin “will assign to” Infochip “all . . . right, title and interest in and to any and all inventions.” Second, that Ms. Hsuin “will hold in trust for” Infochip all such rights. And, third, that Ms. Hsuin executed a quitclaim providing that she “hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have infringement [sic] of any patents, copyrights, or mask work rights resulting from any such application assigned hereunder to the Company.”
District Court Judge Colleen McMahon of the Southern District of New York agreed with the defendants that the employment agreement was prospective in nature and, thus, did not affect any actual transfer of Ms. Hsuin’s rights. Because all co-owners were not parties to the lawsuit, the district court dismissed the case for lack of standing.
On appeal, the Federal Circuit analyzed the three provisions and found them insufficient to transfer ownership. It determined that the “will assign” language creates only an obligation to assign; it does not create an actual or immediate assignment. The “will hold in trust” language similarly fails because, even assuming the rights were placed in the trust, such rights were never transferred out of the trust in favor Advanced Video. And, while Advanced Video potentially could seek to enforce the trust obligations against Ms. Hsiun, it had not done so. Finally, with respect to the quitclaim provision, while Ms. Hsuin waived her rights in what she assigned, the provision has no application because Ms. Hsuin never actually assigned any rights. Accordingly, the Federal Circuit affirmed.
This case clarifies that an obligation to assign is not itself an assignment sufficient to confer standing to sue for patent infringement in an Article III court. Practitioners would be wise to include present-tense language in any assignment or employment agreement—such as “I hereby assign any and all rights, title and interest in and to . . .”—that effectuates an immediate, present assignment.