Fixing Ownership of a Patent After the Fact Jonathan D. Ball, Ph.D., Esq. King & Spalding, LLP I.

Introduction

Developing intellectual property is central to success in many industries. The ability to protect intellectual property once created, especially by obtaining patents, is critical to creating and preserving the value of the intellectual property. Many companies invest substantial sums filing patent applications to protect their inventions, yet overlook important aspects of their ownership of these valuable assets. This paper touches on some best practices for perfecting patent ownership, explores some of the pitfalls that may arise where ownership is not perfected, and reviews some strategies for correcting the ownership of a patent after its creation. II. Getting It Right the First Time

The law of patent ownership in the United States is initially dictated by the law of inventorship. It is from here that many of the more difficult issues of patent ownership arise. After the actual inventors are identified, the law of patent ownership is essentially co-extensive with contract law and rarely do problems arise that could not have been avoided by an ounce of prevention. The following discussion focuses on best practices for securing patent ownership in the first instance. A. Ownership Springs From Invention

United States patents are applied for by or on behalf of 1 the actual inventor of the subject matter for which a patent is sought. 2 Because it is common for an invention to be made by more than one inventor, the Patent Act provides that in such cases the multiple inventors shall apply for patent jointly. 3 As part of the patent application, the inventor or each joint inventor must execute an oath that he believes himself to be the original and first inventor of the subject matter. 4 Failure to name the correct inventive entity may jeopardize the validity of a patent granted from the application. 5 While inventorship is distinct from ownership, it may be said that

In the case of death or incapacity of an inventor, a legal representative of the inventor may apply for a patent under 35 U.S.C. 117. Also, if an inventor refuses to execute an application for patent, or cannot be found or reached after diligent effort, an assignee or other party with sufficient proprietary interest in the invention may make application for patent on behalf of and as agent for the inventor under 35 U.S.C. 118. Finally, if a joint inventor refuses to join in an application for patent or cannot be found or reached after diligent effort, the other joint inventor may file the patent application on behalf of himself and the omitted inventor. 35 U.S.C. 116.
2 3 4 5

35 U.S.C. 111(a)(1) 35 U.S.C. 116 35 U.S.C. 111(a)(2) and 115 35 U.S.C. 102(f)

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[o]wnership springs from invention, 6 since under United States patent law, an application for patent is filed in the name of the inventor(s). In the absence of an agreement transferring ownership to another entity, either by operation of law or contract, ownership of the invention and legal title to any patent or patent application covering the invention resides with the inventive entity. 7 Thus, in the case of a sole inventor, title to the patent vests solely in that inventor, and in the case of joint inventors, absent an agreement providing otherwise, each are joint owners of the patent, enjoying the same exclusive rights as single inventors, and may exercise those rights without the consent of and without accounting to the other owners. 8 Properly identifying the actual inventors 9 of the subject matter is therefore critical, not only because the validity of any patent covering the invention may be jeopardized by failure to do so, but because each of the actual inventors are, by default, co-owners of the patent or application. An actual inventor that is not listed on a patent may nevertheless have an ownership interest in the patent, although this ownership interest may not be enforceable until it is so decreed by a court, 10 possibly several years after the fact and after that inventor has left the company and assigned his or her interest to a third party. 11 Therefore, a would-be assignee should make every effort to identify the actual inventors, in close cases seeking counsel on the issue, and obtain assignments from each of the actual inventors identified. While in some situations a carefully drafted employment agreement having an automatic assignment clause mitigates some of the risk of inadvertently omitting an actual inventor, the effort spent on identifying the actual inventors is nevertheless necessary because (1) the actual inventors must themselves apply for the patent, and (2) confirmatory assignments from each inventor not only obviate the need to prove that an invention was within the scope of the general patent assignment clause of an employment agreement, but also must be filed in many foreign jurisdictions as evidence that the applicant, which in most foreign jurisdictions is the assignee, has the appropriate ownership interest to prosecute the patent application. In addition, as discussed below, recording of an executed assignment perfects the transfer and protects the assignee against subsequent purchasers. Especially problematic ownership disputes may occur when inventions arise out of a collaboration with an independent contractor or from a joint development project with another company. In both situations, it is common for the inventive entity to comprise employees from two or more companies, each of which may therefore have an ownership interest in the
6 7

Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996)

See Beech Aircraft Corp. v. Edo Corp., 990 F.2d 1237, 1248 (Fed. Cir. 1993) (At the heart of any ownership analysis lies the question of who first invented the subject matter at issue, because the patent right initially vests in the inventor who may then, barring any restrictions to the contrary, transfer that right to another, and so forth); 37 C.F.R. 3.73(a) (The inventor is presumed to be the owner of a patent application, and any patent that may issue therefrom, unless there is an assignment.)
8 9

35 U.S.C. 262; See Ethicon, Inc. v. United States Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998). The term actual inventor is used to refer to the inventors in fact, which may be different from the inventors listed on

the patent. An actual inventor can initiate a civil action to be added as an inventor on a patent under 35 U.S.C. 256 which provides that a court before which such matter is called in question may order correction [of inventorship] of the patent on notice and hearing of all parties concerned and the Director shall issue a certificate accordingly.
11

10

See e.g., Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998)

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intellectual property. In these instances, ownership of inventions should be clearly established by written agreement in advance of the work. B. Patent Ownership May Be Assigned

By statute, patents have the attributes of personal property and are thus freely alienable, but, like real property, any transfer of a patent or patent application must be made by an instrument in writing. 12 A written transfer of a patent or patent application is called an assignment, which is defined by the Patent Office as a transfer by a party of all or part of its right, title and interest in a patent or patent application. 13 More particularly, an assignment is a transfer in writing of (1) the whole patent, comprising the exclusive right to make, use, and sell the invention throughout the United States; (2) an undivided part or share of that exclusive right; or (3) the exclusive right under the patent within and throughout a specified part of the United States. 14 If a patent application has been assigned, any patent issuing thereon will be granted to the assignee of the inventor of record, 15 who will hold the legal title to the granted patent.16 If, as discussed above, the patent application has not been assigned, legal title to a patent granted thereon will vest in the one or more inventors. Either way, the legal title holder may further assign its interest in the patent to one or more additional assignees. The hallmark of an assignment is the transfer of all substantial ownership rights, in whole or in part, as opposed to a license, where title remains with the patentee and only permission is granted to another to engage in one or more of the exclusive acts. Thus, a patent assignment should evidence a clear and unmistakable intent to transfer ownership by using language such as hereby assigns all rights, title, and interest. It is the extent of the actual rights that are transferred between parties that controls whether a transaction will be held to be an assignment or a mere license. 17 The assignment document should state that the invention itself is being assigned as well as any patent applications and patents covering that invention. This removes any ambiguity as to whether the initial assignment is intended to reach continuing patent applications, although this should be made explicit in the agreement. While not required to be valid, an assignment should be notarized because it constitutes prima facie evidence of the execution of the assignment, grant, or conveyance of a patent or patent application 18

35 U.S.C. 261; United States v. Solomon, 825 F.2d 1292, 1296 (9th Cir. 1987) (in the context of an assignment of a patent, they can agree verbally until the cows come home, and that patent isnt assigned until theres a writing.) 37 C.F.R. 3.1; Rite-Hite Corp. V. Kelly Co., 56 F.3d 1538, 1551 (Fed. Cir. 1995) (assignment is the conveyance of legal title in patent law.)
14 15 16 17 13

12

Waterman v. Mackenzie, 138 U.S. 252, 255 (1891) 35 U.S.C. 152 Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1578, fn. 2 (Fed. Cir. 1991)

Waterman v. Mackenzie, 138 U.S. 252, 256 (1891) (Whether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions.); see also Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991) (holding that a court must look to the language of the agreements and surrounding circumstances to determine if all substantial rights were transferred).
18

35 U.S.C. 261

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Under basic contract principles, a valid assignment must be supported by consideration. The nature of each inventors employment must be evaluated insofar as continued employment, in some cases may not constitute sufficient consideration for an assignment. 19 Participation in bonus programs or other like incentives tied to the execution of patent assignments might be useful, alone, or to augment other forms of consideration such as continued employment or monetary consideration. C. Recording the Assignment

