Automatic Employee Patent Assigment Rights Obtained to Challenge Jurisdiction

In DDB Technologies v. MLB Advanced Media (February 13, 2008) the ultimate question became whether the patent interest of inventor Dr. David Barstow ("Barstow") were previously assigned to his former employer, Schlumberger Technology Corporation ("Schlumberger") so that those rights could now be used by MLBAM to avoid jurisdiction. The Federal Circuit held that the question of whether a patent assignment creates an automatic assignment or merely an obligation to assign is governed by federal law, and that further jurisdictional discovery was warranted on whether Barstow's work was sufficiently related to his employment in order to fall within the terms of the assignment as construed under Texas law.

Inventor Barstow, a computer scientist, worked for Schlumberger from 1980 until 1994. At the start of his employment, Barstow entered into an employment agreement that included the following relevant provisions:

3. Employee shall promptly furnish to Company 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].

4. Employee agrees to and does hereby grant and assign to Company or
its nominee his entire right, title and interest in and to ideas, inventions and
improvements coming within the scope of Paragraph 3:

a) which relate in any way to the business or activities of [Schlumberger], or

b) which are suggested by or result from any task or work of Employee for [Schlumberger], or

c) which relate in any way to the business or activities of Affiliates of [Schlumberger], together with any and all domestic and foreign patent rights in such ideas, inventions and improvements. Employee agrees to execute specific assignments and do anything else properly requested by [Schlumberger], at any time during or after employment with [Schlumberger], to secure such rights

It was unclear whether Barstows activities may have releated to his work at Schlumberger. During his employment with Schlumberger, Barstow worked on several projects related to the development of computer software used to control and record data measured by physical sensors used in logging oil wells, and on other software development projects. Barstow also worked on several personal projects during that time period, including collaborating with his brother Daniel on a method for broadcasting data about a live event, such as a baseball game, and producing a simulation of that event to be viewed on a computer. This project eventually led to the applications for the four patents in suit.

While employed at Schlumberger, Barstow discussed this project with Charles Huston, Schlumberger’s general counsel for software matters, and Dr. Reid Smith, the director of the lab in which Barstow worked. Both Huston and Smith testified that they knew Barstow was working on a "baseball simulator" project, J.A. at 153, that they had discussed the project with Barstow and also between themselves, and that they did not believe at the time that the project belonged to Schlumberger. Huston stated, "Dave came to Re[i]d and myself and said this is what I’m doing. If there is any problem with this let me know and Re[i]d and I discussed it and we don’t see how it applies to Schlumberger’s business." J.A. at 154. Smith testified that Barstow’s project was "general knowledge" at Schlumberger, that he had never "suggest[ed] to Dr. Barstow that the personal work he was doing belonged to Schlumberger," and that he was not "aware of anyone at Schlumberger ever stating a belief that Dr. Barstow’s personal work belonged to Schlumberger." J.A. at 165-66. However, the extent of Huston and Smith’s knowledge of the project is unclear from the record.

In 2004, DDB filed this patent infringement action against MLBAM, alleging that MLBAM provides several Internet services related to baseball that infringe the Computer Simulation Patents and the Pattern-Matching Patent. More than a year later, immediately before the close of discovery, MLBAM entered into negotiations with Schlumberger to acquire any interest that Schlumberger had in the patents in suit. Several months later, on April 7, 2006, Schlumberger and MLBAM entered into an agreement that assigned to MLBAM all of Schlumberger’s rights and interest in the patents in suit and granted MLBAM a retroactive license to practice under those patents.

On May 1, 2006, MLBAM moved the district court to dismiss the action for lack of subject matter jurisdiction, based on DDB’s failure to join all owners of the patents in suit (including MLBAM) and on DDB’s inability to pursue an infringement claim against MLBAM by virtue of its newly acquired ownership interest in those patents.

On September 26, 2006, the district court granted MLBAM’s motion to dismiss. The court found that the patents in suit fell within the scope of Barstow’s employment agreement because they were both "suggested by" and "related to" his work for Schlumberger. In determining that the patents in suit were "suggested by" Barstow’s work, the district court relied particularly on their relation to two prior patents issued to Schlumberger that named Barstow as the inventor.

Having concluded that Schlumberger, and thereafter MLBAM, was a co-owner of the patents, the court determined that it lacked subject matter jurisdiction because DDB had not joined Schlumberger and could not join MLBAM.



According to the majority opinion by Circuit Judge Dyk,

We must first determine whether the question of automatic assignment is
governed by federal or state law. Although state law governs the interpretation
of contracts generally, see Thatcher v. Kohl’s Department Stores, Inc., 397 F.3d
1370, 1373 (Fed. Cir. 2005), the question of whether a patent assignment clause
creates an automatic assignment or merely an obligation to assign is intimately
bound up with the question of standing in patent cases. We have accordingly
treated it as a matter of federal law. See Speedplay, Inc. v. Bebop, Inc., 211
F.3d 1245, 1253 (Fed. Cir. 2000); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d
1574, 1580-81 (Fed. Cir. 1991); cf. Rhone-Poulenc Agro, S.A. v. DeKalb Genetics
Corp., 284 F.3d 1323, 1328 (Fed. Cir. 2002) (holding that bona fide purchaser
defense is governed by federal law). Applying federal law, we have held that
whether an assignment of patent rights in an agreement such as the one in this
case is automatic, requiring no further act on the part of the assignee, or
merely a promise to assign depends on the contractual language. If the contract
expressly grants rights in future inventions, "no further act [is] required once
an invention [comes] into being," and "the transfer of title [occurs] by
operation of law." FilmTec, 939 F.2d at 1573 (contract provided that inventor
"agrees to grant and does hereby grant" all rights in future inventions); see
also Speedplay, 211 F.3d at 1253 (contract provided that employee’s inventions
within the scope of the agreement "shall belong exclusively to [employer] and
[employee] hereby conveys, transfers, and assigns to [employer] . . . all right,
title and interest in and to Inventions"). Contracts that merely obligate the
inventor to grant rights in the future, by contrast, "may vest the promisee with
equitable rights in those inventions once made," but do not by themselves "vest
legal title to patents on the inventions in the promisee." Arachnid, 939 F.2d at
1581 (contract provided that, for inventions within the scope of the agreement,
"all rights . . . will be assigned by [inventor] to CLIENT").

Paragraph 4 of Barstow’s employment agreement with Schlumberger stated
that Barstow "agrees to and does hereby grant and assign" all rights in future
inventions falling within the scope of the agreement to Schlumberger. J.A. at
471 (emphasis added). This contractual language was not merely an agreement to
assign, but an express assignment of rights in future inventions.3 The district
court therefore determined that, if the patents in suit were within the scope of
the employment agreement, they would have been automatically assigned to
Schlumberger by operation of law with no further act required on the part of the
company. Accordingly, DDB’s statute of limitations, waiver, and estoppel
defenses have no merit.

We turn then to the question whether the employment agreement covered the patents in suit because they "relate in any way to the business or activities" of Schlumberger, or "are suggested by or result from" Barstow’s work for Schlumberger. Those issues, of course, are governed by Texas law.

. . . Because we hold that further jurisdictional discovery was warranted, we do not reach the issue of whether the district court correctly held on the previous record that the patents in suit fell within the scope of Barstow’s employment agreement with Schlumberger.