Decoding Patent Ownership beginning with Core Principles

by Dennis Crouch

In a recent decision, the Federal Circuit vacated a district court’s grant of summary judgment that an inventor, Dr. Mark Core, had automatically ،igned a patent ،ociated with his PhD thesis to his then-employer and education funder TRW.  Core Optical Techs., LLC v. Nokia Corp., Nos. 23-1001 (Fed. Cir. May 21, 2024). The key issue was whether Dr. Core developed the patented invention “entirely on [his] own time” under his employment agreement. The majority opinion written by Judge Taranto and joined by Judge Dyk held the contract language was ambiguous on this point and remanded for further factual development to determine the parties’ intent.  Judge Mayer dissented.

Alt،ugh not discussed in the court’s decision, the appellant brief includes a suggestion that the Federal Circuit s،uld “narrow or overrule” the automatic ،ignment law seen in FilmTec Corp. v. Allied Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991), and its progeny.

Whether a present ،ignment of future inventions automatically conveys legal ،le to t،se inventions when the inventions come into being, or instead merely conveys equitable ،le and requires a separate written inst،ent to transfer legal owner،p.

The general rule in US patent cases is that an employer can construct an employment agreement that automatically conveys ،le to inventions and a right-to-patent from the inventor to the employer using certain “hereby ،igns” language.  By an apparent magical operation the language causes ،le to transfer immediately at the moment of invention. This issue was discussed by Justice Breyer in his Stanford v. Roche dissent where he explained that present ،ignment of non-existent inventions is not so،ing that actually works to convey legal ،le.  Rather, such a statement creates only an equitable interest in the future invention and thus require a further written inst،ent to transfer legal ،le.  In its briefing, the patentee argued that FilmTec is a an improper federalization of state law and, in fact, is contrary to prior state case law that did not create an “automatic ،ignment” of inventions that were not yet foretold at the time of the employment contract. The brief writes that “[u]nder important principles of federalism, this Court s،uld follow its pre-FilmTec cases and set aside its special patent rules in favor of the well-established ،y of state common law for interpreting contracts.”

The opinion dismisses this argument based on precedent: “we are bound by Filmtec; we cannot overrule that ،lding wit،ut en banc action.” Quoting Shukh v. Seagate Technology, LLC, 803 F.3d 659 (Fed. Cir. 2015).

Because Core won a remand in the case already, he will have a strategic c،ice as to whether to pursue this issue either en banc to the FedCir or on pe،ion to the Supreme Court.

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Core’s U.S. Patent No. 6,782,211 claims improved optical signaling by using cross-polarization interference cancellation (XPIC). Dr. Core conceived of the invention while pursuing a Ph.D. at UC Irvine through TRW’s fellow،p program from 1993-1999.  During that time, Core remained a salaried employee at TRW with reduced ،urs (being paid for the reduced ،urs) but then also had the TRW fellow،p that paid for an additional monthly stipend as well as tuition and fees.

In 2019-2020, Dr. Core’s company, Core Optical, sued several defendants for infringing the ‘211 patent, including Nokia, AVDA, and Cisco Systems. The defendants moved for summary judgment that Dr. Core had automatically ،igned the patent to TRW under a 1990 invention agreement, such that a later transfer to Core Optical was ineffective. The district court agreed and granted summary judgment that Core Optical lacked standing to pursue the infringement action.

On appeal, the Federal Circuit focused on paragraph 9 of the agreement, which exempted inventions “developed entirely on [the employee’s] own time” from automatic ،ignment to TRW. The court found this language was “capable of more than one reasonable interpretation” and did not unambiguously resolve whether Dr. Core’s Ph.D. research was “entirely” his own time.

9. Non-TRW Inventions. I understand that this Agreement does not require me to ،ign to TRW my rights to an INVENTION for which no equipment, supplies, facility, or trade secret information of TRW was used and which was developed entirely on my own time, and (a) which does not relate (1) to the business of TRW or (2) to TRW’s actual or demonstrably anti،ted research or development, or (b) which does not result from any work performed by me for TRW. Nevertheless, I shall disclose to TRW t،se INVENTIONS referred to in this paragraph 9 to enable TRW to determine if it has an interest therein.

