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© 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED Patents Jason Penninger Intellectual Property Counsel Hill-Rom Services, Inc. Jason.Penninger@Hill-Rom.com
Page 1 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED Agenda What is a Patent? Assignment of patent rights Ownership and Employees Joint Ownership Patent licensing Hypotheticals
Page 2 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED WHAT IS A PATENT? A patent is a property right granted by the government to an inventor “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States” for a limited time in exchange for public disclosure of the invention when the patent is granted. The owner of a patent can: – License the patent to collect royalties – Sell the patent – Sue an infringer – Manufacture, offer for sale, sell, use or import a product covered by the patent without infringing the patent Inventors may not be owners, but owners may be inventors (except where the owner is a company, which can not be an inventor)
Page 3 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED ASSIGNMENT 35 U.S.C. 261 Ownership; assignment. – Subject to the provisions of this title, patents shall have the attributes of personal property. – Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing. The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States. – A certificate of acknowledgment under the hand and official seal of a person authorized to administer oaths within the United States, or, in a foreign country, of a diplomatic or consular officer of the United States or an officer authorized to administer oaths whose authority is proved by a certificate of a diplomatic or consular officer of the United States, or apostille of an official designated by a foreign country which, by treaty or convention, accords like effect to apostilles of designated officials in the United States, shall be prima facie evidence of the execution of an assignment, grant, or conveyance of a patent or application for patent. – An assignment, grant, or conveyance shall be void as against any subsequent purchaser or mortgagee for valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
Page 4 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED ASSIGNMENT Patent ownership is generally a state law question. However, “the question of whether contractual language effects a present assignment… or an agreement to assign rights in the future, is resolved by Federal Circuit law. Company of Trs. of Leland Stanford Junior Univ. v. Roche Molecular Sys., 583 F.3d 832, 841 (Fed. Cir. 2009), aff’d 131 S.Ct. 2188 (2011). The contract language ‘agree to assign’ reflects a mere promise to assign rights in the future, not an immediate transfer of rights.” Id. “If the contract expressly conveys rights in future inventions, no further act is required once an invention comes into being, and the transfer of title occurs by operation of law.” Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359, 1364 (Fed. Cir. 2010).
Page 5 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED ASSIGNMENT Practice tips: – Include language requiring the assignor to help with the execution of documents. – Designate Canada specifically. Canada wants the assigning instrument to be specific to them. – Notarization is self-proving, but, in the absence, two witnesses can help with confirming the assignment. – An assignment does not have to be notarized to be recorded and used for the notice function. However, it may present issues in later litigation. – Remember that for terminal disclaimers, the ownership has to be common for the life of the disclaiming patent. This needs to be thought through carefully if the disclaiming patent is not a direct descendent of the patent to whose term it is tied. If they are in different families, they may be sold, or wish to be sold, independently.
Page 6 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED ASSIGNMENT Sample assignment language: – The undersigned hereby sell(s), assign(s), and set(s) over to: ___________ (hereinafter designated as the Assignee) their entire right, title, and interest in, to, and under the Application, including all priority rights for other countries arising therefrom, all inventions therein disclosed, and any and all Letters Patent of the United States and of all other countries, including Canada, which may be granted for such inventions, or any of them, all such inventions and all rights in such Application and Letters Patent to be held and enjoyed by Assignee for its own use and enjoyment to the full end of the term or terms for which such Letters Patent may be granted, as fully and entirely as the same would have been held and enjoyed by them had this assignment and sale not been made.
Page 7 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED EMPLOYEES The best way to address employee inventions is with a well drafted employment agreement that establishes that employees agree to assign any and all inventions that they develop during their employment. In situations where no employment agreement is entered into, the employee will usually be the owner of the invention. – A Company may, if equity dictates, acquire a ‘shop right’ in an invention by an employee. This is a factual analysis that include a review of the circumstances surrounding the development of the invention. McElmurry v. Arkansa Power & Light Co., 995 F.2d 1576, 1580 (Fed. Cir. 1993).
Page 8 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED EMPLOYEES Sample employment agreement clauses: – Disclosure: The Employee will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, device, design, apparatus, practice, process, software or computer program, method or product, whether or not patentable or copyrightable, made, developed, perfected, devised, conceived or first reduced to practice by the Employee, either solely or in collaboration with others, during Employee’s employment under this Agreement, or for the period in which a covenant not to compete is in effect hereunder as to Employee, whether or not during regular working hours, relating either directly or indirectly to the business, products or practices of the Company or its subsidiaries (hereinafter referred to as the “Inventions” and each, an “Invention”).
