In order for a patent assignee to recover damages for infringement occurring before the assignee obtained ownership of the patent, the assignment must expressly so state. The Supreme Court said “it is a great mistake to suppose that the assignment of a patent carries with it a transfer of the right to damages for an infringement committed before such assignment.” Moore v. Marsh, 74 U.S. (7 Wall.) 515, 522 (1868).
This is illustrated in the case of Messagephone, Inc. v. Svi Sys., Nos. 99-1471, 99-1478, 2000 U.S. App. LEXIS 19976 (Fed. Cir. 2000). Messagephone sued Svi Systems and Holiday Inn Express alleging infringement of U.S. Patent Nos. 5,323,448 and 5,475,740. These patents were directed to a system that enables hotel guests to order certain amenities, such as movies, in their hotel rooms without incurring charges on their hotel bill.
When the patents where granted in 1994 and 1995, they were assigned to Spectradyne, Inc. On November 7, 1996, Spectradyne assigned title in the patents to Messagephone. This assignment granted Messagephone the “entire right, title, and interest” in the patents. But the assignment was silent regarding Messagephone’s right to sue for infringement that occurred before that date. The Court found that since the assignment did not expressly grant Messagephone’s right to sue for infringement occurring before the date of the assignment, Messagephone could not do so.
The court said, “As a general rule, only a party that possessed legal title to a patent at the time the infringement occurred can bring suit to recover damages for such infringement.” It continued, “A narrow exception to the foregoing rule is that a party may sue for infringement transpiring before it acquired legal title if a written assignment expressly grants the party a right to do so; that right, however, must be articulated explicitly in the assignment and will not be inferred by the court.”
Messagephone tried to fix this, after the lawsuit was filed, by executing a nunc pro tunc (retroactive) assignment of the right to sue for past infringement. But the court said executing it after the lawsuit was filed was too late.
The lack of express language assigning the right to sue for past infringement and damages cost Messagephone one or two years worth of damages, which could be substantial.
If the assignee desires to pursue claims for past infringement occurring before the date of the patent assignment, the patent assignment should include expressly the right to sue and recover for past infringements and damages.
An agreement to assign is not the same as a present assignment of a patent or patentable invention and does not have the same effect. An agreement to assign often requires the execution of an additional assignment to transfer legal title, whereas a present assignment does not. It is possible to assign rights to future patentable inventions with the proper language.
In many cases, one will want to avoid executing a further assignment to gain legal title, and prefers the assignment to occur on the execution of one document. Why? Because what if the inventor / intended-assignor is later unavailable or uncooperative? The situation is then more complicated, expensive, and time consuming. In some cases, litigation may be necessary to force the inventor/assignor to execute an assignment or to otherwise vest an intended-assignee with legal title.
While the applicable state law usually determines the interpretation of an agreement regarding patent ownership, Federal Circuit law determines whether an agreement effects a present assignment of a patent. Board of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys., 583 F.3d 832 (Fed. Cir. 2009). The following cases demonstrate the difference between the language of: “shall be …exclusive property of”, “agrees to assign,” “will assign,” and “hereby assigns.”
“Shall Be and Remain Exclusive Property Of“
Two inventors were named on US Patent 6,075,451: Mayer Micheal Lebowitz and James Seivert. Without an agreement or rule of law otherwise, the co-inventors are presumptive joint legal owners of the patent. 35 USC 116, 262.
After the inventors died, Tobi Gellman as trustee of the Mayer Micheal Lebowitz Trust sued Telular Corporation among others for infringing the patent in the case of Gellman v. Telular Corp. 449 Fed. Appx. 941 (Fed. Cir. 2011). Gellman claimed the Trust was the sole owner of the patent. The defendant(s) claimed the case had to be dismissed because the Trust was not the full owner of the patent.
Gellman claimed that Mr. Seivert was an employee of Mr. Lebowitz at Cellular Alarm and that the terms of his employment included full transfer of rights to any resulting inventions. However, the evidence of this comprised an unsigned agreement titled “agreement for consulting services.” That agreement provided as follows:
“[A]ny and all ideas, discoveries, inventions, [etc.] . . . developed, prepared, conceived, made, discovered or suggested by [Mr. Seivert] when performing services pursuant to this Agreement . . . shall be and remain the exclusive property of Cellular Alarm. [Mr. Seivert] agrees to execute any and all assignments or other transfer documents which are necessary, in the sole opinion of Cellular Alarm, to vest in Cellular Alarm all right, title, and interest in such Work Products.” (emphasis added).
