Saturday, June 06, 2009

Larson v. Correct Craft on patent assignment

The CAFC, on jurisdictional grounds, does not resolve the assignment issues in Larson v. Correct Craft, but does at least itemize things that can go wrong in assignment matters involving non-employees.

Larson's employment status was a topic of debate among the various parties, but he was asserting that he was inventor who (mistakenly) assigned his rights to Correct Craft. At the CAFC, the case did not go far-->

As we explain below, Larson has no concrete financial interest in the correction
of the patents in this case because he has assigned away all of his patent rights, and he
claims no purely reputational interest in the patents. Thus, unless and until Larson
obtains equitable relief that restores his ownership rights, he has no standing to bring a
stand-alone action under § 256. Because his § 256 cause of action was the only basis
for removal from state court, it follows that the district court had no basis for exercising
subject-matter jurisdiction over the case, and so we lack jurisdiction to reach the merits
of Larson’s appeal.

Although the CAFC did NOT resolve any of the contested issues, here are some of the "tricky" facts:

Larson showed his designs for this “wakeboard tower” to William Snook, the
Correct Craft engineer who originally hired Larson. At Snook’s urging, Larson then
presented his idea to management, which approved and directed a prototype to be built.
Robert Todd’s fabrication company delivered the first prototype later in 1996. Snook
was then in charge of the project to improve upon this first-generation tower, during
which Larson “had some input.”

And, "how" the assignment documents were presented:

At issue in this case are the several patents Correct Craft eventually received for
the wakeboard tower. In 1997, Snook told Larson that Correct Craft was going to seek
patent protection. Larson detailed the inception of his tower idea in writing, and he
spoke with Correct Craft’s attorneys about what would be needed for the patenting
process. The attorneys also presented Larson with patent assignments that they
described as formalities and part of the necessary application paperwork. With these
assignments, which he executed between 1998 and 2001, Larson transferred all of his
interest in the wakeboard-tower invention to Correct Craft. In declarations filed with the
Patent and Trademark Office, Larson also attested that he was a co-inventor of the
wakeboard tower together with Snook and Todd. Larson received no compensation in
addition to his usual salary as consideration for executing these assignments and

Larson claims that later, after Correct Craft terminated his employment, he
“discovered [his] rights as the wakeboard tower inventor in February of 2003.” Believing
that Correct Craft misled him about his obligation to sign the patent assignments—and
coupled with his belief that the company betrayed him and violated its own commitment
to Christian principles—Larson sued Correct Craft, Snook, and Todd in Florida state
court on April 22, 2004. Correct Craft removed the case to federal court in May 2005,
citing Larson’s addition of the declaratory-judgment counts in an amended complaint
filed the previous month. In the operative amended complaint, Larson presses eight
claims: fraud, constructive fraud, rescission, breach of contract, and unjust enrichment
against Correct Craft; and three counts seeking declaratory judgments against Correct
Craft, Snook, and Todd concerning the parties’ rights to the wakeboard-tower patents.

Within the opinion, the CAFC cites to Chou v. University of Chicago:

“We have previously interpreted § 256 broadly as a ‘savings
provision’ to prevent patent rights from being extinguished simply because the inventors
are not correctly listed.” Chou v. Univ. of Chi., 254 F.3d 1347, 1358 (Fed. Cir. 2001)


We previously confronted the relationship between a suit under § 256 and the
elements of constitutional standing in Chou v. University of Chicago. In that case, the
plaintiff, a university research scientist, alleged that her name had been improperly
omitted from several patents and foreign applications. 254 F.3d at 1353–54. Although
the terms of her academic appointment obliged her to assign her inventions to the
university, Chou sought correction of inventorship under § 256, citing the fact that she, if
identified as an inventor, would be entitled (under university policy) to royalties,
licensing revenue, and equity in start-up companies. Id. at 1355. After surveying our
own case law, we declined to hold that a plaintiff in an action under § 256 must have an
ownership interest at stake in the suit to have standing: (...)

Larson loses for lack of standing:

Larson’s financial
stake in the patents is contingent on him obtaining relief that a federal court has no
jurisdiction under § 1338 to provide. Because Larson lacks an ownership interest, and
because being declared the sole inventor will not generate any other direct financial
rewards as in Chou, Larson has no constitutional standing to sue for correction of
inventorship in federal court.

An open matter:

Thus, we need not answer the question we left open in Chou—whether a purely
reputational interest is sufficient to confer standing for a § 256 claim—because the issue
is simply not presented by these facts. Larson claims no reputational injury, and so that
cannot be a basis on which to find standing.

The bottom line:

In conclusion, Larson lacks constitutional standing to assert his claims for
correction of inventorship under 35 U.S.C. § 256 in federal court. We therefore find that
the district court lacked jurisdiction to hear the case pursuant to 28 U.S.C. § 1338(a).

Back to Orange County.

In passing, IPBiz did not see discussion of the details of the employment contract or of
an obligation to assign. These matters are for state court. Was Larson "snookered by Snook"?
We shall see.


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