By Richard Stobbe

A group of employees invented a patentable invention. Advanced Video obtained the patent,  and then moved to sue a competitor for infringement. The alleged infringer challenged Advanced Video’s right to sue, pointing out that Advanced Video did not have standing to sue for infringement, since it never obtained the transfer of patent rights from the employee-inventor.

The U.S. case Advanced Video Technologies LLC v. HTC Corporation reviews the narrow issue of whether a co-inventor of the patent transferred her co-ownership interests in the patent under the terms of an employment agreement.

The patent in question listed three co-inventors: Benny Woo, Xiaoming Li, and Vivian Hsiun. The invention was created while the three co-inventors were employed with Infochips Systems Inc. (“Infochips”), a predecessor of Advanced Video.  Through a series of steps, two of the inventors, Mr. Woo and Ms. Li assigned their coownership interests in the patent to Advanced Video. The co-ownership interests of Ms. Hsiun were the subject of this lawsuit.  Advanced Video claimed that it obtained Ms. Hsiun’s co-ownership interests in the invention through the original employment agreement with that employee.

A review of Ms. Hsiun’s employment agreement indicated that the clause in question was pretty clear:

I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company. (Emphasis added)

For emphasis, the employment agreement went on to say:

I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have infringement [sic] of any patents, copyrights, or mask work rights resulting from any such application assigned hereunder to the Company. (Emphasis added)

Translation? The employee agrees that she will assign to the employer all rights to any and all inventions developed by the employee during employment.

Surprisingly, the court decided this language did not clearly convey the rights to the invention, since the word “will” invoked a promise to do something in the future and did not effect a present assignment of the rights.

This was merely a promise to assign, not an actual immediate transfer of the invention.

While this is a U.S. case, it neatly illustrates the risks associated with the fine print in employment agreements: to avoid the problem faced by Advanced Video, it’s valuable for employment agreements to automatically and immediately assign and transfer rights to inventions, and to avoid any language that suggests a future obligation or future promise to assign.

The lesson for business in any industry is clear: ensure that your employment agreements – and by extension, independent contractor and consulting agreements – are clear. Intellectual property and ownership of inventions should be clearly addressed. Get advice from experienced counsel to ensure that the IP legal issues are covered – including confidentiality, consideration, invention ownership, IP assignment, non-competition and non-solicitation.

Related Reading:  Employee Ownership of Patentable Inventions
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