While an assignment, in writing, is alone sufficient to transfer ownership of a patent or patent application, the ownership interest should be perfected by recording the assignment at the United States Patent and Trademark Office. 20 The Patent Act provides that 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. 21 Accordingly, the assignment should be recorded within three months of its execution to fully secure ownership rights as against subsequent purchasers. To be recorded by the Patent and Trademark Office, only a copy of the assignment, not the original, 22 should be submitted, and if the original assignment document is in a language other than English, an English translation signed by the translator must be submitted. 23 The assignment must be accompanied by a cover sheet 24 and the recording fee. 25 As to matters of form, the assignment must identify the subject patent by the patent number or the subject patent application by series code and serial number. If the patent application has not yet been filed, the assignment must identify the patent application by the name of each inventor and the title of the invention so that there can be no mistake as to the identity of the subject application.26 A single assignment document may effect transfer of multiple patents and applications. If a properly worded assignment that transfers all rights in the inventions disclosed in the patent or applications, and preferably recites that applications include any continuations, divisionals, reissues, reexaminations, and extensions thereof, has been recorded for a parent patent application, it is usually not necessary to record an assignment for divisional or continuation patent applications claiming priority to that parent application because the assignment of the parent gives ownership rights to the common subject matter of the divisional or continuation application. 27 On the other hand, the Patent and Trademark Office requires a new
Simmons v. California Institute of Technology, 209 P.2d 581 (CA. 1949); University Patents, Inc. v. Kligman, 762 F. Supp. 1212 (E.D. Pa. 1991). 20 Gaia Technologies, Inc. v. Reconversion Technologies, Inc., 93 F.3d 774, 777 (Fed. Cir. 1996) (the recording of an assignment is necessary only to protect the assignee from subsequent bona fide purchasers without notice.).
21 22 23 24 25 26 27 19

35 U.S.C. 261 37 C.F.R. 3.24 37 C.F.R. 3.26 37 C.F.R. 3.28 37 C.F.R. 3.41 37 C.F.R. 3.21 Manual of Patent Examining Procedure (M.P.E.P.) 303

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assignment and recordation is required for continuation-in-part applications because the disclosure of such an application goes beyond the disclosure in common with the parent application. 28 Similarly, a new assignment must be recorded for a non-provisional application claiming priority to a provisional application, for which an assignment was previously recorded, only if the disclosure of the non-provisional application goes beyond the disclosure of the provisional. 29 D. Patent Ownership in the Employment Context

Whether the inventor or a subsequent assignee of the inventor, it is the legal title holder, referred to as the patentee in the Patent Act,30 who enjoys the exclusive rights to make, use, sell, offer to sell, and import the patented invention.31 In the case of an employed inventor, these rights may potentially be exclusive even as to the inventors employer unless the employer has taken the necessary steps to obtain title to the patent. The default rule is that an employee owns his or her inventions, subject to the two exceptions discussed below, even though the invention was made during working hours. 32,33 1. Employer Rights Under Law

Where an employee is hired for the specific purpose of making an invention, the employer may own any invention resulting from such work based on an implied-in-fact contract to assign patent rights. 34 The same may be true where the employee was originally hired for more general work but subsequently is set to experimenting with the view of making an invention. 35 On the other hand, inventions that result from employment of a more general
28 29 30 31 32

M.P.E.P. 306 M.P.E.P. 306.01 35 U.S.C. 100(d) 35 U.S.C. 281

United States v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933); Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996); Banks v. Unisys Corp., 228 F.3d 1357, 1359 (Fed. Cir. 2000) (The general rule is that an individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment. There are two exceptions to this rule: first, an employer owns an employee's invention if the employee is a party to an express contract to that effect; second, where an employee is hired to invent something or solve a particular problem, the property of the invention related to this effort may belong to the employer.).
33 The employer may also have a royalty free, non-exclusive, non-transferable license to practice the invention under the shop right doctrine. See e.g., McClurg v. Kingsland, 42 U.S. 202 (1843); Gill v. United States, 160 U.S. 178 (1896); and United States v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933).

Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996); See also United States v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933) (One employed to make an invention, who succeeds, during his term of service, in accomplishing that task, is bound to assign to his employer any patent obtained. The reason is that he has only produced that which he was employed to invent. His invention is the precise subject of the contract of employment. A term of the agreement necessarily is that what he is paid to produce belongs to his paymaster.); Standard Parts Co. v. Peck, 264 U.S. 52, 58 (1924).
35 Houghton v. United States, 23 F.2d 386, 390 (4th Cir. 1928) (The right of the employer depends, not upon the terms of the original contract of hiring, but upon the nature of the service in which the employee is engaged at the time he makes the discovery or invention, and arises, not out of the terms of the contract of hiring, but out of the duty which the employee owes to his employer with respect to the service in which he is engaged.); See also Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996) (employer may still claim and employees inventive work where the employer specifically hires or directs the employee to exercise inventive faculties.)

34

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nature, such as basic research and product improvement, typically belong to the inventor. 36 While the specificity of the task for which the employee was hired is often controlling (e.g., was the employee hired specifically to solve a certain problem?), there exists no bright-line formulation for ascertaining whether one was employed to invent, and consequently district court decisions are inconsistent on similar facts. 2. Employer Rights Based on Fiduciary Duty

Certain key employees of a company owe a fiduciary duty to the company, typically including officers and directors, as specified by state law. As part of the fiduciary duty, such employees have an obligation not to compete with the company and thus may be obligated to assign competing inventions to the company that were created during the employment, provided that the fiduciary duty existed at the time the invention was made. 37 3. Employer Rights Under Contract

The employed to invent rule discussed above is a default rule which operates in the absence of express agreement between the parties. An inventor may, of course, freely consent by contract to assign all rights in inventive ideas to the employer and may enter into an employment agreement to that effect. 38 It is therefore wise for employers to clearly delineate ownership of inventions, patent applications, and patents at the inception of employment, though the precise language of the patent assignment clause in an employment agreement can have surprisingly disparate consequences. a. Promise To Assign Future Invention

Many employment agreements contain language providing that the employee agrees to assign to the employer inventions that relate to the employers business. Language of this type amounts to merely an agreement to assign rights in the future and does not vest ownership of an invention in the employer until the employee actually executes an assignment. In the recent IpVenture case, 39 an inventor filed an application for a patent while in the employ of HewlettPackard (HP). Despite language in the inventors employment agreement with HP providing that inventions made during the employment are the sole property of HP and that the employee agree[s] . . . to assign them to HP, an assignment to HP was never executed. Instead, the inventor assigned the patent issuing from the application to IpVenture which in turn sued ProStar Computer, Inc. and Midern Computer, Inc. for patent infringement.
Dalzell v. Dueber Watch Case Mfg. Co,. 149 U.S. 315 (1893) (A manufacturing corporation, which has employed a skilled workman, for a stated compensation, to take charge of its works, and to devote his time and services to devising and making improvements in articles there manufactured, is not entitled to a conveyance of patents obtained for inventions made by him while so employed, in the absence of express agreement to that effect.); United States v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933) (The reluctance of courts to imply or infer an agreement by the employee to assign his patent is due to a recognition of the peculiar nature of the act of invention, which consists neither in finding out the laws of nature, nor in fruitful research as to the operation of natural laws, but in discovering how those laws may be utilized or applied for some beneficial purpose, by a process, a device or a machine.)
37 38 39 36

Dowse v. Federal Rubber Co., 254 F. 308 (N.D.Ill. 1918) Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996) IpVenture, Inc. v. Prostar Computer, Inc., 503 F.3d 1324 (Fed. Cir. 2007)

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The district court dismissed the action on the grounds that IpVenture did not own all substantial rights in the patent, based on the obligation to assign the invention to HP arising from the inventors employment contract. The Federal Circuit reversed, holding that HP was not an assignee at the time suit was filed because the clause in the employment agreement was not a present assignment, but rather an agreement to assign which required a subsequent written assignment to transfer interest in the patent. An agreement to assign vests the employer with equitable title in inventions, patent applications, and patents on the invention but legal title remains with the inventor. 40 The distinction is significant because the equitable title holder has available only remedies at equity, including specific performance to force the inventor to execute a written assignment, 41 recession of a subsequent assignment to another, and perhaps equitable relief against an infringer, 42 but cannot maintain an action at law for damages for infringement. 43 b. Present Assignment of Future Invention

