IP Law Daily Apple loses bid to dismiss infringement suit on standing grounds
Monday, August 2, 2021

Apple loses bid to dismiss infringement suit on standing grounds

By Cheryl Beise, J.D.

Inventor of the asserted patents assigned it to the plaintiff rather than to his employer, the University of Michigan.

In an interlocutory appeal in a patent infringement suit filed by Omni MedSci, Inc. ("Omni") against Apple Inc., a divided U.S. Court of Appeals for the Federal Circuit has ruled that an inventor properly assigned the asserted patents to Omni rather than to his employer, the University of Michigan ("UM"). The assignment agreement between the inventor and UM did not effectuate a present automatic assignment of title to UM, but at most constituted a statement of a future intention to assign the patents at issue. Consequently, the assignment to Omni was valid and the district court correctly denied Apple’s motion to dismiss on standing grounds. Writing in dissent, Circuit Judge Newman expressed her view that the majority’s opinion "is not correct as a matter of contract interpretation, and overturns decades of unchallenged understanding and implementation of the University’s employment agreement and policy" (Omni MedSci, Inc. v. Apple Inc, August 2, 2021, Linn, R.).

Dr. Mohammed Islam is a tenured professor of electrical and computer engineering at UM. In 2011, Dr. Islam received an additional appointment to the Cardiovascular Center ("CVC") at UM’s medical school. When Dr. Islam joined the UM faculty, he signed an employment agreement that included a provision agreeing to abide by UM’s bylaws. In 2012, Dr. Islam took an unpaid leave-of-absence from UM to start "a new Biomedical Laser Company." During his leave, Dr. Islam filed numerous provisional patent applications. Upon returning to UM in 2013, he filed non-provisional applications claiming priority to those provisional applications. After those applications issued as patents, Dr. Islam assigned the patent rights to Omni on December 17, 2013 and recorded their assignment with the Patent and Trademark Office. One of those patents is an ancestor of the patents at issue on appeal.

It was undisputed that the patents at issue were not directly related to Dr. Islam’s teaching, but rather grew out of his time on leave. In 2013, Dr. Islam requested that UM’s Office of Technology Transfer ("OTT") confirm Dr. Islam’s ownership of his inventions. OTT denied the request, asserting that UM owned the patents. Dr. Islam elected not to avail himself of the appeals process to challenge UM’s determination of its ownership.

In 2018, Omni sued Apple in the Eastern District of Texas, asserting infringement of U.S. Patent Nos. 9,651,533 and 9,861,286 (the "asserted patents"). Apple filed a motion to dismiss for lack of standing under Fed. R. Civ. P. 12(b)(1), alleging that UM, not Omni, owned the asserted patents. The Texas court denied the motion. The case was transferred to the Northern District of California and Apple filed for reconsideration of its motion to dismiss. The California court denied the motion but allowed Apple to file an interlocutory appeal.

The Federal Circuit noted that Omni’s standing to assert the patents at issue turned on a legal question of contract interpretation.

Apple argued that Dr. Islam agreed "to abide by all University rules and regulations" including UM bylaw 3.10 when he joined the UM faculty. Apple contended that paragraph 1 of bylaw 3.10 automatically transferred legal title to the patents at issue to UM, leaving Dr. Islam with no rights in the invention to assign to Omni. UM Bylaw 3.10 "stipulates the conditions governing the assignment of property rights to members of the University Faculty and Staff." It provides the disposition of intellectual property under certain conditions.

The Federal Circuit concluded that paragraph 1 of bylaw 3.10 was most naturally read as a statement of intended disposition and a promise of a potential future assignment, not as a present automatic transfer. This was evident from both the text of bylaw 3.10 taken as a whole and a comparison with similar language interpreted in Federal Circuit precedent. First, bylaw 3.10 merely "stipulates the conditions governing the assignment of property rights," the court noted. "It did not purport to effectuate the present transfer of a present or future right." Second, paragraph 4 of bylaw 3.10 shared the same operative language of paragraph 1, "shall be the property of," but could not logically be read as a present automatic assignment. Similarly, the language of paragraph 5 of bylaw 3.10, stating "shall be owned as agreed upon in writing," also could not be read as a present automatic assignment of a future right because paragraph 5 explicitly called for a future determination of ownership after a negotiation between UM and the inventor. Third, the language of paragraph 1 of bylaw 3.10 did not use present tense words of execution. The court noted that unlike the present case, each prior case in which it found a present automatic assignment involved contractual language with a present tense executing verb.

Apple argued that UM’s Technology Transfer Policy confirmed that bylaw 3.10 was meant to effectuate a present automatic transfer. Apple asserted that the section titled "Granting Rights Back to Inventors" set conditions under which the University can "[a]ssign or license its rights in University Intellectual Property back to one or more inventors." The Federal Circuit disagreed. "While the Technology Transfer Policy indicates that the University ‘will retain ownership of Intellectual Property produced by Employees while participating in sabbaticals,’ … it says nothing about how the University obtains its intellectual property," the court said.

The Federal Circuit concluded that paragraph 1 of bylaw 3.10, at most, was a statement of a future intention to assign the patents at issue. It did not effectuate a present automatic assignment of title to UM and thus did not negate Dr. Islam’s assignment of the inventions to Omni, the court said. The district court’s denial of Apple’s motion to dismiss was affirmed.

Dissent. Circuit Judge Pauline Newman filed a dissenting opinion to express her view that the majority’s interpretation of the employment agreement and University Bylaws and Tech Transfer Policy documents contravened the documents’ plain meaning and long-understood interpretation. Judge Newman pointed out that UM’s employment agreement, signed when employment starts, necessarily applies to inventions made in the future. She opined that use of the future tense "shall be the property of the University" conveys the same meaning as the present tense "is the property of the University" and has been interpreted as such for years. According to Judge Newman, it was undisputed that the purpose of Bylaw 3.10 was to establish University ownership of inventions made with University support. Judge Newman also found it significant that Dr, Islam did not invoke the formal "Appeal Process" provided in the Technology Transfer Policy.

The case is Nos. 2020-1715, 2020-1716.

Attorneys: Thomas A. Lewry (Brooks Kushman P.C.) for Omni MedSci, Inc. Jeffrey Paul Kushan (Sidley Austin LLP) for Apple Inc.

Companies: Omni MedSci, Inc.; Apple Inc.

MainStory: TopStory Patent FedCirNews GCNNews

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