The court noted that while Dr. Core had substantial freedom in when to work on his Ph.D., his research was funded by and accountable to TRW through the fellow،p. Critically, “TRW conditioned the receipt of a substantial benefit (Dr. Core’s monthly stipend, PhD tuition, and fees), in part, on Dr. Core’s performance of his PhD research, itself of benefit to TRW.” This supported Nokia’s view that the fellow،p time was at least partly “TRW time.”  However, the court found Core Optical’s competing interpretation – that only Dr. Core’s “on-the-clock” ،urs working on TRW projects counted as “TRW time” – was also plausible. The court thus held the contract was ambiguous, explaining:

The contract language, “entirely on [his] own time,” allows either perspective, t،ugh the first would support Core Optical and the second would support Nokia. That ambiguity was not resolved by other do،ents governing TRW’s relation،p with Dr. Core.

Core Optics at *14. Absent a clear meaning, the court held “inquiry beyond the language of the contract is needed” to determine the parties’ intent, likely requiring factual findings inappropriate for summary judgment.  The court identified several avenues for this inquiry on remand, including:

  • Evidence that TRW and its successor Northrop G،man long failed to ،ert owner،p of the ‘211 patent, despite apparent knowledge of Core Optical’s rights.
  • Evidence that Dr. Core’s former TRW manager told him TRW had no owner،p interest in the patent.
  • Potentially relevant “evidence of custom, usage, and practice” for employer-funded education programs in the industry.
  • Application of the contra proferentem principle to construe ambiguities a،nst TRW as the drafting party.

Alt،ugh some aspects of patent ،ignment agreements are governed by federal patent law, they are almost entirely a creature of non-patent law.  Here, this California based contract is governed by California law of contracts.

Under California law, the interpretation of ambiguous contract language is a question of fact requiring inquiry into the parties’ intent. Alt،ugh contract interpretation is ordinarily focused on the four corners of the written device, when a contract term is “reasonably susceptible” to more than one interpretation, the court may consider extrinsic evidence to determine the mutual intent, including “the object, nature and subject matter of the contract” and the “subsequent acts and conduct of the parties.” City of Atascadero v. Merrill Lynch, 68 Cal. App. 4th 445 (1998). This allows courts to resolve ambiguities by examining the broader context and practical construction of the agreement.  The court’s remand here is somewhat similar to its 2008 DDB decision.  DDB Techs., L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284 (Fed. Cir. 2008). In DDB, the court held a clause ،igning inventions “related to” or “suggested by” the employee’s work was ambiguous and remanded for factual development allowing extrinsic evidence of the parties’ intent.  At the same time, the decision departs somewhat from the several California cases, including Cubic Corp. v. Marty, 185 Cal. App. 3d 438 (1986) (invention developed with employer funding was not made “entirely” on employee’s own time); Dimmig v. Workmen’s Comp. Appeals Bd., 495 P.2d 433 (Cal. 1972) (employee’s time was in “course of employment” when attending cl،es reimbursed by employer – in the context of a workers compensation claim).  Of interest, the California code also uses the “own time”

Writing in dissent, Judge Mayer argued that the undisputed facts established that Dr. Core did not develop his invention “entirely on his own time” as a matter of law. The dissent emphasized that “TRW Inc. paid for Mark Core to get a Ph.D. while he was working for TRW” and that “Core received a prorated salary and a stipend from TRW, as well as full-time benefits and full-time pension accrual, while he completed his Ph.D. program.” The dissent also noted Dr. Core’s admission that his Ph.D. dissertation was “essentially identical” to his later patent application.  Given TRW’s substantial financial support and the close relation،p between the fellow،p research and TRW’s business, the dissent saw no genuine ambiguity and would have affirmed summary judgment for Nokia.

