More on the DDB case
At least two blogs have brought up a recordation issue (35 USC 261) in the DDB case.
Patently-O wrote:
A reader suggested that the patent recordation statute (35 U.S.C. 261) be considered. If you remember 1L property, the patent recordation statute is a notice statute with a three-month grace period. Thus, a subsequent assignee of a patent will hold title over a prior assignee if two conditions are met: (1) the prior assignee did not record in time (which would give constructive notice); and (2) the subsequent assignee was “without notice” of the prior assignment. The timing is no question here — Schlumberger did not record until after DDB had already sued. The only issue then is whether DDB had notice of the prior assignment.
[DDB was represented at the CAFC by MBHB, former home of Patently-O.]
The issue is further crystallized at PLI:
Finally, as Professor Crouch points out in his post, there is likely another important issue lurking here that does not seem to be addressed. An assignment is only effective against those who subsequently obtain an alleged assignment if the original assignment was recorded during the firs 90 days. Schlumberger never recorded within the first 90 days, and in fact did not record until DDB already brought suit against MLB Advanced. This being the case the only issue with respect to whether DDB holds good title should be whether DDB knew of a prior assignment to Schlumberger. Even if Schlumberger did automatically obtain an assignment as a result of the employment agreement if DDB did not know about that assignment then DDB should have superior title to Schlumberger, which would mean that they would have superior title to MLB Advanced, who obtained their rights through assignment from Schlumberger.
IPBiz has noted that the relevant words of 35 USC 261 are An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
As some background, DDB was formed by the brothers David (who worked for Schlumberger between 1980 and 1994) and Daniel Barstow (who did not work for Schlumberger). The patents at issue were assigned by the brothers to DDB in 1998. The "ultimate" issue of the case is whether David's interest was previously assigned to Schlumberger (automatically) as a result of an employment contract. In 2006, Schlumberger assigned whatever rights it had in these patents to MLB.
The issue in the case is one of subject matter jurisdiction, because Schlumberger and MLB were not joined.
The CAFC first determined that "automatic assignment" is an issue of federal law. The issue of whether the employment agreement covered the patents in suit was one of state law (here Texas law). The CAFC ordered additional discovery on the latter point, and did NOT reach the issue of whether the patents did, or did not, fall within the scope of the agreement.
By (negative) implication, one might think that the CAFC did not consider the recordation issue dispositive. If hypothetically the patents are found to be within the scope of the employment agreement, then the patents were automatically assigned to Schlumberger. [If not within the scope, then DDB owns the patents and the jurisdictional issue is gone.]
Of the argument --Even if Schlumberger did automatically obtain an assignment as a result of the employment agreement if DDB did not know about that assignment then DDB should have superior title to Schlumberger--, one notes that
#1. If the court finally determines that Schlumberger did automatically obtain an assignment through the employment agreement, then David Barstow had notice. That notice might be imputed to DDB.
#2. Although the blogs only talk about a subsequent assignee, the statute is about "any subsequent purchaser or mortgagee for a valuable consideration, without notice."
Was DDB a subsequent purchaser and was DDB without notice?
Note text from the case IN RE: CYBERNETIC SERVICES, INC., D/B/A SILENT RADIO, INC, 252 F.3d 1039 (9th Cir. 2001) :
The term "purchaser" does not detract from this conclusion. Section 261 instructs that an unrecorded "assignment, grant or conveyance" shall be void as against a subsequent"purchaser . . . for a valuable consideration, without notice. " The historical definition of a "purchaser for value and without notice" was a "bona fide purchaser. A purchaser .. . who takes a conveyance purporting to pass the entire title, legal and equitable," who pays value and does not have notice of the rights of others to the property. Bouvier's Law Dictionary 1005 (Baldwin's Century ed. 1926). The Supreme Court seems to have accepted this definition as well. See Littlefield, 88 U.S. at 221 (noting that "[b]ona fide purchasers look to [the Patent Act's recording provision] for their protection").
