Rarely does the Federal Circuit hand down a decision that could serve as a basic primer on the distinction between owners and inventors of a patent, and what such distinction implies. Rarer still does such a case also implicate the authorship of a patent. So, while StoneEagle Services v. Gillman (Fed. Cir. 2014) does not break any new legal ground, it does provide a quick and concise lesson in these important legal differences that lawyers and lay-persons alike can learn from.
The inventor in this case is Robert Allen, who worked with David Gillman, the author, to rework Allen’s existing electronic payment system for automotive industries into a system for processing health care claims. Gillman’s exact role in this work remains unclear, but the parties at least agreed that Gillman did not dispute Allen’s claim to be the sole inventor and that Gillman was at least partly responsible for authoring the patent application.
An agreement between the two established Allen’s company, StoneEagle, as the owner of the technology, and Gillman’s company as a licensee responsible for marketing the technology. But Gillman apparently had an ownership interest in the technology as well, at least until mid-2010 when, in the court’s words, Gillman “appears to have assigned his interest to StoneEagle” as well.
A year later, the business relationship fractured. At an investor meeting, according to StoneEagle, Gillman became so agitated at the importance being placed on the patent that Gillman “suddenly and falsely claimed that it is his patent, that he wrote the patent, that it is on his computer, and that he ‘authored’ or ‘wrote’ it, or words to that effect” and stormed out.
Concerned that Gillman would sue the company, StoneEagle filed for declaratory judgment in a Texas district court, seeking to have Allen declared the sole inventor and owner of the patent. Ultimately the district court issued an injunction against Gillman prohibiting him and his company from using or disclosing any of StoneEagle’s trade secrets or confidential information.
Gillman eventually appealed to the Federal Circuit to claim that the district court had no subject matter jurisdiction over the case because Gillman conceded he was not an inventor, and therefore there was no actual controversy arising under federal law.
What about the ownership dispute, and Gillman’s claim to have authored the patent? What about the fact that Gillman collaborated with Allen on the invention? All of these may be relevant questions to be decided, but not by a federal court. The Federal Circuit sided with Gillman, vacating the injunction and remanding the case to the lower court for dismissal.
Only a dispute over inventorship would have kept this case in the federal courts and given StoneEagle a chance at upholding the injunction. Federal patent law defines inventors as those who contribute to the claims of the patentable invention. Many people may contribute to an invention or patent over the course of its development and eventual issuance from the patent office, but most “activities in furtherance of actual reduction to practice” cannot confer any patent rights by themselves.
That includes authoring the patent, a point that Judge Rader emphasized in the StoneEagle opinion. At best, even if Gillman had authored the entire patent as he implied, he would have helped only in constructively reducing Allen’s invention to practice, no different than activities leading to actual reduction to practice. “Otherwise,” says Judge Rader, “patent attorneys and patent agents would be co-inventors on nearly every patent. Of course, this proposition cannot be correct.”
Ownership of patents is covered minimally at the federal level. U.S. patent law merely allows for applications for patents, patents themselves, and any interest in such to be freely assigned to another in writing. Absent any agreement to the contrary, joint owners of a patent are free to make, use and sell the invention in the United States — no consent from the other owners is needed, and no accounting to them is owed.
Beyond this very limited scope, disputes over who actually owns or co-owns a patent are more often matters for state courts, as they typically involve the details of a contract or other written agreement between parties. That would be the case here as StoneEagle’s case is really about the agreement made between Gillman and Allen, as well as the question of Gillman’s assignment of his ownership rights to StoneEagle, not whether Gillman is an inventor.
Ownership disputes and inventorship disputes may be inextricably linked where a person’s status as an inventor also determines his status as owner of a patented invention, since inventors own their inventions absent an assignment of rights. But if inventors have assigned over their ownership rights to an assignee, as happens with many patents today and as was the case here, ownership disputes will generally not implicate inventorship.
It seems fairly clear that StoneEagle has a strong case to make, should they choose to file their action in state court after the federal case is dismissed. In the meantime, however, Gillman has bought himself some time with StoneEagle’s mistake in taking the case to the federal courts.
The StoneEagle opinion notes that after an initial grant of an injunction from the district court in late 2011, Gillman and his company went ahead with a competing venture that apparently violated the terms of the injunction. StoneEagle moved for contempt in 2012, which was eventually denied by the court but the case still resulted in the court reinforcing its order to Gillman to stop using StoneEagle’s technology and materials.
With the injunction invalidated, StoneEagle will have to start over entirely in the state court, and it’s not certain that the company will recover fully on damages that Gillman may have caused them over the past three years.
Federal courts may often be sought over state courts for numerous reasons, but it is critical for attorneys to clearly recognize when a matter is properly and only heard in a state court. Filing in the wrong arena wastes time and money, and the client meanwhile may suffer additional damages that could have been avoided.
It’s worth noting one additional aspect of the case not covered in Judge Rader’s opinion. Not only is authoring a patent insufficient to grant inventorship rights to the author, it’s also generally not sufficient to give copyrights to the author. It may be well-known to practitioners that patent applications and drawings are generally not covered by copyright law, but this is probably not obvious to inventors who write their own applications.
An author can include specific language in a patent application that grants use of the document to the USPTO and to others for specific purposes, but reserves all other copyrights in the author. Patent drafters rarely put such language in their applications, however, leaving the published document freely available to the public.
Mark N. Kittel is an associate attorney with the law firm of Heslin Rothenberg Farley & Mesiti PC. He can be reached via email at email@example.com, or at (518) 452-5600.