In contrast, language in an employee agreement providing that the employee hereby assigns right, title, and interest in and to future inventions is effective to grant a present assignment of future inventions, as opposed to an obligation to assign future inventions. This language creates an expectant interest in the employees inventions and ownership of the inventions vests by operation of law as soon as the invention comes into existence. 44 The recent decision of the Federal Circuit in DDB Technologies 45 illustrates the critical distinction between an agreement to assign clause and a present assignment clause in an employment agreement. In that case, an inventor developed certain technology relating to computer simulation of baseball games and filed patent applications to protect his technology during his employment with Schlumberger, his employer. The inventor was bound by an employment agreement which stated that he agrees to and does hereby grant and assign to

40 DDB Technologies, L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284, 1290 (2008); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1581 (Fed. Cir. 1991) (Although an agreement to assign in the future inventions not yet developed may vest the promisee with equitable rights in those inventions once made, such an agreement does not by itself vest legal title to patents on the inventions in the promise.) 41 Grove v. Grove Valve & Regulator Co., 4 Cal. App. 3d 299 (1970); De Long Corp. v. Lucas, 176 F.Supp. 104 (S.D.N.Y. 1959)

American Steel & Wire Co. of New Jersey, 155 F.Supp. 111 (N.D. Ohio 1957); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574 (Fed. Cir. 1991)
43 44

42

Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574 (Fed. Cir. 1991)

FilmTec Corp. v. Hydranautics, 982 F.2d 1546 (Fed. Cir. 1992) (title to inventions and patents automatically vested in the Government where contract provided that the research contractor does hereby grant to the Government all right, title, and interest in and to inventions made during the course of the engagement and no further act would be required once an invention came into being; the transfer of title would occur by operation of law.); Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed. Cir. 2000) (agreement requiring that employee hereby conveys, transfers and assigns all right, title and interest in and to inventions made during the employment is a present assignment which transfers title to inventions and patents as soon as they come into existence); DDB Technologies, L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284, 1290 (2008) (employment agreement providing that employee agrees to and does hereby grant and assign all rights in future inventions was an express assignment of rights in future inventions which automatically assigned patents to the employer by operation of law with no further act required on the part of the company.)
45

DDB Technologies, L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284 (Fed. Cir. 2008)

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Schlumberger all right, title, and interest in an to inventions made in the course of employment that relate to Schlumbergers business or the employees work for Schlumberger. Along with his co-inventor brother, the inventor assigned his patents on the baseball simulation system to DDB, an entity they had formed to exploit the technology. DDB then filed suit against MLB Advanced Media (MLBAM) for patent infringement. Before the close of discovery, defendant MLBAM enter into an agreement whereby Schlumberger assigned to MLBAM all rights that it had in the patents-in-suit as well as a retroactive license to practice under the patents. The district court then granted MLBAMs motion to dismiss the suit for lack of subject matter jurisdiction because of DDBs failure to join all owners of the patents, inasmuch as MLBAM was now a part owner of the patents. The Federal Circuit held that, while state law generally governs the interpretation of contracts, the question of automatic assignment is a matter of federal law because it is intimately bound up with the question of standing in patent cases. Applying Federal Circuit precedent, 46 the Court held that whether an assignment of patent rights in an agreement such as the one in this case is automatic, requiring no further act on the part of the assignee, or merely a promise to assign depends on the contractual language, and the specific language of the Schlumberger employment agreement (agrees to and does hereby grant and assign) was not merely an agreement to assign, but an express assignment of rights in future inventions. The Court therefore held that if the patents in suit were within the scope of the employment agreement, they would have been automatically assigned to Schlumberger by operation of law with no further act required on the part of the company. The case was remanded for further jurisdictional discovery on the issue of whether the patents-in-suit fell within the employment contract; that is, whether they related to Schlumbergers business or to the inventors work for Schlumberger. 47 In the wake of DDB Technologies and other precedent from the Federal Circuit, the best practice for businesses is to incorporate clauses into employment agreements which create present assignments of future inventions. Specifically, the agreement should include the language does hereby assign rather than agrees to assign so that title to inventions and patent applications pass to the employer by operation of law as soon as they come into existence. The patent assignment clause in an employment agreement should be viewed as a safety net and should not substitute for a confirmatory inventionspecific assignment which is timely recorded in the Patent Office. III. Consequences of Failure to Perfect Assignment

