“Will Assign” ≠ “Do Assign”; Check Your Chain of Title

In Advanced Video Technologies LLC v. HTC Corporation, [2016-2309, 2016-2310, 2016-2311] (January 11, 2018) the Federal Circuit affirmed the dismissal of an action for infringement of U.S. Patent No. 5,781,788 on the ground that a co-owner of the patent was not a party to the suit.

The Federal Circuit explained that the single issue involved in the appeal was whether a co-inventor of the patent transferred her co-ownership interests in the patent under the terms of an employment agreement.

Plaintiff, Advanced Video, Advanced Video asserted that it obtained co-inventor Hsiun’s co-ownership interests in the invention through a
series of transfers:

  1. The first transfer was made before the ’788 patent application was
    filed, pursuant to a January 1992 Employment Agreement
    (“Employment Agreement”) between Ms. Hsiun and
  2. The second transfer occurred when Infochips’ “receivables,” which had been pledged as security in a financing agreement between Infochips and an entity called Lease Management Services, were seized by Lease Management when Infochips went out of business in 1993.
  3. The third transfer occurred in 1995 when Lease Management sold the Infochips assets to Mr. Woo, one of the three co-inventors.
  4. The fourth transfer occurred when Mr. Woo assigned his ownership interest in the ’788 patent to an entity called AVC Technology Inc. (“AVC”),

Hsiun’s employment agree provided that she would “hold in trust” for the company and “will assign” to the company all inventions, and quitclaimed any and all claims for infringement.  The district court concluded that these provisions did not effect a transfer of Hsiun’s ownership rights to Advanced Video.

The district court found that “will assign” invoked a promise to do
something in the future and did not effect a present assignment, and the Federal Circuit agreed.  Regarding the trust language, the Federal Circuit said even if it determined that Hsiun’s interests in the invention were immediately placed in trust, it did not follow that those interests were automatically, or ever, actually transferred out of trust in favor of
Advanced Video’s predecessor. Absent a transfer, Hsiun would continue
to hold the invention rights as a trustee.  Noting that because Advanced Video had not sought to enforce any obligation Hsiun might have under the trust, it ultimately has no standing to bring a patent infringement
action.  The Federal Circuit was similarly unimpressed with the quitclaim assignment of right to sue for infringements, noting that this cannot result in a transfer that did not in fact occur.