Page 9 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED EMPLOYEES – Employee agrees that any Invention that is or has already been conceived, devised, made, developed, reduced to practice or perfected by Employee, alone or with others, during Employee’s employment by the Company, whether or not in the course of employment, shall be promptly disclosed in writing by Employee to the Company. As to any future Inventions made by the Employee which relate solely to the business, products or practices of the Company or its subsidiaries and which are first conceived or reduced to practice during the Term, or for the period in which a covenant not to compete is in effect hereunder as to Employee, but which are claimed for any reason to belong to an entity or person other than the Company or its subsidiaries, the Employee will promptly disclose the same in writing to the Company and shall not disclose the same to others if the Company, within twenty (20) days thereafter, shall claim ownership of such Inventions under the terms of this Agreement.
Page 10 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED EMPLOYEES – Assignment and Assistance: Employee agrees to assign the sole ownership and to assist and cooperate fully with the Company to secure and/or enforce any trade name, patent, trademark, copyright, or intellectual property protection or other similar rights in the United States and/or in foreign countries, including without limitation, the execution and delivery of assignments, patent applications and other documents at the Company’s reasonable request, whether during or at any time after Employees employment with the Company. If such assistance is requested after the conclusion of Employees employment, the Company shall compensate Employee at a reasonable rate for the time actually spent by Employee at the Company’s request on such assistance. – Record Keeping: The Employee will keep complete, accurate and authentic accounts, notes, data and records of all Inventions in the manner and form requested by the Company. Such accounts, notes, data and records shall be the property of the Company, and, upon its request, the Employee will promptly surrender the same to it or, if not previously surrendered upon its request or otherwise, the Employee will surrender the same, and all copies thereof, to the Company upon the conclusion of his employment.
Page 11 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED JOINT OWNERSHIP 35 U.S.C. 262 Joint owners. – In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.
Page 12 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED JOINT OWNERSHIP Problems with joint ownership – “[E]ach co-owner is ‘at the mercy’ of the other in that the right of each to license independently may, for all practical purposes, destroy the monopoly.” Wisconsin Alumni Research Found v. Xenon Pharms, 591 F.3d 876, 882 (7 th Cir. 2010). Co-owner can independently license the patent rights to a 3 rd party without paying the other owner any of the money they received Remember, joint inventors are joint owners, unless they are contractually obligated to transfer their rights. – Co-owner can start a competing company – All co-owners must consent to bringing a suit enforcing the patent. Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed. Cir. 1998). This could present problems if a co-owner refuses to join a suit, thereby limiting the ability of the other owners to enforce the monopoly. – Who files for the patent and who pays the fees to maintain the patent?
Page 13 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED JOINT OWNERSHIP Ways to avoid joint ownership issues – Negotiate an agreement The owners could “vary their rights” by contract so that the monopoly is protected. Wisconsin Alumni Research Found v. Xenon Pharms, 591 F.3d 876, 882 (7 th Cir. 2010). – Start a company together Company would own the patent Company rules typically include buy out provisions if there are problems with the owners Royalties from licenses can be distributed to the owners pursuant to the company’s rules
Page 14 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED LICENSE “Only assignments need be in writing under 35 U.S.C. §261. Licenses may be oral.” Waymark Corp. v. Porta Sys., 334 F.3d 1358, 1364 (Fed. Cir. 2003). The rights to a patent can be assigned in whole, as an undivided share, or as a territorial right to some geographic portion of the U.S. The assignee is vested with title and right to sue infringers if there is a whole or territorial right. All entities that have an undivided share must be a party to enforcement by one of the owners; the assignee and the assignor. Waterman v. Mackenzie, 138 U.S. 252, 255-256 (1891). A license is a right to use the patent, but does not transfer ownership. An assignment of the patent rights is a transfer of title to the patent. An assignment of a license puts the license assignee in the shoes of the original licensee. FilmTec Corp. v. Allied-Signal Inc., 939 F.2d 1568, 1572 (Fed. Cir. 1991).
Page 15 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED LICENSE Sample license grant clauses: – “Licensor hereby grants to Licensee a non-exclusive, non-assignable license under the Licensed Patent to manufacture, sell, and/or lease Licensed Products in the United States. The term of the license shall extend from January 1, 20__ to the expiration date of the Licensed Patent.” NOTE: “Non-exclusive” could be changed to “exclusive” and it would change the relationship between the parties as there is some “ownership” right in the exclusive licensee. While the ownership could revert completely to the licensor by contract, as long as the contract is in place, the licensor and exclusive licensee appear to be “co-owners” of the right. See Waterman supra.
