Who Owns the Patent?: The Validity of Automatic Assignment Provisions

The U.S. Court of Appeals for the Federal Circuit is currently considering a petition for en banc rehearing of the “automatic patent assignment” rule announced in the Court’s 1991 decision in FilmTec Corp. v. Allied-Signal, Inc. See Alexander Shukh v. Seagate Tech. (Fed. Cir. 2015) (en banc petition). In FilmTec, the Federal Circuit determined that a contract that assigns (i.e., “do hereby assign”) potential future inventions from an employee/inventor to an employer is an effective transfer of title of those future inventions to the employer. These agreements are particularly helpful for employers, such as those in the automotive industry where employee migration is a fact of life. Having an employment agreement that includes an automatic assignment provision can mitigate some of the issues associated with obtaining assignments of inventions to the employer after an employee inventor has left the company, since one can argue that such inventions were prospectively assigned to the employer prior to conception of the invention.

Alexander Shukh v. Seagate Tech.

The petitioner in this case, Alexander Shukh, is challenging the FilmTec decision on the basis that a contract to assign a potential future invention merely creates an equitable title to that invention, and that under traditional notions of property law, a separate contract at or after the time of invention is required to convey actual legal title to the employer. See, e.g., UCC Section 2-105(2) (“A purported present sale of future goods or of any interest therein operates as a contract to sell”). Therefore, absent a separate agreement or conveyance from the employee/inventor to the employer, the rights to the invention remain vested with the inventor and not the employer.

Potential Implications of Alexander Shukh v. Seagate Tech.

Although this case is at an early stage, it presents an important consideration for employers in the automotive industry and other industries where employee migration can be a concern. That is, whether to rely exclusively on an automatic assignment provision to convey actual legal title of a future invention to the employer. Given that these provisions may be subject to scrutiny in the future, employers should consider retaining language in their agreements requiring that the employee/inventor “agree to assign and hereby does assign” any future inventions, and then subsequently requiring the employee/inventor to execute a separate agreement (e.g., a patent assignment, etc.) at the time of invention or as soon as practicable thereafter to convey actual legal title to the employer. See, e.g., Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 583 F.3d 832, 842 (Fed. Cir. 2009) (citing IpVenture, Inc. v. Prostar Computer, Inc., 503 F.3d 1324, 1327 (Fed. Cir. 2007) finding that the language ‘agree to assign’ is ‘an agreement to assign’ requiring a subsequent written instrument). This practice will help to mitigate potential risks that could arise down the road with respect to the validity of an automatic assignment of a later invention.