Context: Yesterday the Federal Circuit published a precedential opinion on fee-shifting concerning PTAB IPRs and attorney’s liability (May 20, 2024 ip fray article).
What’s new: The next precedential Federal Circuit opinion in a patent case came down today (PDF). Parallel patent infringement lawsuits that Core Optical Technologies brought against Nokia, Adva and Cisco were dismissed by Judge John Kronstadt in the Central District of California on summary judgment for lack of standing under an assigment clause in an old employment agreement signed by the inventor with TRW (later acquired by Northrop Gunman). By a 2-1 majority, a Federal Circuit panel vacated that holding and remanded for further factual determinations, along with instructions that considerably up the ante for the defendants.
Direct impact: There is now a rather high likelihood of the case going forward. Circuit Judge Haldane Mayer disagreed with Circuit Judges Timothy Dyk and Richard Taranto, but the dissent is short and thin. Given that there are three defendants, it is still quite possible that someone will seek a rehearing en banc.
Wider ramifications: Employee inventions are an important aspect of patent law. Today’s majority opinion reflects the fact that in case of doubt, judges are more likely than not to side with inventors.
The employment contract that contains the assignment clause in question was signed in 1990. But the invention was made as part of a fellowship: TRW supported the inventor’s Ph.D. (University of California, Irvine). The invention, which is related to optical networks and gave rise to Mark T. Core’s U.S. Patent No. 6,782,211 (title: “cross polarization interface canceler”), relates to the Ph.D. program.
The outcome-determinative part of the assignment clause exempts inventions that Dr. Core developed “developed entirely on [his] own time.” There were also some other requirements, but those were not the issue.
The panel majority, based on extensive dictionary lookups and a discussion of state court cases cited by the district court, held that the contract alone does not resolve the dispute so as to warrant the dismissal of the case on jurisdictional grounds. One can argue that the inventor’s company-supported participation in a Ph.D. program was more like an extension of his regular employment, but one can also distinguish the two as the inventor enjoyed far greater liberties with respect to his studies. A clause according to which the assignment clause remained in force “during” the fellowship didn’t persuade the panel majority either as it has only a temporal meaning but does not specifically say what does or does not constitute the inventor’s own time.
The majority remands for further factual determinations, for which the judge will be the finder of fact as it’s about jurisdiction over the case (as opposed to the decisions on the merits that are left to a jury if a party so requests).
What the final part of the per curiam opinion then says about certain relevant facts (in a non-exhaustive discussion of potentially important facts) does not bode well for the defendants (Nokia, Adva, Cisco):
- “TRW and its successor Northrop Grumman did not assert ownership for a very long time.” Nokia provided an explanation (they didn’t consider the patent valuable enough to care), but that wasn’t necessarily enough for the majority to consider the facts clear.
- “Dr. Core’s former project manager at TRW affirmatively represented to Dr. Core that Dr. Core owned the ’211 patent and that TRW maintained no ownership interest in it.”
- “[E]vidence of custom, usage, and practice in a field is sometimes relevant to determining mutual intent when commonly used language is on its face uncertain in meaning.” That part is neutral.
- But then the Federal Circuit instructs the district court to adhere to the contra proferentem principle, attaching a lot of weight to the fact that employers typically write the employment contracts and, therefore, any ambiguity must in case of doubt be interpreted in the light most favorable to the employee who just signed but didn’t draft the agreement. The majority points to a Supreme Court decision (Lamps Plus, Inc. v. Varela) that favors employees in such situations.
It would not be surprising if the parties settled the three parallel cases now, given that today’s Federal Circuit decision means the case is not extremely likely to be resolved on the basis of standing.