Page 16 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED LICENSE – Licensor hereby irrevocably grants to Licensee and its Affiliates (including those authorized by Licensee to perform such acts on behalf of Licensee and its Affiliates) the exclusive, indivisible right in the Territory, directly or indirectly, to make, have made by others, use, have used by others, modify, have modified by others, import, have imported by others, sell, offer to sell, and have sold by others, Licensed Products. – Licensor hereby irrevocably grants to Licensee and its Affiliates (including those authorized by Licensee to perform such acts on behalf of Licensee and its Affiliates) the exclusive, indivisible right in the Territory, directly or indirectly, to make, have made by others, use, have used by others, modify, have modified by others, import, have imported by others, sell, offer to sell, and have sold by others, any Licensor Improvements without payment of any additional royalty other than that provided hereunder.
Page 17 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED LICENSE Sample enforcement clauses: – If, during the Term, Licensor becomes aware of the infringement of any claim or claims of Licensed Patents by a person, firm or corporation not a party to this Agreement, Licensor shall promptly, and not later than thirty (30) days thereafter, notify Licensee of such potential infringement, and the parties to the Agreement shall consult each other with respect to a course of action to be taken with respect to such alleged infringer. Licensee may, at its own expense, and at its exclusive option, institute legal proceedings against such alleged infringer. Licensor shall assist and cooperate with Licensee in all necessary respects in the conduct of such legal proceedings, and Licensee shall reimburse Licensor for its out-of-pocket expenses incurred in the performance of its obligation to assist and cooperate with Licensee in the conduct of such legal proceedings, and Licensee shall retain the balance of any monies recovered through such legal proceedings.
Page 18 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED LICENSE – If Licensee declines to institute legal proceedings against such alleged infringer within a reasonable period of time after having first received notice of such alleged infringement, Licensor shall have the right to request that Licensee either commence such legal proceedings within thirty (30) days of such request and, if Licensee fails to commence such legal proceedings, Licensor shall have the right to commence such legal proceedings against such alleged infringer and, in the event that Licensor does so commence such legal proceedings against such alleged infringer, Licensee shall have the obligation to assist and cooperate with Licensor in all necessary respects in the conduct of such legal proceedings, and Licensor shall reimburse Licensee for its out-of-pocket expenses incurred in connection with the performance of its obligation to assist and cooperate with Licensor in the conduct of such legal proceedings, and Licensor shall retain the balance of any monies recovered in such legal proceedings.
Page 19 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED Hypothetical 1 Employees from Company A meet with employees from Company B to discuss Company B’s capabilities for developing a new widget. Discussions quickly move from fact finding to brainstorming. The only agreement in place is a basic non-disclosure agreement. Who owns the patentable subject matter generated by the brainstorming session? What effect might this have on negotiations should the companies move forward with development? Can Company A file a patent on the new widget? How could this situation have been avoided?
Page 20 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED Hypothetical 2 Company A engages Company B to develop and supply a new widget. Company A provides Company B with a document that states that the widget needs to able to perform a specific function, but does not provide any specifics. Company B develops the widget according to Company A’s document and the widget is commercially released. After the widget is commercially released, Company B develops new features for the widget to improve its performance. Who owns the inventions in the new features for the widget?
Page 21 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED Hypothetical 3 Aaron from Company A meets with Bob from Company B to discuss an idea for Company A’s new product. Aaron and Bob co-invent a new feature for the product. Bob subsequently leaves Company B and joins Company A. Company A requests that Bob assign his rights to the invention to Company A. Can Bob assign his rights to Company A? What if Bob had resigned from Company B when the invention was created?
Page 22 © 2012 Hill-Rom Services, Inc. ALL RIGHTS RESERVED Hypothetical 4 Company A wants to build a new widget and contacts Company B and Company C to see if they would be interested in quoting the project. As part of the quoting process Company A signs a non-disclosure agreement with each company and provides a specification for the widget. Company C informs Company A that they will develop a prototype free of charge and Company A begins working with Company C on the widget. Meanwhile, instead of quoting, Company B begins working on a prototype. Company A receives prototypes from both Company B and Company C and wants to ensure that Company A owns all of the inventions created for the prototypes. Who owns the inventions? What ways could you resolve the situation?
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