The court also stated: As noted, the Patent Act's recording provision provides that an "assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the [PTO]." 35 U.S.C. §§ 261. In order to determine whether Congress intended for parties to record with the PTO the type of interest that is at issue in this case, we must give the words of the statute the meaning that they had in 1870, the year in which the current version of §§ 261 was enacted.5 See Perrin v. United States, 444 U.S. 37, 42 (1979) (giving the word "bribery," as used in the Travel Act, the meaning that it had in 1961, when the Travel Act was enacted).
Separately, as a point about "custom and practice" within oil companies, LBE notes that Exxon had a rating system for employee inventions, with category 4 indicating "no company interest." If one wanted to pursue, on one's own, a category 4 invention, one obtained a written release. One finds no talk about a written release in the DDB case. [LBE once tried to obtain release of an invention rated 4, and the invention was immediately re-rated category 3!]
Commentary to the Patently-O blog mentioned some generally interesting statutes (e.g., Nevada--NRS 600.500 Employer is sole owner of patentable invention or trade secret developed by employee. and Illinois: 765 ILCS 1060/2) but did NOT mention a highly relevant law review article: 2 U. Balt. Intell. Prop. L.J. 163
OWNERSHIP RIGHTS OF EMPLOYEE INVENTIONS: THE ROLE OF PREINVENTION ASSIGNMENT AGREEMENTS AND STATE STATUTES
Separately, note the provision in Delaware (19 Del. 805):
Any provision in an employment agreement which provides that the employee shall assign or offer to assign any of the employee's rights in an invention to the employee's employer shall not apply to an invention that the employee developed entirely on the employee's own time without using the employer's equipment, supplies, facility or trade secret information, except for those inventions that; (i) relate to the employer's business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and is unenforceable. An employer may not require a provision of an employment agreement made unenforceable under this section as a condition of employment or continued employment.
Long, long ago, LBE had written about the Mars case: Mr. Knecht had worked for 17 years for Mars, but was fired over the dispute.
The district court decision in DDB [465 F. Supp. 2d 657 ] brings out some other facts:
In addition, paragraph 3 of the employment agreement obligated Barstow, as the employee, to provide Schlumberger a "complete record of any and all technological ideas, inventions and improvements, whether patentable or not, which he, solely or jointly, may conceive, make or first disclose during the period of his employment" with Schlumberger. The parties acknowledged at the hearing that a 1992 e-mail to Barstow's supervisor was the only written record related to the patents-in-suit that Barstow provided Schlumberger. The e-mail does not, however, satisfy Barstow's obligations under paragraph 3 of the employment agreement.
For example, in the e-mail, Barstow referred to "that project of my brother's that I told you about a couple of years before" and limited his role as helping his brother "define the symbolic representation for baseball games." Barstow did not request in the e-mail a waiver or release of any rights that Schlumberger might have had in this "project," even though he mentioned that "some patents may issue this year, in both of our [Barstow and his brother's] names." Nor did Barstow provide Schlumberger with the '630 Patent when it issued in February 1993, despite the fact that Barstow was still employed with Schlumberger at that time and Barstow represented in the e-mail that he would "let [his supervisor] know if it actually happens." In the e-mail, Barstow sought permission only to include a biographical paragraph in the project description. Thus, the Court considers this an inadequate disclosure of the patents-in-suit under paragraph 3 of the employment agreement. On this record, DDB cannot claim that Schlumberger is estopped, has intentionally waived, or was barred by laches or the statute of limitations from asserting its rights in the patents-in-suit and assigning those rights to MLB.
Further, the technology is not as remote to Schlumberger as one might think if limiting Schlumberger to a well-logging company:
DDB further claims that Schlumberger's primary area of business involves providing services to companies in the exploration for oil and the retrieval of oil from oil fields, although Schlumberger has been involved in other businesses, such as electricity and gas meters, gas-station control systems, smart cards, and parking meters.
And there is the communication between Barstow brothers:
MLB directs the Court to the portion of the letter in which Barstow wrote:
It's curious how BBL and my Schlumberger work go hand-in hand; the work I did on BBL last summer helped me get ready for my card payment work, and the work I did on that helped me get ready for the next piece of BBL.
MLB explains that "BBL" refers to an early embodiment of the patents-in-suit and the "card payment work" refers to one of Barstow's Schlumberger projects.
