Addressing whether a patent owner with incomplete ownership interest had standing to sue, the US Court of Appeals for the Federal Circuit upheld a district court’s decision, finding that the plaintiff did not have full ownership of the asserted patent by virtue of an inventor’s employment agreement with the patent owner’s transferee. Advanced Video Technologies LLC v. HTC Corp., et al., Case Nos. 16-2309; -2310; -2311 (Fed. Cir., Jan. 11, 2018) (Reyna J) (O’Malley, J, concurring) (Newman, J, dissenting).
Advanced Video sued HTC on a patent relating to a full duplex single chip video codec. Advanced Video obtained ownership of the patent through a series of title transfers that originated from Infochips Systems. Of the three inventors listed on the patent and employed by Infochips, one (Hsiun) refused to assign her ownership interest in the invention despite being required to under her employment agreement. HTC moved to dismiss the case for lack of standing because Hsiun was not a party to the suit.
Advanced Video argued that Hsiun’s employment agreement transferred ownership rights to Infochips and subsequently to Advanced Video. The employment agreement at issue contained three relevant provisions:
- A “will assign” provision
- A “trust” provision
- A “quitclaim” provision
Under the “will assign” and “trust” provisions, Hsiun agreed to make a full written disclosure that Infochips would hold in trust, and further agreed that she would assign, all rights to any and all inventions. Under the “quitclaim” provision, Hsiun agreed to waive all claims she had or may have relating to infringement of the patent. The district court dismissed the case, finding that these provisions did not create a transfer of Hsiun’s ownership rights and that Advanced Video lacked standing because Hsiun was not a party to the suit. Advanced Video appealed.
On appeal, the Federal Circuit found that the “will assign” provision did not create an immediate assignment of rights in the invention to Infochips. The Court agreed with the district court that the word “will” in the provision invokes a promise to do something in the future and does not create a present assignment. Advanced Video argued that even if ownership rights were not assigned, Hsiun was a trustee, and her interests in the invention were immediately placed in trust for the benefit of Infochips and subsequently Advanced Video. The Federal Circuit disagreed, finding that for purposes of standing, Infochips did not have any ownership rights since no ownership interests were ever actually transferred out of trust. As to the quitclaim provision, the Federal Circuit found that it only applied to “rights resulting from any applications actually assigned,” and because no patent rights were ever assigned to Infochips, the quitclaim provision did not apply.
The Federal Circuit ultimately concluded that Advanced Video did not have full ownership of the asserted patent and had no standing to maintain its suit. The Court suggested that to gain standing, Advanced Video must seek to enforce its alleged ownership rights against Hsiun.
Practice Note: Careful attention should be paid to the verb tense used in assignment provisions, and to whether an employee has actually made an assignment or whether the employee agrees that he or she will make the assignment.