ADVANCED PATENT TOPICS FOR ENTREPRENEURS

Patent Ownership & Inventorshippresented byCrissa A. Seymour Cook

UMKC School of LawNovember 12, 2015

Patent Ownership PrimerTraditionally in the U.S., patent rights initially vest in their human inventors, and thus only inventors can apply for a patent. The inventor is the applicant. The application and/or patent can be assigned (and issue) to an organization.Under the AIA, organizations can now be named as the applicant inventors and applicants are two separate categories. Inventors can still also be applicants

Patent Ownership PrimerIn the International realm and many foreign countries, companies can apply for patents on behalf of the human inventors (usually their employees).

Dichotomy between inventor and applicant needs to be considered in terms of who has standing to both apply for the patent application and make a valid priority claim to an earlier application.

Employee created IPEssentially, any IP created by an organization is employee-created IP because only human individuals can invent under the U.S. patent scheme.

This raises several issues with respect to establishing proper ownership and transfer of invention rights to the company or organization.

** The term employee is used very broadly herein to encompass inventors that might not be traditional employees, but have some relationship to the company which may entitle the company to intellectual property created by that individual.

Employee created IPGeneral practitioners who draft agreements relating to employment, confidentiality, research, manufacturing, etc. need to be cognizant of IP provisions and the proper approach to establishing a clear chain of title.Employment considerationsEmployment agreementsAssignment formsRecordation/timing

Inventorship

An invention presumptively belongs to its creator.Employers may have an interest in the creative products of their employees.When an employer hires an employee to devote his efforts to solve a particular problem and an invention results from performance of that work, the invention belongs to the employer.Does not always require express written contract - implied contract to assign inventive rights to the employer.Caveat: Stanford v. Roche (US Sup. Ct 2011)

Stanford v. Roche2011 Supreme Court case that involved an HIV diagnostic test, developed as a result of joint efforts between Stanford and Cetus (a biotechnology company later acquired in-part by Roche).

Specifically, a Stanford researcher was working as a visitor at Cetuss facility when he first conceived of the invention and devised a procedure for the HIV test. He then returned to Stanford and completed his work to test the procedure. Stanford was ultimately granted three patents on the invention.

Roche acquired various Cetus assets, including those relating to the HIV procedure developed at Cetus. After conducting clinical trials with the procedure, Roche began commercializing the HIV test kits worldwide.

Stanford v. RocheWhen Stanford later sued Roche for patent infringement, Roche claimed co-ownership of the invention by virtue of a contract the researcher had signed with Cetus as a condition to gaining access to Cetuss facility. This contract contained a provision for the assignment of both present and future rights to inventions.

Key Cetus Contract Language: will assign and do[es] hereby assign...right, title and interest in ...the ideas, inventions, and improvements ...[made] as a consequence of [his] access to the Cetus facility

Stanford v. RocheIn contrast, Stanfords employment agreement contained a promise to assign inventions, but not a present assignment of rights.

Key Stanford language: agree to assign to Stanford the inventors right, title and interest in inventions resulting from employment there

Stanford tried to argue that it did not need a present assignment from the researcher, because its rights automatically vested in the invention by virtue of the Bayh-Dole Act.

Stanford v. RocheThe Supreme Court confirmed that since 1790 U.S. patent rights initially vest in "the inventor" and that the non-specific language of the Bayh-Dole Act did not change this setup.

The Court pointed out that Bayh-Dole only confers the option to retain rights, but that one has to have those rights in the first place before being able to retain them. Thus, although the researcher was under a duty to assign his rights to Stanford, he had actually assigned them to Cetus (and thus Roche) first.

Stanford v. Roche Take home point 1The Bayh-Dole Act allows universities, rather than the U.S. government to own inventions arising out of federally-funded research. However, what the Act does not do is automatically vest ownership in the university. Rather, the Supreme Court, in Stanford v. Roche confirmed that the patent rights, under U.S. patent law originally vest in the inventor.

The university must still obtain an effective transfer of those rights via an assignment.

Stanford v. Roche Take home point 2

The Court also stated that [P]atent law has always been different: We have rejected the idea that mere employment is sufficient to vest title to an employees invention in the employer.

Stanford v. Roche Take home point 2Even if an employee is under a duty to assign their rights, there is the potential that they can actually assign to a 3rd party if they havent already assigned them to employerEmployment agreements should include express provisions clearly addressing ownership of employee-created IP. Ownership should not be taken for granted simply because there is an employer-employee relationship.The same approach should be taken for independent contractors, etc.

Employment AgreementsHow? (1) A promise to cooperate and assign rights; or (2) An automatic, present assignment that occurs constructively at the moment of invention.

If Stanford had chosen option 2 for its employment contract, then it would have automatically taken rights in the invention (which it could then have elected to retain under Bayh-Dole.)

