Tricky Wording: Assigning Rights to Future Inventions

There is a Greek myth that Eos, the Goddess of the Dawn, asked Zeus to grant her mortal lover Tithonus immortality – but forgot to ask that the grant include eternal youth. The sad result of the grant language not being quite up to snuff is that Tithonus aged into an eternally-living cricket.

The wrong choice of grant language in the patent assignment clause of an employment or consulting agreement can also have dire effects.

Most technology-based enterprises, both commercial and academic, require their employees and individual consultants to sign an agreement that, among other things, is supposed to assign to the employer all rights to any invention made on the employer’s dime or time. A problem arises if an invention assignment clause in such an agreement is improperly drafted. More specifically, courts treat phrases like “Employee/Consultant assigns all invention rights to Employer” much differently than phrases like “Employee/Consultant agrees to assign all invention rights to Employer”.

Language like “Employee/Consultant assigns all invention rights to Employer” is a present assignment of future rights in an invention, and thus creates an assignment of invention rights to the employer even when an invention isn’t even a glimmer in the eye of the employee or consultant. Because the assignment of rights was affirmatively made when the agreement was signed, when the employee or consultant does develop an invention, the employer automatically owns the rights to the invention with no further action needed on the part of the employee or consultant.

In contrast, language like “Employee/Consultant agrees to assign all invention rights to Employ-er” is merely a promise to assign to the employer, sometime in the future, rights in future inventions. In order to convert the employer’s contractual right to own an invention into a vested ownership interest, the employee or contractor must still sign a later written document formally as-signing all rights to the invention to the employer.

In most cases, an actual legal problem may not arise because when an invention does arise, the employee or consultant is often still employed by the original employer and will generally be willing to “do the right thing” – that is, abide by the invention assignment clause and sign a formal assignment document.

But of course, things can go awry. For example, in the case of Board of Trustees of Leland Stan-ford Junior University v. Roche Molecular Systems, Inc., Stanford University sued Roche Molecular Systems for infringement of several biotech patents. In its defense, Roche argued that Stanford didn’t own all rights in the patents in issue and thus lacked the right to bring the suit. Roche’s argument was based on two points: a wording flaw in Stanford’s assignment clause that a co-inventor of the patents in issue had signed, and a later properly-worded assignment by that co-inventor of the same invention to Cetus Corporation – an invention Roche later purchased from Cetus.

One co-inventor of the patents in issue had signed an agreement with Stanford that recited “I agree to assign or confirm in writing to Stanford … right, title and interest in … such inventions …”. Stanford was collaborating with Cetus in development of the technology that ultimately led to the disputed patents. Later, as part of the collaboration, the co-inventor worked with Cetus to learn necessary background technology, and in doing so, the co-inventor signed an agreement with Cetus that recited “I will assign and do hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements”. The co-inventor and several other employees of Stanford then invented the technology behind the patents in issue.

The Federal Circuit held that (1) the wording of the agreement with Stanford created a mere promise to assign rights in the future, and not an immediate transfer of future rights, and (2) the wording of the agreement with Cetus was a present assignment of the co-inventor’s future inventions, and Cetus immediately gained equitable title to those inventions.

The Federal Circuit went on to hold that, once Stanford filed patent applications on the inventions in issue, Cetus’s equitable title to the inventions immediately converted to legal title. Be-cause Cetus’s legal title vested first as a result of the properly-worded present assignment of the co-inventor’s future inventions to Cetus, the co-inventor no longer retained any rights that could be assigned to Stanford as promised under the (flawed) wording of the agreement with the University. While Stanford was a co-owner of the patents in suit through an assignment of rights by the other co-inventors, Cetus had also been a co-owner. But Roche had purchased Cetus’s co-ownership interest in the patents in suit years before Stanford sued. Accordingly, Stanford had no right whatsoever to assert the patents in issue against Roche – or against any infringer if Roche refused to join in a suit.

All because the grant language “agree to assign” was not quite up to snuff, all that Stanford got for its efforts was – crickets.

John Land is a Partner in Jaquez, Land, Greenhaus & McFarland. He is a graduate of Caltech (BS with Honors 1975) and USC (JD 1978). He practices in the area of patents, copyright law, licensing, and the business problems of technologically-oriented clients.