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Advanced Video Tech v. HTC Corp. – Co-inventor did not transfer interests in patent via employment agreement

| Category: Intellectual Property News

On January 11, 2018, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) issued its opinion in Advanced Video Technologies LLC v. HTC Corp., holding that a co-inventor of a patent does not transfer ownership interests in the patent under a California employment agreement that includes a “will assign” provision, a trust assignment provision, and a quitclaim assignment provision.

In 2011, Advanced Video Technologies LLC (“AV Tech”) sued HTC, Blackberry, and Motorola (“the defendants”) for patent infringement. The U.S. District Court, however, held that AV Tech did not have full ownership of the patent at issue (“the ′788 patent”) and thus, did not have standing to sue. The District Court found that one of the co-inventors, Vivian Hsiun, never assigned her interests in the ′788 patent application to AV Tech.  

Appealing the District Court’s decision, AV Tech argued that it obtained Hsuin’s interests through a series of transfers.  AV Tech asserts that in 1992, Hsiun first assigned her interests to Infochips Systems Inc. (“Infochips”), pursuant to an employment agreement; and thus, after Infochips went out of business in 1993 and a series of transfers, the interests of the ′788 patent were obtained by AV Tech.  AV Tech asked the Federal Circuit to dismiss the District Court’s finding for a lack of standing and to determine whether Hsuin had transferred her interests in the patent under the terms of her employment agreement with Infochips.

The Federal Circuit rejected AV Tech’s arguments and agreed with the District Court, holding that the employment agreement never assigned Hsuin’s interests in the patent to Infochips.  The opinion first looked at the “will assign” provision within the employment agreement.  The “will assign” provision provided that Hsiun “will assign to the Company” all her right, title, and interest in any inventions.  Relying on Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1576 (Fed. Cir. 1991), the District Court found that “will” invoked “a promise to do something in the future and did not effect a present assignment.”  Op. at 6. The Federal Circuit agreed with the District Court, and found that the “will assign” language alone did not create an immediate assignment of Hsiun’s rights in the invention to Infochips.

The Federal Circuit also found that the trust assignment provision undermined the existence of an immediate assignment. The Federal Circuit explained that an inventor could not hold patent rights in trust and immediately assign patent rights at the same time. Even if the AV Tech was a beneficiary of a trust, the beneficiary, under California trust law, generally is not the party in interest and may not sue in the name of the trust.

The Federal Circuit then examined the quitclaim provision, which basically waived Hsuin’s rights to patents that were assigned. However, because no patent rights were ever assigned to Infochips, the Federal Circuit found that the quitclaim provision did not apply in this situation. Since none of the provisions ever immediately assigned Hsiun’s interests of the patent to Infochips, AV Tech did not have full ownership of the patent after all of the transfers. Therefore, because Hsiun was never a party to the suits and did not consent to be party to the suits, AV Tech lacked standing and the District Court’s dismissal of the cases was affirmed.

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