Inventor’s Employment Agreement Did Not Affect His Freedom to Assign and Assert Patents Broadly Related to His Employment

Authored by D. Brian Kacedon; John C. Paul; and Jon T. Self, Ph.D. 

Abstract

Although an inventor's employment agreement obligated him to assign to his employer all inventions and patents resulting from his work during his employment relating to his employer's current, anticipated, or prospective business activities, a court found that the agreement narrowly covered only particular business activities of the employer. As a result, the inventor could freely assign patents on his other inventions to third parties, who had standing to assert them in patent infringement litigation, even though the inventions and patents were generally related to the business activities of the employer.

Patent infringement defendants attempted to dismiss a lawsuit on the basis that the inventor's employment agreement obligated him to assign his rights to inventions to his employer and that the employer had title to the patents, rather than the plaintiff to whom the inventor assigned his rights.

The defendants urged the court to interpret the employment agreement as broadly covering inventions related to wireless communications technology. But the court found that the parties intended the agreement to cover only patents on the inventor's work that related to particular business activities of his employer, and not patents on the inventor's unrelated independent work, which had been assigned to the plaintiff.

Background

Odyssey Wireless sued Apple, Samsung, Motorola, & LG for infringement of patents related to wireless telecommunications technology that Odyssey acquired by assignment from the inventor, Dr. Peter Karabinis.

The defendants tried to dismiss the litigation, claiming that Odyssey Wireless had no title to the patents and therefore no standing to sue because an employment agreement between Dr. Karabinis and Mobile Satellite Ventures (MSV) resulted in an prior assignment of the patent rights to his employer MSV, leaving him with no rights to assign to Odyssey. The relevant portion of Dr. Karabinis's employment contract with MSV provided:

I [,Peter Karabinis,] agree that MSV shall own, and I hereby grant to MSV, all right, title and interest in and to all proprietary rights, including but not limited to copyrights, patents, trademarks, and trade secrets, in all work product, developments, inventions, or other materials produced by me ("Works") which refer to or result from my work for MSV during my employment by MSV and which relate to MSV’s current, anticipated, or prospective business activities . . . .

The Odyssey Wireless Decision

The court's decision in Odyssey Wireless turned on whether the sole inventor of the patent-in-suit had title to the patents when he assigned them to Odyssey Wireless's predecessor, or whether they had been automatically assigned under his employment agreement to his employer, MSV.

The court applied the contract interpretation law of Virginia according to a choice-of-law provision in the employment agreement, observing that basic rules of contract interpretation apply in Virginia, so a contract should be construed based on its plain meaning and "extrinsic evidence" may be relied on to resolve any ambiguities in the contract language.

Applying Federal Circuit precedent, the court found the "hereby grants" language of the agreement automatically assigned all rights to MSV in future inventions by Dr. Karabinis covered under the agreement without the need for any additional act of assignment.

The court then considered the language of the agreement defining the scope of invention rights covered by the agreement as those "which refer to or result from my work for MSV during my employment by MSV and which relate to MSV’s current, anticipated, or prospective business activities." The court found that the terms, "work for MSV" and "MSV’s current, anticipated, or prospective business activities" were not expressly defined and could be understood in multiple ways. Thus, the district court considered the terms to be ambiguous and resorted to extrinsic evidence to determine their intended meaning.

The defendants argued that the patents fall within the broad scope of MSV’' business activities because they generally relate to wireless communication systems and methods. Odyssey Wireless, on the other hand, argued that MSV's business activities during Dr. Karabinis's employment related specifically to repurposing and adapting satellite communication frequencies for use in terrestrial cellular communications. This differed from the subject matter of the patents, which related to using new and different waveforms.

The court sided with Odyssey Wireless, relying in large part on the conduct of the parties to the MSV employment agreement. In particular, the court was persuaded by extrinsic evidence showing that MSV and Dr. Karabinis did not intend for his separate work for his business to fall under the employment agreement. In support, the court cited evidence that 1) Dr. Karabinis took the job at MSV on the condition that he be allowed to work on ideas unrelated to his work at MSV when he was not at work; 2) MSV knew Dr. Karabinis filed patent applications using his own company, EICES; 3) MSV and Dr. Karabinis knowingly used the same patent prosecution counsel who billed for work for MSV and EICES separately; 4) In 2007, MSV discussed with Dr. Karabinis a potential license to the invention that is the parent of all the patents-in-suit; and 5) MSV never suggested that it had any rights to the inventions at issue while Dr. Karabinis worked there. Based on these facts, the Court concluded that both parties were aware that Dr. Karbinis was pursuing patents on inventions apart from his work at MSV and that both parties considered him to be the owner of such subject matter. Accordingly, the Court ruled that Odyssey Wireless had title to the patents and had standing to sue the defendants for patent infringement.

Strategy and Conclusion

This decision shows that past employment or assignment agreements of inventors can threaten an apparent title-holder’s standing to bring suit on a patent and result in disputes on ownership and standing to sue. The likelihood of such disputes may be diminished by identifying agreement terms that are undefined or can be understood in different ways and expressly defining them or reciting the details of what is covered and not covered.

Endnotes
¹The Odyssey Wireless opinion may be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2016/OdysseyWirelessIncvAppleInccasd-3-15-cv-01743-208DI186201.pdf.