The court found that even if the agreement had been signed, the language of the agreement did not effect a present transfer of ownership. The language of “shall be and remain the exclusive property” is not the same as “hereby assigned.”
Gellman argued the “remain” language indicated the invention had been fully conveyed previously. However the court found that Mr. Seivert’s contributions to the inventions remained only in equitable status until such time as Mr. Seivert “execute[d] any and all assignment or other transfer documents which are necessary . . . to vest in Cellular Alarm all right, title and interest in such inventions.” The agreement at most created an equitable obligation of Mr. Seivert to assign to Cellular Alarm. That equitable title could be converted to legal title (legal ownership) if and when Mr. Seivert actually assigned or, if necessary, through a law suit to force Mr. Seivert to execute an assignment. This did not happen. And the case was dismissed because the Trust did not have full legal title to the patent.
“Hereby Assign” v. “Agree to Assign”
It is possible for an employee to assign any and all of his or her rights to future patentable inventions. But the assignment must expressly undertake the assigning act at the time of the agreement, and not leave it to some future date.
Before visiting Catus Holodniy signed a Copyright and Patent Agreement (“CPA”) with Standford. The CPA provided, “I agree to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in . . . such inventions as required Contracts or Grants.”
Later, when visting Catus, Holodniy signed a visitor confidentiality agreement (“VBA”) which provided, “I will assign and do hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements.”
Standford secured patents naming Holodniy as an inventor. Standford sued Cetus’s successor, Roche, for infringement. Roche defended on the ground that it owned the interest of Holodniy in the patent based on the assignment provision of the VBA.
The court found that the “agree to assign” language of the first CPA to Standford was not a present assignment. Instead, it was only a mere promise to assign rights in the future. It was not an immediate transfer of expectant ownership interests. Standford might have an equitable claim against Holodniy, but Standford did not immediately gain legal title to Holodniy’s inventions as a result of the CPA.
In contrast, the court found that the “do hereby assign” language of the VBA to Cetus effected a present assignment of Holodniy’s future inventions to Cetus.
Therefore, at the time of the lawsuit for infringement, Roche–Cetus’s successor– had Holodniy’s rights in the patents and Standford did not. This demonstrates a big difference between “agrees to assign” and “do hereby assign”. The former requires additional step(s), such as the signing of another assignment document, to carryout the transfer of title/ownership, whereas the latter does not require any further step to transfer legal title in the invention.
Other cases where the language did not provide a present assignment are:
Advanced Video Techs. LLC v. HTC Corp., 879 F.3d 1314, 1317-18 (Fed. Cir. 2018) (“will assign to the Company” does not create an immediate assignment);
IpVenture, Inc. v. ProStar Computer, Inc., 503 F.3d 1324, 1327 (Fed. Cir. 2007) (employment agreement providing that the employee “agree[s] to assign” was not a present assignment); and,
Arachnid, Inc. v. Merit Indus., 939 F.2d 1574, 1580-81 (Fed. Cir. 1991) (“will be assigned” does not constitute a “present assignment of an existing invention” or “a present assignment of an expectant interest”).
Other cases where the Federal Circuit found the language of “does hereby assign” or “hereby grant” sufficient to effect an automatic transfer of later arising patent rights, include:
DDB Techs., L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284, 1290 (Fed. Cir. 2008) ( “does hereby grant and assign”);
Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed. Cir. 2000) (“hereby conveys, transfers and assigns”);
The hereby assign language effects a present assignment, according to the Federal Circuit, and should better avoid the need of executing further documents to transfer legal title to a patent or patentable invention. Even though an additional assignment or assignment conformation is often executed when a patent application is filed, including the present assignment language in an earlier employment or consulting agreement is a prudent step in case the inventor / intended-assignor is later unavailable or uncooperative.
The transfer of rights in a patent generally fall into two categories: an assignment and a license. The transfer is usually accomplished by an agreement.
Whether the agreement at issue is an assignment or a license matters because generally an assignee can sue for infringement alone, while a licensee of less than substantially all of the patent rights cannot sue for infringement alone without the patent owner.