Also, for those interested, the Barstow patents involve continuation applications:
Four patents are at issue: (1) U.S. Patent No. 5,189,630 (filed Jan. 15, 1991) (issued Feb. 23, 1993), entitled "Method for Encoding and Broadcasting Information About Live Events Using Computer Pattern Matching Technique" (the " '630 Patent"); (2) U.S. Patent No. 5,526,479 (filed Jul. 29, 1992) (issued June 11, 1996), entitled "Method and Apparatus for Broadcasting Live Events to Another Location and Producing a Computer Simulation of the Events at that Location" (the "'479 Patent"); (3) U.S. Patent 5,671,347 (filed June 10, 1996) (issued Sep. 23, 1997), entitled "Method and Apparatus for Broadcasting Live Events to Another Location and Producing a Computer Simulation of the Events at that Location" (the " '347 Patent"); and (4) U.S. Patent No. 6,204,862 (filed June 9, 1997) (issued March 20, 2001), entitled "Method [**4] and Apparatus for Broadcasting Live Events to Another Location and Producing a Computer Simulation of the Events at that Location" (the " '862 Patent"). 1
On June 25, 1990, during his employment with Schlumberger, Barstow submitted to the United States Patent and Trademark Office ("PTO") patent application number 07/542,990 ("the '990 application"). The '990 application, entitled "A Method for Broadcasting Live Events Using Computer Simulation Techniques," disclosed the use of symbols to describe an event, and the broadcast of the information to a computer where the event would then be simulated. The '990 application was abandoned in favor of a continuation-in-part application filed July 29, 1992, which ultimately issued as the '479 Patent. The '347 Patent is a continuation of the '479 Patent, and the '862 Patent is a continuation of the '347 Patent.
Barstow submitted the application for the fourth patent-in-suit, the '630 Patent, to the PTO on January 15, 1991, also during his employment with Schlumberger. The '630 Patent includes the specification from the '990 application and discloses a method of notifying users of a match between symbolic descriptions and specified actions of interest, as well as producing an audio or video representation of the action. The '630 Patent issued on February 23, 1993, while Barstow was employed with Schlumberger.
Patently-O wrote:
A reader suggested that the patent recordation statute (35 U.S.C. 261) be considered. If you remember 1L property, the patent recordation statute is a notice statute with a three-month grace period. Thus, a subsequent assignee of a patent will hold title over a prior assignee if two conditions are met: (1) the prior assignee did not record in time (which would give constructive notice); and (2) the subsequent assignee was “without notice” of the prior assignment. The timing is no question here — Schlumberger did not record until after DDB had already sued. The only issue then is whether DDB had notice of the prior assignment.
[DDB was represented at the CAFC by MBHB, former home of Patently-O.]
The issue is further crystallized at PLI:
Finally, as Professor Crouch points out in his post, there is likely another important issue lurking here that does not seem to be addressed. An assignment is only effective against those who subsequently obtain an alleged assignment if the original assignment was recorded during the firs 90 days. Schlumberger never recorded within the first 90 days, and in fact did not record until DDB already brought suit against MLB Advanced. This being the case the only issue with respect to whether DDB holds good title should be whether DDB knew of a prior assignment to Schlumberger. Even if Schlumberger did automatically obtain an assignment as a result of the employment agreement if DDB did not know about that assignment then DDB should have superior title to Schlumberger, which would mean that they would have superior title to MLB Advanced, who obtained their rights through assignment from Schlumberger.
IPBiz has noted that the relevant words of 35 USC 261 are An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
As some background, DDB was formed by the brothers David (who worked for Schlumberger between 1980 and 1994) and Daniel Barstow (who did not work for Schlumberger). The patents at issue were assigned by the brothers to DDB in 1998. The "ultimate" issue of the case is whether David's interest was previously assigned to Schlumberger (automatically) as a result of an employment contract. In 2006, Schlumberger assigned whatever rights it had in these patents to MLB.
The issue in the case is one of subject matter jurisdiction, because Schlumberger and MLB were not joined.
The CAFC first determined that "automatic assignment" is an issue of federal law. The issue of whether the employment agreement covered the patents in suit was one of state law (here Texas law). The CAFC ordered additional discovery on the latter point, and did NOT reach the issue of whether the patents did, or did not, fall within the scope of the agreement.
