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Employment Agreement Didn’t Prevent Inventor from Assigning Inventions

Employment contract
Doesn’t prevent inventor
assigning patents

It’s very common for an employment agreement to include an “invention assignment.” (This can also be a stand-alone agreement or combined with an NDA.)

An invention assignment, which might also be called an intellectual property (IP) assignment, assigns the ownership of any invention or other intellectual property created by the employee to the employer.

An IP assignment can be broad or narrow.

For example, a broad assignment would include be anything that the employee worked on during the period of employment, whether or not the work was done during normal work hours, at the employer’s site, or had anything to do with the employer’s business.

Not all states will enforce such a broad IP assignment. For example, the California Labor Code, section 2870, provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

(Emphasis added.)

The recent case of Odyssey Wireless, Inc. v. Apple Inc. involved four separate actions for patent infringement brought by Odyssey that were eventually transferred to the US District Court for the Southern District of California.

Each patent listed Peter D. Karabinis as the inventor and EICES Research, Inc. as the assignee of the patent. Dr. Karabinis is the founder and Chief Technology Officer of EICES, which is the predecessor of Odyssey.

In 2001, Mobile Satellite Ventures (MSV) hired Dr. Karabinis as its Vice President and Chief Technical Officer. He signed an intellectual property and confidential information agreement with the company.

The IP agreement included the following clause:

(a) Ownership: 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 –

(1) whether I developed the Works alone or jointly with others, including both other employees of MSV or its customers or prospective customers;

(2) whether or not the work resulting in any inventions took place during regular working hours; and

(3) whether or not the work results in any inventions that are patentable or eligible for copyright protection.

Dr. Karabinis was employed by MSV and its successor companies until 2010.

The defendants sought to dismiss the infringement lawsuit on the grounds that Odyssey had no title to the patents because they had been assigned to MSV when Dr. Karabinis worked there.

The court found that the ownership clause only applied

if the invention “refer[s] to or result[s] from [Dr. Karabinis’s] work for MSV during [his] employment by MSV” and it “relate[s] 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” are not expressly defined in the agreement, and the meaning of the terms is not apparent from the face of the agreement. Because these terms could be understood in multiple ways, they are ambiguous, and it is necessary to resort to extrinsic evidence to ascertain the intention of the parties.

Based on that extrinsic evidence, the court found that Dr. Karabinis had not assigned the rights to the inventions at issue.

Takeaway

An invention assignment clause needs to be carefully drafted in order to be enforced as the employer originally intended. In this case, MSV might have ended up the owner of (apparently) valuable patent rights if it had only defined some key terms in its invention assignment form.

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