Stan Gibson

The Federal Circuit’s recent decisions on the assignment of future inventions have drawn a sharp distinction in what would appear to be minor difference in language that have major consequences and significance to ownership. The language turns on the difference in the phrase “agree to assign” and the phrase “do hereby assign.” Under the Federal Circuit’s interpretation, the former language (“agree to assign”) is only a mere promise to assign inventions that are created in the future and requires a subsequent assignment agreement, while the latter (“do hereby assign”) constitutes an immediate assignment when the invention is created in the future without the need of an additional assignment agreement. As reflected in recent Federal Circuit decisions, this difference in language can have severe consequences in determining who owns later issued patents.

For more on these decisions see this link: Analysis of Federal Court’s Ruling on Assignment Agreements in Abraxis Bioscience, Inc. v. Navinta LLC, Case No. 2009-1539 (Fed. Cir. Nov. 9, 2010) and others.

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On April 20, 2011, the Federal Circuit sitting en banc vacated a $110 million damage award against Dish Network Corp. and EchoStar Corp. The Court rejected its two-step test that had been used to determine infringement of a redesigned product in a contempt hearing and instead adopted a single-step test for determining infringement in a contempt hearing. The new single-step standard focuses solely on whether there is “more than a colorable difference” in a newly redesigned product from a product that was previously found to infringe.

The district court had previously found that defendants’ DVR products infringed a patent held by TiVo. After entering a judgment in favor of TiVo based on a jury verdict, the district court also entered a permanent injunction that required defendants to stop making products and to disable products it had already sold. Defendants redesigned their DVR products and TiVo, claiming that the redesigned products still infringed, moved for contempt. The district court found contempt based on continuing infringement and awarded $110 million to TiVo.

A Federal Circuit panel affirmed in a 2-1 decision and the Federal Circuit subsequently agreed to hear defendants’ petition for a rehearing. Sitting en banc, the Federal Circuit addressed its two-step analysis set out in the KSM Fastening Systems, Inc. v. H.A. Jones Co., KSM Fastening Systems, Inc. v. H.A. Jones Co., 776 F.2d 1522 (Fed. Cir. 1985) decision. KSM set forth a two-step analysis involving first whether there was “more than a colorable difference” between the redesigned product and the infringing product and, if not, a second step would determine whether the redesigned product still infringed the patent.

Due diligence is an important part of acquiring patents and intellectual property, but community property laws are often overlooked in this process. Companies, when acquiring inventions from inventors or from small, closely-held companies, should carefully review the ownership of the patents to determine whether a spouse or former spouse of an inventor has rights to the patent or invention based on applicable state law. Failure to examine these issues and analyze the applicable state law could have disastrous consequences, particularly in California where California’s community property laws provide spouses with rights to intellectual property under certain circumstances.

A recent case from the Federal Circuit highlights the importance that community property laws may play in determining who actually owns a patent. Enovsys LLC v. Nextel Communications, Inc., et al., 614 F.3d 1333 (Fed. Cir.

Read a detailed analysis of the case here: Do Not Overlook Community Property Laws When Acquiring Patents and Other Intellectual Property

On April 12, 2011, the Federal Circuit rejected McKesson Technologies Inc.’s suit for patent infringement against Epic Systems Corporation. McKesson Technologies Inc. v. Epic Systems. Corp., Case No. 2010-1291 (Fed. Cir. April 12, 2011). The Federal Circuit rejected McKesson’s claim for patent infringement because McKesson could not prove that one party (i.e., the Epic customers) performed all of the steps of the method claim recited in the patent.

McKesson’s patent is directed to an electronic method of communication between healthcare providers and patients involving personalized web pages for doctors and their patients. Epic is a software company that licenses software to healthcare providers and one of its products was accused of infringement, Epic’s MyChart software. Notably, Epic itself does not use the MyChart software and it was undisputed that Epic’s customers did not perform one of the steps required by the method claim, i.e., “initiating a communication,” nor did the customers exercise control or direction of another who performs this step. Based on this record, the district court granted Epic’s motion for summary judgment based on divided infringement in that no one person or entity performed all the steps of the method claim.

The Federal Circuit affirmed the decision of the district court, noting that McKesson had brought its claims against Epic on the theory of inducing infringement and to show inducing infringement McKesson was required to show that one person or entity performed every step of the method claim. The Federal Circuit also rejected any argument regarding joint infringement as it reiterated that this requires a showing of an agency relationship where a party is contractually obligated to perform a specific step of the method.

The assignment provisions in employment agreements have taken on added importance with recent case law from the Federal Circuit. The Federal Circuit’s decision in Stanford University v. Roche, 583 F.3d 832 (Fed. Cir. 2009), drew a sharp distinction between language in assignment provisions focusing on the difference between “agree to assign” and “do hereby assign,” with the former constituting a mere agreement to assign in the future, which is ineffective absent an additional agreement to assign intellectual property that is created in the future.

Read a more detailed description here: Protect Your Intellectual Property: Draft Employment Agreements Carefully.

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On April 1, 2011, the Federal Circuit issued another decision regarding the written description requirement. In Crown Packaging v. Ball Metal, No. 2010-1020 (Fed. Cir. April 1, 2011), the Federal Circuit analyzed a district court’s decision holding that certain claims of the Crown patent were invalid for violating the written

description requirement.

The patent at issue pertained to an invention for seaming metal cans. The district court held that the asserted claims covered driving a chuck either inside or outside of the reinforcing bead for seaming the can, but the specification only supported driving a chunk outside of the can end’s reinforcement bead. Thus, according to the district court, the specification did not support the claims in the patent because the specification only taught “outside,” while the claim covered both “outside” and “inside.” The patent therefore was invalid.