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Patentee Surrendered Ownership to Asserted Patents in Employment Agreement

July 26, 2001

Decision icon Decision

Last Month at the Federal Circuit - August 2001

Judges: Gajarsa (author), Mayer, and Michel

In Imatec, Ltd. v. Apple Computer, Inc., No. 00- 1262 (Fed. Cir. July 21, 2001) (nonprecedential decision), the Federal Circuit affirmed a district court’s decision that Imatec, Ltd. (“Imatec”) and Dr. Hanoch Shalit lacked standing to bring suit for infringement of three U.S. patents (collectively the “Shalit patents”) because they did not own the patents.

The Shalit patents are directed toward systems for matching an image displayed in one format to that same image displayed in another format. In particular, these patents address the problem of accurately matching an image displayed on a video monitor to a photograph of the image or to the image displayed on a second monitor.

Dr. Shalit, President and Chairman of Imatec, was an employee of Fonar Corporation (“Fonar”) prior to founding Imatec. While at Fonar, Dr. Shalit developed a system to produce accurate hard-copy images of a magnetic resonance image (“MRI”) scan as viewed on a video monitor. Dr. Shalit left Fonar on February 14, 1988. Nine days later, Dr. Shalit filed an application for the first of the Shalit patents.

Imatec sued Apple Computer, Inc. (“Apple”), alleging that Apple’s ColorSync software that matches the colors of images on various computer peripherals, such as printers, scanners, and monitors, infringed the Shalit patents. Apple filed a motion to dismiss for lack of standing and a motion for SJ of noninfringement. The district court had held that Imatec lacked standing to bring suit for infringement of the Shalit patents because the employee agreement (“the Agreement”) Dr. Shalit entered into while an employee of Fonar had covered the Shalit patents. The Agreement, the district court determined, had assigned the rights to the inventions of the Shalit patents to Fonar. The district court further held that Apple’s ColorSync software did not infringe the claims of the Shalit patents.

On appeal, Imatec argued the Agreement specifically exempted the Shalit patents from its scope by providing a designated space for employees to exclude from its scope patents covering certain inventions. In that space, Dr. Shalit listed “single step laser printing” and “photographic video recording for keeping records of video tape content.” Imatec argued that Dr. Shalit intended the phrase “photographic video recording for keeping records of video tape content” to cover the Shalit patents because the invention of the Shalit patents involved printing of images displayed on video monitors that were generated from a video tape.

The Federal Circuit, applying New York state law to construe the scope of the Agreement, rejected this argument. The Court determined that the focus of the Shalit patents is to ensure accurate reproduction of an image displayed on a video monitor. The Court noted that the disputed exemption phrase not only failed to suggest processing an image to generate accurate reproductions, but failed to even mention the display of images or the use of a monitor. And, in contrast to the Shalit patents, the Court identified the use of “video tape” as the critical aspect of the invention Dr. Shalit had sought to exempt. While video tape was listed in the Shalit patents as one alternative for the source of an image, the Court recognized that the use of video tape was not critical to the operation of the Shalit patents. The Court also noted that Fonar had attempted to avoid this type of dispute by devoting an entire paragraph of the Agreement to instruct employees to clearly document the subject matter the employee intended to exempt. The Court weighed the fact that Dr. Shalit had failed to do so against him. Thus, the Court concluded that the Agreement’s language was clear and unambiguous and that the exemptions did not accurately describe the Shalit patents. Accordingly, the Court held that both Imatec and Dr. Shalit lacked standing to bring suit for infringement of the Shalit patents and that the issue of infringement was therefore moot.