By (negative) implication, one might think that the CAFC did not consider the recordation issue dispositive. If hypothetically the patents are found to be within the scope of the employment agreement, then the patents were automatically assigned to Schlumberger. [If not within the scope, then DDB owns the patents and the jurisdictional issue is gone.]
Of the argument --Even if Schlumberger did automatically obtain an assignment as a result of the employment agreement if DDB did not know about that assignment then DDB should have superior title to Schlumberger--, one notes that
#1. If the court finally determines that Schlumberger did automatically obtain an assignment through the employment agreement, then David Barstow had notice. That notice might be imputed to DDB.
#2. Although the blogs only talk about a subsequent assignee, the statute is about "any subsequent purchaser or mortgagee for a valuable consideration, without notice."
Was DDB a subsequent purchaser and was DDB without notice?
Note text from the case IN RE: CYBERNETIC SERVICES, INC., D/B/A SILENT RADIO, INC, 252 F.3d 1039 (9th Cir. 2001) :
The term "purchaser" does not detract from this conclusion. Section 261 instructs that an unrecorded "assignment, grant or conveyance" shall be void as against a subsequent"purchaser . . . for a valuable consideration, without notice. " The historical definition of a "purchaser for value and without notice" was a "bona fide purchaser. A purchaser .. . who takes a conveyance purporting to pass the entire title, legal and equitable," who pays value and does not have notice of the rights of others to the property. Bouvier's Law Dictionary 1005 (Baldwin's Century ed. 1926). The Supreme Court seems to have accepted this definition as well. See Littlefield, 88 U.S. at 221 (noting that "[b]ona fide purchasers look to [the Patent Act's recording provision] for their protection").
The court also stated: As noted, the Patent Act's recording provision provides that an "assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the [PTO]." 35 U.S.C. §§ 261. In order to determine whether Congress intended for parties to record with the PTO the type of interest that is at issue in this case, we must give the words of the statute the meaning that they had in 1870, the year in which the current version of §§ 261 was enacted.5 See Perrin v. United States, 444 U.S. 37, 42 (1979) (giving the word "bribery," as used in the Travel Act, the meaning that it had in 1961, when the Travel Act was enacted).
Separately, as a point about "custom and practice" within oil companies, LBE notes that Exxon had a rating system for employee inventions, with category 4 indicating "no company interest." If one wanted to pursue, on one's own, a category 4 invention, one obtained a written release. One finds no talk about a written release in the DDB case. [LBE once tried to obtain release of an invention rated 4, and the invention was immediately re-rated category 3!]
Commentary to the Patently-O blog mentioned some generally interesting statutes (e.g., Nevada--NRS 600.500 Employer is sole owner of patentable invention or trade secret developed by employee. and Illinois: 765 ILCS 1060/2) but did NOT mention a highly relevant law review article: 2 U. Balt. Intell. Prop. L.J. 163
OWNERSHIP RIGHTS OF EMPLOYEE INVENTIONS: THE ROLE OF PREINVENTION ASSIGNMENT AGREEMENTS AND STATE STATUTES
Separately, note the provision in Delaware (19 Del. 805):
Any provision in an employment agreement which provides that the employee shall assign or offer to assign any of the employee's rights in an invention to the employee's employer shall not apply to an invention that the employee developed entirely on the employee's own time without using the employer's equipment, supplies, facility or trade secret information, except for those inventions that; (i) relate to the employer's business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and is unenforceable. An employer may not require a provision of an employment agreement made unenforceable under this section as a condition of employment or continued employment.
Long, long ago, LBE had written about the Mars case: Mr. Knecht had worked for 17 years for Mars, but was fired over the dispute.
The district court decision in DDB [465 F. Supp. 2d 657 ] brings out some other facts:
In addition, paragraph 3 of the employment agreement obligated Barstow, as the employee, to provide Schlumberger a "complete record of any and all technological ideas, inventions and improvements, whether patentable or not, which he, solely or jointly, may conceive, make or first disclose during the period of his employment" with Schlumberger. The parties acknowledged at the hearing that a 1992 e-mail to Barstow's supervisor was the only written record related to the patents-in-suit that Barstow provided Schlumberger. The e-mail does not, however, satisfy Barstow's obligations under paragraph 3 of the employment agreement.
