Assignments in Employment Agreements
Most prudent companies have their employees sign employee agreements pointing out that all intellectual property created by the employees within the scope of their job belong to the company. However, the employee agreement itself may not suffice as an assignment to establish title to any patents/patent applications concerning the employee. For example, if the employee agreement does not include an express assignment, the assignment may be considered an obligation to assign rather than an assignment. This can become a big issue if an employee leaves the company and assigns his rights to someone else.
An express assignment includes present tense language such as “the party grants all rights to COMPANY X or does hereby assign to COMPANY X.” In comparison, an obligation to assign may use tense implying a future action with respect to the assignment such as “the party has agree[d] to assign” .
Such were the facts in the recent Supreme Court decision of Stanford vs. Roche. Dr. Mark Holodniy was a research fellow of Stanford researching an improved method for quantifying HIV levels in blood samples. He signed an agreement stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment at the University. Subsequently, Stanford arranged for him to do research at a company called Cetus (a company later acquired by Roche) regarding using PCR to quantify blood levels. As a condition of gaining access to Cetus, Dr. Holodniy signed an agreement stating that he “will assign and do[es] hereby assign” to Cetus his “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus. Sometime later, Dr. Holodniy returned to Stanford. Stanford obtained written assignments of rights from Holodniy, and filed and obtained several patent applications related to the procedure. Cetus was acquired by Roche in 1991.
In 2005 Stanford sued Roche for patent infringement of the HIV quantification procedure. However, Roche asserted that it was a co-owner of the patents at issue due to the agreement Dr. Holodniy signed at Cetus as a condition for gaining access.
The Court of Appeals for the Federal Circuit agreed with Roche. First, the court concluded that Holodniy’s initial agreement with Stanford was a mere promise to assign rights in the future, unlike Holodniy’s agreement with Cetus which itself assigned Holodniy’s rights in the invention to Cetus. A majority of the Supreme Court agreed with this conclusion.
A prudent reader of my blog may be thinking, didn’t you warn in your previous article that if I did not record the assignment within three months of execution, it could be voided by a subsequent assignee? Particularly, since Roche(Cetus) did not record the assignment, isn’t it void against the subsequent assignment by Stanford per 35 USC 261 ???
Although this issue was not discussed in the Supreme Court decision, it was raised by Stanford at the Federal Circuit. However, the Federal Circuit stated that Stanford had constructive inquiry notice since an organization can be charged with notice of its employee’s assignments.
NUTSHELL: Case should be taken to ensure that employee agreements are an assignment rather than an obligation to assign.