by James Juo.

In Omni MedSci, Inc. v. Apple Inc., Nos. 2020-1715, 2020-1716 (Fed. Cir. Aug. 2, 2021), the Federal Circuit held that the specific “shall be” language of an employment agreement did not effectuate a present automatic assignment of patent rights.

Dr. Mohammed Islam is a professor at the University of Michigan (UM), who took an unpaid leave-of-absence from UM in 2012, and filed multiple patent applications during his time on-leave. In 2013, Dr. Islam requested that UM confirm his ownership of the patents, but UM refused, asserting that it had made expenditures to support the cost of Dr. Islam's space and had provided “medical school faculty partners who have helped springboard ideas with him.” So, UM took the position that it was the owner of the patents. Dr. Islam did not formally appeal UM's decision, but also did not formally assign his patents to UM.

Dr. Islam did assign the patents to Omni in December 2013, and Omni sued Apple in 2018 for patent infringement in this lawsuit. But Apple argued that UM owned the patents, so Omni lacked standing to assert the patents against Apple.

The issue on appeal was whether Dr. Islam's employment agreement automatically transferred legal title in his invention to UM. There was no dispute between Apple and Omni that the inventions were not directly related to Dr. Islam's teaching duties, but rather grew out of his time on leave.

Below are relevant clauses from UM's bylaws (Dr. Islam's employment agreement included a provision agreeing to abide by UM's bylaws), with emphasis added:

1) Patents … 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 (e.g., through the use of University resources or facilities) 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.

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4) Patents, copyrights, and property rights in computer software resulting from activities which have received no support, direct or indirect, from the University shall be the property of the inventor, author, or creator thereof, free of any limitation which might otherwise arise by virtue of University employment.

5) In cases which involve both University-supported activity and independent activity by a University staff member, patents, copyrights, or other property right in resulting work products shall be owned as agreed upon in writing and in advance of an exploitation thereof by the affected staff member and the Vice-Provost for Research in consultation with the Committee on Patents and Copyrights and with the approval of the University's Office of the General Counsel. It is understood that such agreements shall continue to recognize the traditional faculty and staff prerogatives and property rights concerning intellectual work products.

The Federal Circuit, in an opinion written by Judge Linn and joined by Judge Chen, held that this language “is most naturally read as a statement of intended disposition and a promise of a potential future assignment, not as a present automatic transfer.”

First, paragraph 1 merely stipulates conditions governing assignment, rather than effectuating a present transfer of a present or future right.

Second, the “shall be” language in paragraph 1 should not be read as a present automatic assignment because the same language found in paragraphs 4 and 5 could not be so read.

Third, paragraph 1 does not use present tense words of execution. Notably, the provisions did not say that the inventor “agrees to grant and does hereby grant” title to the patent (for a present automatic assignment of a future interest) or that the inventor “will assign” the patent rights (for an agreement to assign).

Fourth, consistent with this interpretation, UM also uses an Invention Report that includes a declaration referencing bylaw 3.10, which states: “As required, I/we hereby assign our rights in this invention and all resulting patents … [to UM].” This separate form contains language of present assignment rather than of confirmation.

The Federal Circuit also noted the parties' past conduct was not particularly helpful in this instance and did not change the court's interpretation of the above language.

Judge Newman, however, dissented and argued that the words “shall be the property of the University” in paragraph 1 was an unambiguous statement of intended and agreed ownership, and supports no plain and ordinary meaning other than that UM is vested as owner when the property comes into being.