Federal Circuit Summary

Before Newman, O’Malley, and Reyna. Appeal from the United States District Court for the Southern District of New York.

Summary: A co-inventor did not transfer ownership interests in a patent under a California employment agreement that included a “will assign” provision, a trust provision, and a quitclaim provision.

Advanced Video sued the defendants for patent infringement. The district court dismissed the case, finding that Advanced Video lacked standing because a co-inventor had not assigned ownership rights in the patent pursuant to the Employment Agreement and was not a party to the action.

The Federal Circuit agreed with the district court that the future-tense “will assign” language in the Employment Agreement did not itself effect an assignment. Furthermore, the trust provision undermined the existence of an immediate assignment because an inventor could not immediately assign patent rights and at the same time hold them in trust. Even if Advanced Video was a beneficiary of a trust, the Federal Circuit explained that, under California trust law, the beneficiary generally is not the party in interest and may not sue in the name of the trust. Finally, the quitclaim provision of the Employment Agreement merely waived the co-inventor’s rights to patents that were assigned. However, as no patent rights were ever assigned, the Federal Circuit found that the quitclaim provision was inapplicable. Accordingly, Advanced Video did not have full ownership of the patent, and because the co-inventor was not a party to the suits and had not consented to the suits, Advanced Video lacked standing and the district court’s dismissal of the cases was affirmed.

Judge O’Malley concurred that the judgment was compelled by binding precedent, but argued that the precedent serving as the predicate for the case was wrong. The concurring opinion examined Rule 19, case law addressing joinder under Rule 19, and the Patent Act itself, concluding that that Rule 19, which allows for involuntary joinder, should be applied to cases such as this. The concurring opinion then called for the Federal Circuit to reconsider en banc its precedent that a co-owner or co-inventor cannot be involuntarily joined pursuant to Rule 19.

Judge Newman dissented, arguing that Advanced Video had full ownership of the patent and standing to sue. Judge Newman argued that the Employment Agreement, including the “will assign”, trust, and quitclaim provisions, demonstrated a mutual intent and understanding of employer and employee to effect an assignment of patent rights. Judge Newman also disagreed with the majority’s findings regarding the trust, arguing that the trust vested immediately upon creation of an invention under the Employment Agreement, and that the beneficiary could act on behalf of the trust if the trustee were absent or inactive.

This case is: ADVANCED VIDEO TECHNOLOGIES LLC v. HTC CORPORATION ET AL.

Written By: Karen M. Cassidy and C. Dylan Turner, Ph.D.

Edited By: Paul Stewart