A patent grants the owner certain rights, such as the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States. 35 U.S.C. § 154(a)(1)
Usually, an assignment transfers all of the rights* of one party in a patent to the recipient (the assignee). Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991); 35 USC 261. Also, a transfer of substantially all of the patent rights can be considered an assignment for the purposes of standing to sue for infringement. A transfer of less than substantially all of the rights, is a mere license. It is the content and legal effect of the agreement that determines whether it is an assignment or license, not its title.
In the Vaupel case, the court found the agreement at issue there transferred substantially all of the rights in the patent, where the seller retained the following rights: “1) a veto right on sublicensing by Vaupel; 2) the right to obtain patents on the invention in other countries; 3) a reversionary right to the patent in the event of bankruptcy or termination of production by Vaupel; and 4) a right to receive infringement damages.” Therefore, despite the seller retaining these rights, the agreement at issue was considered an assignment.
In contrast, in Sicom Sys. v. Agilent Techs., Inc., 427 F.3d 971, 978-979 (Fed. Cir. 2005), Canada licensed the patent at issue to plaintiff Sicom. The court found the license did not transfer substantially all of the rights, where Canada reserved the right to use the patented technology itself, to veto Sicom’s reassignment of its rights, and to sue for non-commercial infringement. Canada also retained legal title to the patent.
The line between a transfer of substantially all of the rights and less than substantially all of the rights is gray. Ignoring this issue and simplifying it, an assignment usually transfers everything (including legal title) whereas a license grants less than all of the rights and reserves rights to the person or entity granting the license.
*The Supreme Court has also said that the transfer of an undivided portion or share of a patent can also be an assignment, but then assignor and assignee must act together to sue for infringement. Waterman v. Mackenzie, 138 U.S. 252 (1891).
The case of CMS Industries, Inc. v. L. P. S. International, Ltd. is about how to loose rights in patents by not recording ownership changes with the U.S. Patent and Trademark Office (USPTO). It involved the seller trying to tell the public it was doing one thing (selling patents to a subsidiary company) while secretly reserving ownership for itself. It failed.
SEE International, Inc. assigned, in a first assignment, its rights in six patents to SEE’s subsidiary, Shoplifter International. But on the same day SEE and Shoplifter International entered into a second agreement purporting to transfer back to SEE all of the rights transferred to shoplifter under the first assignment.
The first assignment transferring rights to shoplifter international was recorded with the patent office. The second assignment was not.
Later Shoplifter International entered bankruptcy and its assets, including the six patents, were sold to a third party, Elmer Whitaker.
Whitaker’s licensee CMS filed a lawsuit against LPS international, another subsidiary of SEE. CMS Industries, Inc. v. L. P. S. International, Ltd., 643 F.2d 289 (5th Cir. 1981). LPS and SEE claimed that the second unrecorded agreement prevented CMS from winning its lawsuit and that SEE still had rights in the six patents.
But because SEE failed to record the second agreement with the USPTO, the second agreement was unenforceable against Whitaker who had no knowledge of it at the time that Whitaker acquired rights in the patents. The court held that Whitaker was the proper owner of six patents.
Patent Ownership Recording System
SEE failed because 35 U.S.C. 261, which provides “An interest that constitutes an assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.”
That means that if an assignment is not recorded at the USPTO, it will not be superior to rights obtained by a third party for value if that third party did not have knowledge of the unrecorded assignment.
This provision is similar to many state-based systems of recording ownership of land.
Section 261 encourages patent owners to file (record) evidence of their ownership of a patent with the USTPO. This allows people who enter into transactions regarding those patents to look to the public record to determine whether the person they’re dealing with is the actual owner or not.
The recording system discourages a seller from selling rights to a first person and then selling the same rights to a second person. The first person will have an incentive to record that transfer with the USPTO because of the protections provided by section 261.
If the first person records at the USPTO, the second person, before proceeding with the transaction, can check the patent office to see that the first person is the owner. The second person then will not proceed with the transaction from the original seller who no longer has rights in the patents.
Record or Be At Risk
Therefore, when you purchase patent rights it is very important for you to record at the USPTO the assignment (or other transfer document) transferring those patent rights to you. Otherwise you could lose rights in the patents to someone who purchases rights in the patents later without knowledge of your ownership/assignment.