Employment Agreements

If possible, employment agreements should always have a present assignment of inventions.

Employment AgreementsA formal assignment should still be executed and recorded once a patent application has actually been prepared to provide notice to third parties.

Record with the USPTO within 3 months, otherwise can run into a BFP situation.

Employment AgreementsCaveat - State-specific requirements: Several states, including Kansas (KSA 44-130) have labor laws addressing the assignment of inventions.Also California, Delaware, Illinois, North Carolina, Minnesota, Utah, Washington among others

Employment AgreementsEffectively, three categories of inventions that belong to the employer under these types of agreement are inventions that: (1) Employee develops using Employers equipment, supplies, facilities, time, personnel, or trade secrets; and/or(2) Result from work he/she performs for Employer; and/or (3) Otherwise relate to Employers actual or demonstrably anticipated research and/or development,

Employment AgreementsThe employer must also provide written notice to the employee that the agreement does not apply to inventions developed entirely by employee (own time, resources, information, etc.), unless:(1) it relates directly to the existing or future business or R&D of the employer; or(2) it results from any work performed by the employee for the employer.

Employment AgreementsIt is unlawful to require an employee to sign an agreement assigning inventions developed entirely by employee (own time, resources, information, etc.) and not under one of the exceptions as a condition of employment or continuing employment.

Works for Hire

This language is sometimes used erroneously in employment agreements with respect to inventions. It is specific to copyright and does not apply to patent law.

True Work for HireEmployer owns copyrights of employees if work was prepared within the scope of employmentEmployer does not automatically own copyrights for work created by independent contractors, even if employer paid for the workIf not employer/employee relationship, must obtain a written Work for Hire Agreement and must fall within statutorily enumerated categories

WORKS MADE FOR HIRE (17 USC 101)(Copyrightable) Works made by an employee within the course of employment;

OR

(Copyrightable) Works specially ordered pursuant to a signed written work for hire agreement AND if the works are in eligible categories

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WORKS FOR HIRE CATEGORIEScontribution to a collective workpart of a motion picture or otheraudiovisual worka translationa supplementary worka compilationan instructional texta test or answer material for a testan atlas

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WORKS MADE FOR HIRE (17 USC 101)

Exemplary pitfall: Assumption that hiring a software developer to develop your website is a work for hireguess who owns the copyright on your website??

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WORKS MADE FOR HIRE (17 USC 101)

In drafting contracts that include assignment clauses, do not make the mistake of calling an invention a work for hire.

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Inventions for Hire?

Hired to invent type doctrineShop rights doctrine

May help a company successfully argue ownership, even where no specific employment provisions are present.

Inventions for Hire? Hired to invent does not apply to general employee job descriptions. It must be a specific task and the facts must make it unmistakably clear the person was hired to achieve a specific result. Shop rights does not give the company patent-type rights. Its traditionally viewed as simply a license to practice the invention.

Priority and OwnershipEqually as important as ownership.

Timing of assignment is key to establishing priority of invention in the international realm.

TimingLast minute process no time to get signature documents prepared plan to do after filingNo signature documents prepared not sure if will convert to a nonprovisional or not.

Timing- Employment agreement between Inventor A and Company contains a promise to assign.

- RESULT: Companys priority claim to the provisional application is likely invalid.

Timing- Employment agreement between Inventor A and Company contains a promise to assign.

- RESULT: Companys priority claim to the provisional application is valid.

Timing- Employment agreement between Inventor A and Company contains a present assignment.

- RESULT: Companys priority claim to the provisional application is likely valid. The formal assignment is merely confirmatory.

Priority and OwnershipCompany (or whoever is going to be named the applicant) must acquire rights before naming self as applicant and making the priority claim.

In other words: Assignment of the priority right must take place BEFORE filing the subsequent application.

Timing- Must ensure that Company has the Right to apply for the provisional application Inventor must have already assigned or be under an obligation to assign his/her rights to Company.- There must be some nexus between the Company and the Inventor at thetime of filing. (Boston Scientific Scimed v. Medtronic Vascular (Fed. Cir. 2007))

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Practice Pointers

Assignments should contain a transfer of the right to claim priority.If practice in International realm, should be aware of assignment requirements of key jurisdictions.Generally, want the assignors signature to be notarized. In addition, some places like Europe actually require both parties to sign. So need to also get the assignees signature (does not have to be notarized).

Practice PointersFinal point: Many of these issues are not encountered during prosecution of the patent application. They are only raised during litigation when you try to assert the patent against someone this is the key time when ownership and priority rights matter most!

Any Questions?

Crissa A. Seymour Cookccook@hoveywilliams.com913.647.9050

Thank You!

Hovey Williams LLP84 Corporate Woods10801 Mastin Blvd., Suite 1000Overland Park, KS 66210913.647.9050www.hoveywilliams.com

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