WEB PATENT NEWS--April, 2002
by Robert M. Hunter, Registered Patent Agent
News about patents, licensing and seed capital sources for inventors and innovating organizations.
I. INVENTORSHIP VERSUS OWNERSHIP - The differences between and overlap of these two important concepts is explained.
II. HOW INVENTION OWNERSHIP (AND FEDERAL GRANT AWARDS) CAN AFFECT PATENTABILITY - Examples teach how to avoid obviousness rejections by managing ownership of inventions.
I. INVENTORSHIP VERSUS OWNERSHIP
In the U.S., inventorship (who is the inventor?) and ownership of a patent (in whom do the patent rights vest?) are different concepts. Both are important for inventors and their employers to understand because they can affect not only who can benefit financially from a patent but also whether a claimed invention is patentable. This article explains how the concepts differ and how they intertwine in certain situations and includes references to the USPTO Manual of Patent Examining Procedure (MPEP).
Inventorship is earned by conceiving (thinking up) a complete and operable invention (MPEP 2138.04). U.S. patent applications must be filed in the name of the true inventor(s). Intentionally claiming that a person is an inventor who is not a true inventor or claiming that fewer than all true inventors invented a claimed invention can be used (by an infringer, for example) to invalidate an issued patent. Because what is claimed as an invention can change during prosecution of a patent application, adding or deleting inventor(s) can become necessary.
In conceiving an invention, inventors can accept the suggestions of others, but must maintain intellectual domination of the conception process (MPEP 2138.04). One who merely reduces an invention to practice (e.g., one who provides a pair of hands that build and test a working model of the invention, for example) is not an inventor, unless that person too contributes to conception of a claimed invention. If more than one person, who is aware of the work of the other inventors, conceive of any invention claimed in a patent, then joint inventorship has occurred.
Under U.S. law, ownership of an invention typically vests with the inventor(s), unless the inventor was "employed to invent" or has agreed that someone else (e.g., his employer) will own the inventions that he conceives (MPEP 301). The Supreme Court established the "employed to invent" doctrine when it stated, "one employed to make an invention, who succeeds, during the term of his service, in accomplishing that task, is bound to assign to his employer any patent obtained." In the absence of an agreement to the contrary, joint inventors each own an interest in all of the claimed invention can sell or license that right to another without sharing the proceeds with the other inventors (35 U.S.C. 262).
An inventor who uses the resources (time, facilities or materials) of an employer to make an invention thereby grants an extensive "shop right" to the employer to use the invention solely in the employer's business without paying a royalty to the inventor. Most employment and joint inventing agreements wisely impose on the potential inventors the obligation of disclosing any inventions and assigning ownership rights to those inventions conceived in the performance of a party's duties (whether conception occurs in the workplace or not).
In summary, inventorship and ownership are important issues to inventors and their employers. Any patent practitioner (agent or attorney) can assist you with resolving inventorship issues and resolution can occur after invention has occurred. Care must be taken to insure that ownership issues are addressed before invention occurs, however, and consultation with an attorney who practices in the intellectual property or technology field is wise in such situations.
II. HOW INVENTION OWNERSHIP (AND FEDERAL GRANT AWARDS) CAN AFFECT PATENTABILITY
Whether or not inventors have a pre-existing obligation to assign 100 percent of their rights in their inventions to an owner [e.g., individual(s), business(es) or non-business(es)] can significantly affect the patentability of a new invention under certain situations. U.S.C. 103(c) stipulates as follows:
"Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the invention was made, owned by the same person or subject to an obligation of assignment to the same person."
Congress created this exception to the nonobviousness requirement in view of the collaborative environment that exists within modern research organizations. Under this rule, inventors who have an obligation to assign (100 percent of) their inventions to a party that also owns (100 percent of) "subject matter" (technology) that could render the inventions obvious can avoid obviousness rejections if the subject matter became a part of the prior art via one of the routes noted above. This can become very important in a number of situations, including the following:
Example 1: Two independent inventors who are not working under an obligation to assign their inventions to a single party jointly invent an obvious (but valuable and otherwise patentable) improvement of subject matter disclosed in a published patent application that was filed previously (and is owned) by one of the inventors. The invention is deemed obvious in view of the 35 U.S.C. 102(e) reference and the joint inventors are denied a U.S. patent on the improvement.
Example 2: Joint inventors who are working on a Small Business Innovation Research (SBIR) project (one is an employee of the small business and the other is a university subcontractor who has not voluntarily - and he cannot be legally forced to - agreed to assign inventions to the small business) invent an obvious improvement of subject matter that was admittedly invented previously (and is owned) by one of them. A U.S. patent on the invention issued to the joint inventors (in error) but, during a patent infringement/validity lawsuit, a court judged the invention obvious in view of a 35 U.S.C. 102(f) admission (that should have been made to the USPTO during prosecution of the patent under 37 CFR 1.56) and the patent was deemed invalid and unenforceable.
Example 3: An employee who was not employed to invent and who is working for a small business to which he has no obligation to assign his inventions (because that clause it not present in his employment agreement) invents an obvious improvement of subject matter that was previously "made" ("made" in this context means conceived and actually reduced to practice) by owner of the company who had assigned the invention to the company and who had not abandoned, suppressed or concealed the "made" invention (MPEP 2138.03). During a priority contest at the USPTO, the invention is deemed obvious in view of the 35 U.S.C. 102(g) admission and the sole inventor is denied a U.S. patent on the improvement.
