Don’t Just Agree to Transfer Patent Rights—Do It!

Intellectual Property News

Client Alert


Patent owners and employers: Pay attention to the words in assignment and employment agreements that transfer patent ownership to you. A recent Federal Circuit case once again emphasizes the need to use particular language to transfer patent rights. Failure to do so may risk losing the right to enforce your patents, or even any rights to the patent at all.

Advanced Video Technologies LLC (AVT) brought a patent infringement suit against HTC Corporation (the maker of the Blackberry™ phone). The patent listed three co-inventors, including Vivien Hsiun, who worked at the time for AVT’s predecessor in interest, Infochips Systems Inc. (Infochips). At the time the relevant patent application was filed, Infochips had gone out of business, and by a number of transfers, the patent rights in that application were eventually assigned to AVC Technology, Inc. (AVC). At this time, Hsiun refused to sign an assignment transferring her patent rights to AVC. AVC requested that the U.S. Patent & Trademark Office (USPTO) allow it to proceed with the application as the sole assignee. In support of this request, AVC included an employment agreement between Infochips and Hsiun. The USPTO granted the petition, and the patent was issued in the name of AVC. Eventually, by a series of additional transfers, the patent was transferred to AVT. AVT then sued HTC and others for patent infringement.

The entire issue in the case before the Federal Circuit concerned whether the initial employment agreement between Hsiun and Infochips actually transferred Hsiun’s rights in the patent to Infochips. If Hsiun still owned any rights, then by law Hsiun had to join the suit in order for the case to proceed—but as an independent patent owner, she could not be forced to join. If she did not join, the case would be dismissed for failure to join a necessary party. (This is a separate requirement that all patent co-owners must be joined to a patent lawsuit. It is somewhat controversial, and one of the judges criticizes it in a concurrence. However, that is largely settled law and not the issue that this decision turned on.) The district court found that Hsiun had not relinquished her rights and dismissed the case, and AVT appealed.

AVT relied on three provisions in the employment agreement with Hsiun to show ownership, which are provided in bold and italics below:

I agree that I … will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions … which I may solely or jointly conceive or develop or reduce to practice … during the period of time I am in the employ of the Company.

I 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 … resulting from any such application assigned hereunder to the Company.

The Federal Circuit held that none of these three provisions effectively assigned the invention from Hsiun to Infochips. Treating the “will assign” language first, the Federal Circuit followed long-standing precedent holding that a clearly stated promise to do something in the future (e.g., “I will assign”) does not cause a present assignment and transfer of rights (e.g., “I do assign”). Turning to the “will hold in trust” language, the Federal Circuit found that a beneficiary’s assets held “in trust” by a trustee does not mean the beneficiary has legal title to the asset. The “hold in trust” language could create an action for AVT against Hsiun for breaching that trust arrangement and allow AVT to seek to transfer the patent rights under state law. But this by itself did not actually transfer legal title to AVT. Finally, the “quitclaim” provision only waived and quitclaimed any rights that Hsiun had “assigned hereunder”—and as noted above, Hsiun’s agreement to “assign in the future” did not actually assign any rights under the employment agreement. Therefore, the Federal Circuit held that Hsiun still jointly owned legal title in the patent with AVT. Because Hsiun would not join the suit voluntarily, the Federal Circuit affirmed the dismissal of AVT’s suit.

This decision stands as another warning to patent owners and employers about the pitfalls that can thwart the acquisition and enforcement of patent rights. Patent and invention assignments must be in writing, and they must  cause a present transfer of rights from the inventor to the prospective owner. It is not enough to say that the employee “will assign” the rights in the future or “hold in trust” such rights for the employer’s benefit. The assignment must actually assign the patent rights. This holds true not just in the employment context, but for any patent assignment.

Employers, check your employment agreements and policies. Don’t just have your employees agree to assign patent rights later—make sure they do it now!