Employees Who Assign Patent Rights to Employers May Have Standing to Challenge Omission as Inventors

Employees Who Assign Patent Rights to Employers May Have Standing to Challenge Omission as Inventors

Employers do not automatically obtain legal ownership of the patent rights to their employees’ inventions simply because of the employer-employee relationship.  Thus, it is a standard practice to require employees to assign their patent rights to their employers in an employment agreement.  This practice raises the following question: Can an employee (or ex-employee) file an action to correct inventorship on an issued patent in district court after assigning his or her patent rights to an employer?  In Alexander Shukh v. Seagate Technology, LLC, Case No. 2014-1406, slip op. (Fed. Cir., October 2, 2015), the Federal Circuit answered “YES.”  A copy of the opinion can be found here.

In Shukh the plaintiff and former employee of defendant Seagate assigned his patent rights to the company in an employment agreement at the outset of his employment.  After being terminated with several other employees, he filed an action under 35 U.S.C. § 256 in the U.S. District Court for the District of Minnesota seeking to add himself as an inventor to several Seagate patents.  Seagate asserted that because he had assigned his patent rights, the plaintiff lacked standing to bring an inventorship correction action under Section 256.

The plaintiff asserted that he had standing because he had an ownership interest, a financial interest, and a reputational interest in the subject patents. Shukh at 5. The district court granted summary judgment in favor of Seagate holding that none of the alleged interests conferred standing.

The Federal Circuit reversed and remanded, holding that there was a triable issue of fact as to whether Seagate’s alleged omission of the plaintiff as an inventor caused a reputational injury and that a reputational injury, if proven, could confer standing to seek correction under Section 256. Id. at 7.  The Federal Circuit panel held that because the plaintiff had assigned his patent rights to Seagate, it was bound by Filmtec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991) to hold that the plaintiff lacked either a sufficient ownership interest or a sufficient financial interest to confer standing.  However, Filmtec did not preclude standing based on a reputational injury. 

In prior cases, the Court had declined to hold that reputational injury could confer Article III standing. However, in Shukh the Court concluded that pecuniary consequences could flow from not being named as an inventor, including negative effects on the omitted inventor’s present or future employment.  Id. at 7. The Federal Circuit panel acknowledged that the plaintiff’s “reputation as an inventor” and “as an employee” could give rise to Article III standing to seek correction of inventorship under Section 256. Id. at 8 and 12. In particular, the panel found that there was an issue of fact as to whether the plaintiff’s “negative reputation for seeking credit for his inventions is traceable to Seagate’s omission of [him] as an inventor from the disputed patents.”  Id. at 12. The panel also held that a trier of fact could conclude that the plaintiff suffered an economic harm to his employment prospects as a result of the alleged reputational injury and that his “inability to obtain employment is a concrete and particularized financial harm that suffices to create Article III standing.” Id.

There is no indication in Shukh that Seagate would be liable for monetary damages from a reputational injury arising out of being omitted as an inventor.  The Federal Circuit simply held that the plaintiff could seek judicial correction of inventorship under Section 256.

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