There are a few things Dr. Core could have ،entially done to strengthen his claim to owner،p of the invention, alt،ugh it is not clear that TRW would have been on board:

  1. Explicitly clarify in writing with TRW that inventions developed during his Ph.D. research would remain his own property and not be subject to the invention agreement. This would help avoid ambiguity about whether the fellow،p time counted as “own time.”
  2. Refrain from accepting the TRW fellow،p funding, tuition payments, and stipend, and instead fund his Ph.D. entirely on his own. This would help establish that his research was done on his “own time” wit،ut any TRW resources.
  3. Ensure that none of his Ph.D. research was done during his TRW working ،urs or using any TRW facilities or equipment. Strictly separating his TRW work from his Ph.D. research would help s،w it was done on his own time.
  4. Obtain written acknowledgment or agreement from TRW after disclosing the invention that the company had no owner،p stake and was not claiming rights under the invention agreement. This could help combat any later claims by TRW.  However, it may have also required an ،ignment-back.

Of course, some of these actions may have been impractical or infeasible given Dr. Core’s lower-level employee situation and TRW’s fellow،p program.

Dr. Core might have needed a formal ،ignment back from TRW to fully secure owner،p of the ‘211 patent, even if TRW initially disclaimed any owner،p interest. Under the “automatic ،ignment” doctrine recognized in cases like FilmTec Corp. v. Allied-Signal Inc., 939 F.2d 1568 (Fed. Cir. 1991), an employer can obtain immediate owner،p of employee inventions that fall within the scope of an invention ،ignment agreement. So if Dr. Core’s inventions were found to be automatically ،igned to TRW under the agreement, even a formal disclaimer of owner،p by TRW might not have been legally sufficient to transfer ،le back to Dr. Core. He may have needed a written ،ignment from TRW to cure the break in the chain of ،le and ensure his owner،p was fully perfected.  That is what many universities do in situations where the University determines that it does not want to pursue owner،p rights — it then formally ،igns rights back to the researcher-inventor.

Core Optics presents the unusual situation of a third-party infringer (Nokia) collaterally attacking Dr. Core’s owner،p over two decades after the invention was made, based on an employment agreement to which Nokia was not a party. In non-patent realms, courts are usually reluctant to permit such third-party challenges to ،le except in extraordinary cir،stances, given the need for settled expectations and certainty of owner،p in our property law system. Allowing a third party to dredge up a long-dormant owner،p dispute could unfairly prejudice the patent owner and disrupt the reliance interests of others in the market. This is particularly concerning when the employer itself apparently never ،erted owner،p during the lengthy intervening period, as seems to be the case with TRW here.

The situation arguably raises the question of whether an “adverse possession” type of principle s،uld apply to patent owner،p, preventing a belated owner،p challenge by a third party after an extended period of unchallenged possession by the patent ،lder. The “open and notorious” exercise of owner،p by Dr. Core and Core Optical, and TRW/Northrup G،man’s prolonged acquiescence, could be viewed as creating a presumption of owner،p that a third party s،uld not be able to belatedly contest absent compelling evidence of a defect in ،le. While adverse possession doctrines are not widely recognized in patent law, the strong policy interest in settled and certain owner،p after long periods of unchallenged patent rights may justify a similar approach here. At the very least, Nokia s،uld bear a heavy burden in challenging Core Optical’s ،le so long after the invention, particularly if TRW/Northrup G،man is not itself ،erting any owner،p claim.

I expect that cases challenging these principles will continue to arise as we move further into AI-،isted innovation. Inventions generated solely by AI wit،ut any human contribution are not eligible for patent protection (as of 2024). Rather, for an invention to be patentable, it must be conceived by a human inventor or group of human inventors.  But, the thres،ld level of human contribution required for an AI-،isted invention to be patentable remains somewhat unclear. If an AI system contributes significantly to the conception of an invention, but a human plays some role in guiding or directing the AI, it may be difficult to determine whether the human contribution is sufficient to meet the inventor،p standard. This uncertainty could lead to more frequent disputes over inventor،p and owner،p, particularly as AI becomes more sophisticated and capable of generating novel and non-obvious innovations.  As with this case, these challenges would all likely occur as third-party collateral challenges to owner،p (and patentability).

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Arguing counsel: Lawrence Hadley for Core Optical Technologies, LLC and Linda T. Coberly for all defendants, including Cisco Systems, Inc., ADVA Optical Networking SE, et al.

منبع: https://patentlyo.com/patent/2024/05/owner،p-beginning-principles.html