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MShore Law
MShore Law, Attorney
Category: Business Law
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Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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Person A discloses to person B an invention (of scope C) believing

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Person A discloses to person B an invention (of scope C) believing that they will file a patent jointly (person B is the boss of person A at company X). Person B also works at company Y and commits silent fraud by applying for a patent with scope D, which is a subset of invention C (C > D), independently from company X. Although they would have the right to, company X does not claim ownership in the patent since they also are a equity holder in company Y and will profit from the sale of company X.

It's understood that the patent application is invalid due to the fraud. However, there are damages to person A, who would have benefited from the licensing or sale of patent claiming all of C.

What is the scope of damages arising from this silent fraud? Can the ideas not captured by the application encompassing invention scope D (scope C-D) be valuated as potential damages if they are now dedicated to the public?
Thank you for the post, I am happy to assist you by answering your questions. Has the invention that is the subject of the patent for C turned profitable?
Customer: replied 3 years ago.

It is a medical device, and is in development so it has not been sold. Company Y has been acquired by a new company Z for their IP portfolio.


I don't know what the subset of the acquisition value was my contribution, but I hope to determine that through discovery. This fraud initiated in 2007 and was only uncovered in late 2011.

Thank you Eugene, was your invention created during the scope of your employment? Also, do you have any employment contract assigning all IP creations to your employer, if created during the term of your employment?
Customer: replied 3 years ago.

This is where it gets tricky and the general case diverts from my case specifically.


I am a graduate student where the ownership of the idea changed from mine on day 0 (students own their IP), to the University's after I pursued the development of the technology for my thesis (students give up their IP by using U resources). I was unaware that I could have retained the rights for myself on day 0.


In another twist, the University gave up it's assignment rights of the invention to the government, whose grant supported the work I did. Subsequently, I was reassigned the IP rights back from the government which I retain today.


The IP rights are for a different patent application filed in 2012 (whereas the original fraudulent application was filed in 2007 for overlapping subject matter C & D).

I want to make sure I follow you, is there something in writing whereby the federal government's rights reverted back to you?
Customer: replied 3 years ago.


Thank you, XXXXX XXXXX B apply for the patent in his personal capacity?
Customer: replied 3 years ago.

Person B was CEO and owner of company Y and assigned the application to company Y. He included two other employees from company Y on the application as well.

Thank you Eugene, from your description you have a Person B for misappropriation to Company Y, and to enjoin Company Y from utilizing or exercising any rights to be realized per the patent. As you can likely image, this is a complex issue as a matter of law, and you should strongly consider retaining counsel intellectual property counsel to contact Person B on your behalf to demand a financial settlement, under a threat of the filing of an injunction to block their use of the patent. Please let me know if this answers your questions, or if you have any follow up questions.
Customer: replied 3 years ago.

My main question was in terms of the silent fraud leading to my inability to file a patent on the scope of inventions in C (which is larger than D).


Analogy: If person B stole a dozen eggs and used half of them for an omelet that he sold and profited from, can he be liable for the eggs that weren't used in the omelet as well? The eggs are bad now and may no longer have any value today. When he took them, they could have been a bigger omelet.


As a consequence of his silent fraud, my potential IP was not filed on in company X so he could file a portion of it through his company Y.

Thank you for the follow up and clarification Eugene, to your analogy, Person B would be liable for the eggs that were not used as well as the eggs that were, because the eggs that were not used in the omelet were still taken from Person A such that Person A could not use them (e.g. whether the eggs are later used or not, they were stolen from Person A and Person A cannot use his eggs as he sees fit because Person B stole them). The challenge then is valuing the eggs that were never used and have since gone bad, the measure of damages would be the opportunity costs Person A suffered by virtue of not having access to the eggs. Please let me know if this does not make sense, or does not answer your questions.
Customer: replied 3 years ago.

Thank you, XXXXX XXXXX we are on the same page now. I agree about the challenge on the valuation of the unused eggs. Since the eggs in this case are IP, I was wondering how the laws on silent fraud relate to this damage since the valuation is speculative, or if it would be inadmissible as a damage because so.


In summary, since the value of lost IP is hard to quantify, is it dismissed as a damage? If there was any precedent that exists, that would be a home run.


Thanks for your time.

No, it would not be dismissed as a damage, the damage would have to qualified by the opportunity costs you incurred as a result of not being able to capitalize on the IP developed. Regarding cases, there is actually a publication that addresses this very issue, with case law references:

Please let me know if this does not answer your questions.
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