For example, in the e-mail, Barstow referred to "that project of my brother's that I told you about a couple of years before" and limited his role as helping his brother "define the symbolic representation for baseball games." Barstow did not request in the e-mail a waiver or release of any rights that Schlumberger might have had in this "project," even though he mentioned that "some patents may issue this year, in both of our [Barstow and his brother's] names." Nor did Barstow provide Schlumberger with the '630 Patent when it issued in February 1993, despite the fact that Barstow was still employed with Schlumberger at that time and Barstow represented in the e-mail that he would "let [his supervisor] know if it actually happens." In the e-mail, Barstow sought permission only to include a biographical paragraph in the project description. Thus, the Court considers this an inadequate disclosure of the patents-in-suit under paragraph 3 of the employment agreement. On this record, DDB cannot claim that Schlumberger is estopped, has intentionally waived, or was barred by laches or the statute of limitations from asserting its rights in the patents-in-suit and assigning those rights to MLB.
Further, the technology is not as remote to Schlumberger as one might think if limiting Schlumberger to a well-logging company:
DDB further claims that Schlumberger's primary area of business involves providing services to companies in the exploration for oil and the retrieval of oil from oil fields, although Schlumberger has been involved in other businesses, such as electricity and gas meters, gas-station control systems, smart cards, and parking meters.
And there is the communication between Barstow brothers:
MLB directs the Court to the portion of the letter in which Barstow wrote:
It's curious how BBL and my Schlumberger work go hand-in hand; the work I did on BBL last summer helped me get ready for my card payment work, and the work I did on that helped me get ready for the next piece of BBL.
MLB explains that "BBL" refers to an early embodiment of the patents-in-suit and the "card payment work" refers to one of Barstow's Schlumberger projects.
Also, for those interested, the Barstow patents involve continuation applications:
Four patents are at issue: (1) U.S. Patent No. 5,189,630 (filed Jan. 15, 1991) (issued Feb. 23, 1993), entitled "Method for Encoding and Broadcasting Information About Live Events Using Computer Pattern Matching Technique" (the " '630 Patent"); (2) U.S. Patent No. 5,526,479 (filed Jul. 29, 1992) (issued June 11, 1996), entitled "Method and Apparatus for Broadcasting Live Events to Another Location and Producing a Computer Simulation of the Events at that Location" (the "'479 Patent"); (3) U.S. Patent 5,671,347 (filed June 10, 1996) (issued Sep. 23, 1997), entitled "Method and Apparatus for Broadcasting Live Events to Another Location and Producing a Computer Simulation of the Events at that Location" (the " '347 Patent"); and (4) U.S. Patent No. 6,204,862 (filed June 9, 1997) (issued March 20, 2001), entitled "Method [**4] and Apparatus for Broadcasting Live Events to Another Location and Producing a Computer Simulation of the Events at that Location" (the " '862 Patent"). 1
On June 25, 1990, during his employment with Schlumberger, Barstow submitted to the United States Patent and Trademark Office ("PTO") patent application number 07/542,990 ("the '990 application"). The '990 application, entitled "A Method for Broadcasting Live Events Using Computer Simulation Techniques," disclosed the use of symbols to describe an event, and the broadcast of the information to a computer where the event would then be simulated. The '990 application was abandoned in favor of a continuation-in-part application filed July 29, 1992, which ultimately issued as the '479 Patent. The '347 Patent is a continuation of the '479 Patent, and the '862 Patent is a continuation of the '347 Patent.
Barstow submitted the application for the fourth patent-in-suit, the '630 Patent, to the PTO on January 15, 1991, also during his employment with Schlumberger. The '630 Patent includes the specification from the '990 application and discloses a method of notifying users of a match between symbolic descriptions and specified actions of interest, as well as producing an audio or video representation of the action. The '630 Patent issued on February 23, 1993, while Barstow was employed with Schlumberger.
posted by Lawrence B. Ebert at 4:36 PM
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