"Shall Be The Property" Is Insufficient To Automatically Assign Title To An Invention In A Contract

• Published date: 15 September 2021
• Subject Matter: Intellectual Property, Patent
• Law Firm: Haug Partners
• Author: Mr Rich Kurz and Kiersten Fowler

On August 2, 2021, in Omni MedSci, Inc. v. Apple Inc., No. 20-1715, slip op. (Fed. Cir. Aug. 2, 2021), a Federal Circuit panel decision, with a dissent, upheld the district court's denial of Apple Inc.'s ("Apple") motion to dismiss Omni MedSci's ("Omni") patent infringement complaint for lack of standing. At the center of the Majority's holding was its decision that the contractual language "shall be the property of the University" did not create a present automatic assignment of title to intellectual property ("IP") rights in a contract between a professor and the University of Michigan ("the University"). Instead, the Majority decided that this language, at most, "reflect[ed] a future agreement to assign rather than a present assignment." Id. at 7. Thus, since the inventor Dr. Islam, and not the University, retained title to the asserted patents and he had assigned the rights to the patents to Omni, the Majority agreed with the district court's decision that Omni properly had standing to sue in an infringement litigation against Apple.

As background, Dr. Islam was a tenured professor at the University of Michigan. Id. at 2. When Dr. Islam's employment began in 2011, he signed an employment agreement that included a provision in which he agreed to abide by the University of Michigan's bylaws. Those bylaws contained the following paragraph regarding the disposition of IP:

1) Patents and copyrights issued or acquired as a result of or in connection with administration, research, or other educational activities conducted by members of the University staff and supported directly or indirectly ... by funds administered by the University regardless of the source of such funds, and all royalties or other revenues derived therefrom shall be the property of the University.

Id. at 2-3 (emphasis in original).

In 2012, Dr. Islam filed multiple provisional patent applications during an unpaid leave-of-absence. Id. at 3. Those applications eventually led to issued patents, and Dr. Islam assigned the patent rights to Omni in 2013. Id. at 3-4. One of these patents is an ancestor of the two patents-in-suit: U.S. Patent Nos. 9,651,533 ("the '533 patent") and 9,861,286 ("the '286 patent) (collectively the "asserted patents"). Id. at 4-5.

In 2018, Omni sued Apple alleging infringement of the asserted patents. Id. Apple filed a motion to dismiss under the Fed. R. Civ. P. 12(b)(1) for lack of standing on the basis that the University of Michigan, and not Omni, owned the asserted patents. Id. Specifically, Apple alleged that because of the agreement that Dr. Islam signed with the University, he had automatically assigned the asserted patents to the University when the invention was conceived. Id. at 5. Therefore, Apple argued, Dr. Islam had no rights to the invention and he could not assign patents with the invention to Omni, which gave Omni no right to sue Apple. Id. The district court, however, concluded that the bylaw in the contract "was not a present automatic assignment of title, but, at most, a statement of a future intention to assign." Id. (emphasis added). Thus, dismissal was improper because Dr. Islam owned the IP rights - and not the University - at the time that Dr. Islam assigned those rights to Omni.

WHO OWNED THE ASSERTED PATENTS?

At issue in Apple's motion to dismiss was whether Omni had standing to sue, a question which turns on whether Omni had an exclusionary right in the asserted patents. Id. at 6. In particular, the issue boiled down to a legal question of contract interpretation and "whether paragraph 1 of bylaw 3.10 automatically and presently assigned legal title of Dr. Islam's inventions to [the University]." Id. The Majority concluded that the "shall be the property of the University" language "is most naturally read as a statement of intended disposition and a promise of a potential future assignment, not as a present automatic...