The pitfalls of failing to perfect patent ownership are many and sometimes severe. Most notably, title to an invention may literally walk out the door with an employee if the employer has failed to properly obtain an assignment. Other notable consequences are briefly discussed below.
FilmTec Corp. v. Hydranautics, 982 F.2d 1546 (Fed. Cir. 1992); Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000)
47 The inventors work at Schlumberger related to software used to control and record data from sensors in oil wells. Schlumbergers general counsel for software matters and the director of the lab in which the inventor worked both testified that the inventor had discussed his baseball software projects with them and they did not believe that the work belonged to Schlumberger. 46

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A.

All Owners Are Required to Act Before the Patent Office

Upon proof of title, 48 the assignee of the entire right, title, and interest in a patent application may prosecute the patent application to the exclusion of the inventive entity or to the exclusion of a prior assignee. 49 Where more than one entity holds a portion of the ownership interest in a patent application, each co-owner must join together to take action in prosecuting a patent application before the Patent Office. 50 This includes the case where there are multiple assignees of the patent application as well as where less than all of the inventors have assigned their rights in the application. 51 Therefore, if an employer is not diligent about obtaining assignments from all inventors, it could find itself in a position where it lacks the power to take action in a case because either the non-assigning inventor or its assignee refuses to cooperate. 52 B. Lack of Standing in Civil Litigation

The Patent Act limits the identity of the party having the right to sue for patent infringement to the patentee, 53 a term which is defined as including not only the patentee to whom the patent was issued but also the successors in title to the patentee. 54 Thus, a suit to recover damages for patent infringement must ordinarily be brought by the title holder of the patent. 55 A plaintiff without title to a patent at the time suit is brought lacks standing to bring a suit at law for infringement of the patent; a deficiency which cannot be cured by a nunc pro tunc assignment executed after filing of a lawsuit. 56

48 49 50 51 52 53 54 55

37 C.F.R. 3.73(b) 37 C.F.R. 3.71(a) 37 C.F.R. 3.71(a)-(b) 37 C.F.R. 3.71(b)(2) In some cases, an assignee of less than the entire interest may take action by petitioning under 37 C.F.R. 1.47. 35 U.S.C. 281 35 U.S.C. 100(d)

In limited circumstances, where all substantial rights under the patent have been transferred in the form of an exclusive license, the exclusive licensee may have standing to bring suit under the theory that it is a virtual assignee. See Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1093 (Fed. Cir. 1998); Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991) The rationale for this rule is explained in Proctor & Gamble Co. v. Paragon Trade Brands, Inc., 917 F.Supp. 305, 310 (D.Del. 1995), which has been quoted with approval by the CAFC in Gaia Technologies, Inc. v. Reconversion Technologies, Inc., 93 F.3d 774, 777 (Fed. Cir. 1996), as follows: As a general matter, parties should possess rights before seeking to have them vindicated in court. Allowing a subsequent assignment to automatically cure a standing defect would unjustifiably expand the number of people who are statutorily authorized to sue. Parties could justify the premature initiation of an action by averring to the court that their standing through assignment is imminent. Permitting non-owners and licensees the right to sue, so long as they eventually obtain the rights they seek to have redressed, would enmesh the judiciary in abstract disputes, risk multiple litigation, and provide incentives for parties to obtain assignments in order to expand their arsenal and the scope of litigation. Inevitably, delay and expense would be the order of the day.
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C.