Additional examples of how these and other rules affect patentability in the U.S. under different fact scenarios are presented on my website.
Thus, U.S. patent law now provides (for patent applications filed after November 29, 1999) that subject matter developed by another "inventive entity" that qualifies as "prior art" only under one or more of subsections 35 U.S.C. 102(e), (f) and (g) is not to be considered when determining whether an invention sought to be patented is obvious under 35 U.S.C. 103, provided the subject matter and the claimed invention were commonly owned at the time the invention was made ("made" in this context means its conception was complete) [MPEP 706.02(l)]. [A different inventive entity is one that differs by at least one inventor (MPEP 2136.04).] It is important to note that 35 U.S.C. 103(c) applies only to subject matter which qualifies as prior art under 35 U.S.C. 103 (obviousness); it does not affect subject matter which qualifies as prior art under 35 U.S.C. 102, i.e., anticipatory (lack of novelty) prior art, e.g., subject matter that is public knowledge, in public use in the U.S., on sale in the U.S. or patented or published information.
In general, the prior art "subject matter" that qualifies under each of the above subsections is as follows:
35 U.S.C. 102(e) - subject matter that was disclosed in a published U.S. patent application or PCT patent application that is published in English and subject matter that was disclosed in a patent granted on an application for patent by another filed in the U.S. (MPEP 2136),
35 U.S.C. 102(f) - subject matter that was invented by another (MPEP 2137), and
35 U.S.C. 102(g) - subject matter that was conceived and reduced to practice in this country or a NAFTA or a WTO member country by another who has not abandoned, suppressed, or concealed it (MPEP 2138).
As was hinted in the second example, joint or sole inventing by the employees and/or contractors of small businesses or non-profit organizations (e.g., universities) can add further complications to the inventorship/ownership issue. Procurement regulations applicable to federal grants and contracts awarded to these parties (e.g., SBIR awards) require that employment agreements (and training) be in place during the performance of funded projects. The agreements must impose on employees an obligation that they "execute all papers necessary to file patent applications on subject inventions and to establish the government's rights in the subject inventions" (37 CFR 401.14). This is often interpreted as a requirement that employees be required to assign inventions to their respective employers, however, when joint inventors work together who have an obligation to assign inventions to different parties (e.g., employers), the protections of 35 U.S.C. 103(c) are not available to either party [MPEP 706.02(l)(2)]. This can cause serious problems (loss of patentability) for inventors working for one party whose inventions are obvious improvements to a previously invented subject matter that is owned by another party.
In the absence of a voluntary agreement to the contrary, ownership rights to "subject inventions" that are "conceived or first actually reduced to practice" in performance of a SBIR project are allocated by regulation. In general, the small business or its subcontractor (if the subcontractor conceived or first actually reduced to practice the invention) "may retain the entire right, title, and interest throughout the world to each subject invention." Note that retaining less than 100 percent ownership (e.g., assigning non-U.S. patent rights to another party, even to an employee or the Government) of separate inventions can preclude common ownership and, hence, reliance on 35 U.S.C. 103(c), with respect to those inventions.
Participants in a Small Business Technology Transfer (STTR) project, on the other hand, are required to negotiate an agreement to allocate rights to intellectual properties (e.g., previously invented subject matter) that form the background of a STTR project or are developed in the performance of a STTR award. Versions of the model agreement posted on agency websites typically contain the following suggested clause: "Unless otherwise agreed in writing, Project Intellectual Property shall be owned by the party whose employees make or generate [whatever that term means] the Project Intellectual Property. Jointly made or generated Project Intellectual Property shall be jointly owned by the Parties unless otherwise agreed in writing." Here, a "Catch 22" is created when a new invention (that is obvious in view of subject matter owned by one party and that is shared during the project) is not, at the time the new invention is made, "owned by the same person or subject to an obligation of assignment to the same person" that owns the subject matter that renders it obvious. Got that?
Both small businesses and universities currently have an opportunity to participate in a congressionally-mandated [15 U.S.C. 638 Section 9(w)] review of the STTR "model agreement" and are encouraged to do so by the Small Business Adminstration. As an aside, this author hopes that the following unnecessary and open-ended clauses will also be removed from the model agreement: "In addition to the Government's rights under the Patent rights clause of 37 CFR 401.14, the Parties agree that the Government shall have an irrevocable, royalty free, nonexclusive license for any Governmental purpose in any Project Intellectual Property." and "The Parties will indemnify and hold harmless the Government with regard to any claims arising in connection with commercialization of the results of this STTR project."
Hopefully, some day consistency among all these laws and regulations will be achieved, but for now, inventors are well advised be careful about multiple-party inventing. Before you sign any agreement disposing of any part of the ownership in either background technology ("subject matter") or new inventions that might be conceived during multiple-party research projects, I suggest you consult with an attorney experienced in intellectual property or technology law. One option you might want to consider, if potentially-obvious, improvement-type inventions are likely, is to temporarily transfer 100 percent ownership of background technology to a single party (e.g., the small business in a STTR project) and to have all inventors (at least temporarily) be under an obligation to assign 100 percent of ownership in new inventions to the same party during the research project. Percentages of ownership can revert to an appropriate party(ies) after conception of the new invention is complete [MPEP 706.02(l)].
Robert M. (Bob) Hunter, Ph.D.
Licensed Professional Engineer
Registered Patent Agent
65-1116 Hoku'ula Rd.
P.O. Box 2709
Kamuela, HI 96743
tel (808) 885-4194
fax (808) 885-4114