In Omni MedSci, Inc. v. Apple Inc., the Federal Circuit held that language the inventor agreed to via his employment agreement “did not effectuate a present automatic assignment of [his] patent rights.” The issue arose in the context of a motion to dismiss a patent infringement suit for failing to be brought by the patent owner. After finding the inventor had not automatically assigned his rights to the unnamed party, the Federal Circuit affirmed the district court’s denial of the motion to dismiss. 

The Ownership Events At Issue

A brief timeline of events relating to ownership of the patents at issue is summarized below:

• When Dr. Islam joined the University of Michigan (UM) faculty as a professor of electrical and computer engineering, he executed an employment agreement that included a provision agreeing to abide by UM’s bylaws.

• While on leave in 2012, Dr. Islam filed multiple provisional patent applications.

• After returning to UM in 2013, Dr. Islam filed non-provisional patent applications claiming priority to the provisionals.

• In 2013, Dr. Islam requested that UM’s Office of Technology Transfer (OTT) confirm Dr. Islam’s ownership of his inventions, but OTT denied the request because although the subject matter was “not directly related to Dr. Islam’s teaching,” UM at least indirectly supported his work.

• On December 17, 2013, Dr. Islam assigned his patent rights to Omni MedSci; the assignments were recorded at the USPTO.

• In 2018, Omni MedSci filed a patent infringement suit against Apple, asserting U.S. Patent Nos. 9,651,533 and 9,861,286, which Dr. Islam had assigned to Omni MedSci.

The Agreement Language At Issue

The UM bylaw at issue “stipulates the conditions governing the assignment of property rights to members of the University faculty and staff.” 

Paragraph 1 states the conditions under which patent rights “shall be the property of the University”:

Patents and copyrights issued or acquired as a result of or in connection with administration, research, or other educational activities conducted by members of the University staff and supported directly or indirectly (e.g., through the use of University resources or facilities) by funds administered by the University regardless of the source of such funds, and all royalties or other revenues derived therefrom shall be the property of the University.

Paragraph 4 states the conditions under which patent rights “shall be the property of the inventor”:

Patents, copyrights, and property rights in computer software resulting from activities which have received no support, direct or indirect, from the University shall be the property of the inventor, author, or creator thereof, free of any limitation which might otherwise arise by virtue of University employment.

Paragraph 5 addresses joint activities:

In cases which involve both University-supported activity and independent activity by a University staff member, patents, copyrights, or other property right in resulting work products shall be owned as agreed upon in writing and in advance of an exploitation thereof by the affected staff member and the Vice-Provost for Research in consultation with the Committee on Patents and Copyrights and with the approval of the University’s Office of the General Counsel. It is understood that such agreements shall continue to recognize the traditional faculty and staff prerogatives and property rights concerning intellectual work products

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Linn and joined by Judge Chen. Judge Newman wrote a dissenting opinion.

Judge Linn framed the issue before the court as “whether paragraph 1 … automatically and presently assigned legal title of Dr. Islam’s inventions to UM.” In that context, the majority decision explains:

A patent assignment clause may presently assign a to-be-issued patent automatically—in which case no further acts to effectuate the assignment are necessary—or may merely promise to assign the patent in the future

The majority acknowledged that the language at issue “does not unambiguously constitute either a present automatic assignment or a promise to assign in the future.” However, it found the language “is most naturally read as … a promise of a potential future assignment, not as a present automatic transfer.” The majority cited the following in support of this characterization:

• “By its own terms,” the bylaw “merely ’stipulates the conditions‘ governing the assignment of property rights,” rather than purporting to “effectuate the present transfer” of patent rights.

• The language used in paragraph 1 is same as the language used in paragraph 4, which “cannot logically be read as a present automatic assignment,” because “the inventor [would not] presently automatically transfer title to himself.” The majority pointed to Imation Corp. v. Koninklijke Philips Elects. N.V. (Fed. Cir. 2009) for the proposition that “the identical phrase in two paragraphs of a contract should be read identically.”

• ”[T]he language of paragraph 1 does not use present tense words of execution,” such as “assigns,” “hereby assigns,” and “does hereby assign.”

• In contrast to the language at issue, language used in a UM OTT form called the “Invention Report” does use present tense words of execution: “As required, I/we hereby assign our rights in this invention and all resulting patents . . . to the Regents of the University of Michigan.”

The majority considered and rejected Apple’s arguments that the “shall be the property of the University” language at issue is similar to language the Supreme Court has held as automatically vesting title, in Bd. Of Trustees of Leland Stanford Jr. Univ. v. Roche Mol. Sys., Inc. and Heinemann v. United States. The majority noted that the cited decisions were interpreting statutory language, not language in a contract between two private parties.

The majority also responded to Apple’s arguments that “whether an agreement confers an assignment … depends on the substance of what was granted rather than formalities or magic words.” In particular, the majority noted that its decision was not based on “magic words,” but rather on “[t]he absence of an active verbal expression of present execution,” which the majority characterized as a “substantive indication that a present automatic assignment was not intended.”

The majority also considered and rejected Apple’s arguments regarding UM’s technology transfer policy and prior conduct between Dr. Islam and UM, finding neither sufficient to show that the by-law language effected a present transfer of rights. On the other hand, the majority noted that the fact that UM had “’waived’ any claim to ownership in three provisional applications filed by Dr. Islam” instead of offering to assign them back supported their interpretation.

Judge Newman’s Dissent

Judge Newman wrote a dissenting opinion disagreeing with the majority’s interpretation based on both the language at issue and its “long-understood interpretation.”

An Item For The Due Diligence Checklist?

Although Apple’s motion was not successful, this decision highlights the potential value in a litigation or due diligence context of looking behind recorded assignments for potential ownership issues, particularly if there is any discrepancy between the patent owner and the inventor’s employer.  Additionally, although UM was not trying to exploit or enforce the patents at issue, this decision may serve as a reminder to employers to review the language of their employment agreements and consider obtaining case-specific assignments whenever a new patent application is filed.