Agreement to assign to employer requires separate assignment; dismissal for lack of standing vacatedOctober 1, 2007

In a decision released late Friday, the Federal Circuit vacated and remanded a district court's decision that a plaintiff did not have standing to sue for patent infringement. At issue was whether a joint inventor of the patent had assigned his interest in the patent to a third party, thereby making the third party a necessary party to the case. The court concluded that the employment agreement signed by the joint inventor did not immediately assign all inventions made by that inventor when they were made, but instead only created an obligation to assign. Because the assignment was never completed, and the third party subsequently disclaimed having any interest in the patent, the court held the plaintiff had standing to sue for infringement alone. More detail of IpVenture, Inc. v. ProStar Computer, Inc. after the jump.

The plaintiff, IpVenture, is the assignee of the '235 patent entitled "Thermal and power management for computer systems." The patent application leading to the '235 patent was filed in 1994 while one of the inventors, C. Douglass Thomas, was employed by Hewlett-Packard as a patent attorney. When he was hired, Mr. Thomas entered into agreement providing that (emphasis added):

This Agreement also concerns inventions and discoveries (whether or not patentable) . . . (hereinafter called "Proprietary Developments") that are conceived or made by me alone or with others while I am employed by HP; that relate to the research and development of the business of HP, or result from work performed by me for HP; or that do not qualify under the prevailing provisions of California Labor Code Section 2870. Such Proprietary Developments are the sole property of HP, and I agree:a. to disclose them promptly to HP; b. to assign them to HP; and c. to execute all documents and cooperate with HP in all necessary activities to obtain patent, copyright, mask work, and/or trade secret protection in all countries, HP to pay the expenses.

On April 20, 2005, IpVenture and Hewlett-Packard entered into a retroactive agreement stating that:

IpVenture is the sole assignee of [the '235 patent and other patents] . . . HP has never asserted any ownership rights to the IpVenture Patents and agrees to forbear from asserting such rights at anytime in the future . . . [Hewlett-Packard] has no rights . . . and never has had any legal or equitable rights, including any shop rights, to any of the IpVenture Patents.

This agreement was signed almost two years after IpVenture filed suit against two computer manufacturers, ProStar Computer, Inc. and Midern Computer, Inc., alleging infringement of the '235 patent. The district construed the "I agree to assign" language of the employment agreement to be a present assignment of inventions made by Mr. Thomas, meaning it served as an immediate assignment of all inventions when they are made. The district court also held that the 2005 agreement could not cure a "standing" defect if applied retroactively. Thus, the district court concluded that Hewlett-Packard had an ownership interest in the '235 patent at the time the suit was filed and IpVenture lacked standing to sue for patent infringement.The Federal Circuit disagreed. The court noted that the employment agreement indicated that Mr. Thomas "agree[d] to assign," rather than "hereby assign[ing]" his inventions to HP. The court also highlighted the language of the 2005 agreement stating that Hewlett-Packard "never has had any legal or equitable rights" to the '235 patent. According to the court, this language reinforced that the employment agreement entered into by Mr. Thomas contained an agreement to assign rather than a present assignment. This distinction was significant, as an agreement to assign creates an option requiring an additional written assignment to grant Hewlett-Packard an ownership interest, rather than an ownership interest that immediately vests upon creation.This case underscores the importance of employment agreements in the context of intellectual property. In some cases, a company would prefer to have an immediately-vesting interest in employee inventions (or other potential intellectual property, such as copyrights), and as such an agreement with the immediately vesting language would be a better choice. It is at least a reminder to ensure companies are aware of the legal effect of agreements they have in place with their employees, so there isn't an unwelcome surprise down the road.To read the full decision in IpVenture, Inc. v. ProStar Computer, Inc., click here.