Bona Fide Purchaser for Value Defense

As discussed above, the Patent Act provides that an unrecorded assignment is void against any subsequent assignment to bona fide purchaser for value without notice of the earlier unrecorded assignment. 57 Therefore, in every instance, an assignment should be recorded within the statutorily prescribed three months to protect against subsequent purchasers. This does not imply, however, that a non-recorded assignment is not effective to transfer ownership. IV. Fixing Patent Ownership After the Fact

Patent ownership may be corrected at any time by standard assignment, provided that the title holder consents to the transfer, although the rights transferred will be prospective unless special language is used. The general principles of patent assignment are discussed above and do not bear repeating. Other approaches to correcting patent ownership are discussed below. A. Fixing Ownership With a Nunc Pro Tunc Assignment

The most common way to fix patent ownership after the fact is to execute a nunc pro tunc assignment. The Latin term nunc pro tunc translates literally as now for then and signifies that a later taken action relates back to an earlier date. An agreement to hereby assign all rights, title, and interest in and to [U.S. Patent No.], nunc pro tunc, now for then, effective as of [earlier date], may retroactively bestow patent ownership in the assignee for some, but not all, purposes. 1. Fixing a Break in the Chain of Title

One of the primary utilities of a nunc pro tunc assignment is to correct a deficiency in the chain of title of a patent. For example, in the case where entity B assigns a patent to entity C but title to the patent actually resided with entity A at the time of the conveyance, C does not take title under the common law principle nemo dat quod non habet. 58 However, an assignment of the patent nunc pro tunc from A to B may rectify the situation if the nunc pro tunc assignment relates back to the time that B made the assignment to C. 2. The Right to Sue For Past Infringement

A carefully worded assignment may also give the assignee the right to sue for infringement of the subject patent occurring before the assignment was made. The general rule is that damages for infringement can only be recovered by a party that held the legal title to the patent during the time of the infringement. 59 Therefore, an assignment of the patent after the infringement has occurred does not ordinarily give the assignee the right to recover damages for

35 U.S.C. 26; See e.g., FilmTec Corp. v. Hydranautics, 982 F.2d 1546 (Fed. Cir. 1992); Katz v. Lear Siegler, Inc., 29 U.S.P.Q.2d 1450 (Fed. Cir. 1993); CMS Indus., Inc. v. L.P.S. Int'l, Ltd., 643 F.2d 289, 294 (5th Cir. 1981).
58 59

57

Subject to the bona fide purchaser for value rule codified in 35 U.S.C. 261.

Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24, 40-41 (1923) ([T]he plaintiff in an action at law must be the person or persons in whom the legal title to the patent resided at the time of the infringement.); Mas-Hamilton Group v. LaGard, Inc., 156 F.3d 1206, 1210 (Fed. Cir. 1998); Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991) (The general rule is that one seeking to recover money damages for infringement of a United States patent (an action at law) must have held the legal title to the patent during the time of the infringement.)

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the past infringement. 60 The exception being that a party may sue for infringement transpiring before it acquired legal title if a written assignment grants the party a right to do so, although such a grant must be articulated explicitly in the agreement, by stating for example, including the right to sue for past infringement, as courts will not otherwise infer the existence of such a grant. 61,62 B. Fixing Ownership By Changing Inventorship

Depending on whether there is an agreement concerning ownership, patent ownership may change at any time through a change in inventorship of a patent application. For example, if inventorship is amended during prosecution of a patent application 63 to add an ommitted inventor, new ownership rights vest in the omitted inventor or in the assignee of that inventor. Similarly, if the inventorship on a patent application is amended to delete and inventor, the ownership interest of the deleted inventor or his assigns terminates. The patent laws similarly provide for correction of erroneous inventorship of an issued patent, to either add an omitted actual inventor and remove an incorrectly named inventor, provided the error occurred without deceptive intent. 64 Correcting inventorship has been used strategically to change the ownership of an issued patent and to defend against a charge of patent infringement, as illustrated by Ethicon, Inc. v. U.S. Surgical Corp. 65 In that case, a patent infringement action was dismissed because after the action was commenced the accused infringer obtained a retroactive license to practice the invention from an individual who was subsequently found by the court to be a co-inventor, and thus a co-owner of the asserted patent. The patent-in-suit was directed to a surgical instrument and listed Dr. Yoon as the sole inventor. Ethicon obtained an exclusive license under the patent from Dr. Yoon and filed suit against defendant U.S. Surgical for patent infringement. During the course of litigation, U.S. Surgical discovered that Dr. Yoon had collaborated with Mr. Choi in the development of the patented surgical instrument. The evidence indicated that Mr. Choi should have been included as an inventor but the patent application from which the patent-in-suit issued was filed by Dr. Yoon without Mr. Chois knowledge and without listing him as an inventor. While the suit was pending, U.S. Surgical approached Mr. Choi and obtained a retroactive license under any interest he might have in the patent. U.S. Surgical then moved to add Mr. Choi as a co-inventor of the patent-in-suit under 35 U.S.C. 256 and following
60 Moore v. Marsh, 74 U.S. 515, 522 (1868) ([I]t is a great mistake to suppose that the assignment of a patent carries with it the right to damages for an infringement committed before such assignment.); Hockerson-Halberstadt, Inc. v. Nike, Inc., 779 F.Supp. 49 (E.D.La. 1991); John L. Rie, Inc. v. Shelly Bros., Inc., 336 F.Supp. 84 (E.D.Pa. 1973) (A mere assignment of a patent which does not also expressly assign the right to recover damages or profits arising from infringement of such patent occurring before such assignment, does not transfer to the assignee the right to recover such damages and profits.)

Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1579, fn. 7 (Fed. Cir. 1991) (The authorities are uniform that the [assignment of a right of action for past infringements] must be express, and cannot be inferred from an assignment of the patent itself.); Jones v. Berger, 58 Fed. 1006 (D.Md. 1893) (The rule is that to pass the right to sue for past infringement words must be used in the assignment which expressly transfer to the assignee the right of action.) However, a party cannot assign a right to sue for infringement occurring prior to the time that such party itself possessed such a right. See Blessing v. Consolidated Trimming Corporation, 26 F.Supp. 112, 113 (S.D.N.Y. 1939).
63 62

61

37 C.F.R. 1.48

64 65

35 U.S.C. 256 Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998)

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an extensive hearing on the issue, the district court granted the motion, finding that Mr. Choi was in fact a co-inventor of the patent-in-suit. The district court dismissed the complaint against U.S. Surgical and the Federal Circuit affirmed, holding that Mr. Choi was a co-inventor of two of the 55 patent claims to the patented surgical instrument and each co-inventor presumptively owns a pro rata undivided interest in the entire patent, no matter what their respective contributions and thus Mr. Choi had the power to license rights in the entire patent. The Court noted that all co-owners of a patent must be joined as plaintiffs in an infringement action, and held that because Mr. Choi did not consent to be joined and could no longer consent to an infringement suit in light of the exclusive license to U.S. Surgical, the suit was properly dismissed for failure to join Mr. Choi. C. Specific Performance

As discussed above, an employer may hold equitable title in an invention if the inventor was bound by an obligation to assign under an employment agreement or by fiduciary duty. If the inventor does not execute an assignment to the employer, the employer may seek specific performance of the agreement to assign, 66 although such an action may be subject to equitable defenses, including laches and estoppel. 67 V. Conclusion

For the independent inventor, patent ownership rarely poses an issue because, unless active steps are taken to assign away the rights, the patent application is filed and issued in his or her name, with ownership attaching as a matter of law. However, the majority of patents are filed by employed inventors, often jointly, creating more complex patent ownership issues. Companies should strive to establish patent ownership at the earliest possible time by clearly articulating patent ownership policies in the employment contract and including clauses effecting present assignments of future inventions, carefully identifying the actual inventors, and immediately obtaining confirmatory assignments and recording them with the Patent Office. The principles of fixing patent ownership after the fact are no different, although somewhat different tools may be used. The nunc pro tunc assignment may be effective to relate ownership back to an earlier date, for some purposes, and should be coupled with an explicit grant of the right to sue for past infringement. Patent ownership can also be fixed by changing the inventive entity in a federal court action. Defendants in patent litigation should look for issues of patent ownership, as this may be an effective tool to defend against a charge of patent infringement where all title owners have not been joined.

Grove v. Grove Valve & Regulator Co., 4 Cal. App. 3d 299 (1970); De Long Corp. v. Lucas, 176 F.Supp. 104 (S.D.N.Y. 1959)
67 Phillips Screw Co. v. Givnan, 200 Or. 279, 256 P.2d 253 (1953) on rehearing 265 R.2d 1084 (1954); J.A. Migel, Inc. v. Bachofen, 96 N.J. Eq. 608, 126 A. 396 (1924).

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