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Delta-Lawyer
Delta-Lawyer, Patent Prosecutor
Category: Intellectual Property Law
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Experience:  Patent Bar Certified
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Question on intellectual property and patent. Case A) Mr. X

Customer Question

Question on intellectual property and patent. Case A) Mr. X joined company October 2013 as employee as title of Chief Data Officer responsible for developing proprietary library of drug candidates, owing 5%-ish common share. B) X was appointed to interim
CEO and a board director and accepted on March 2015. C) X turned in his resignation letter to company July 2015 and sold all of his share to other shareholders. He cut official tie with company completely upon the resignation. D) X confessed that he applied
two provisional patents, one in June 2015 (when he is still a board director officially) and the other in July 2015 (after he resigned officially) under his name. E) We are not sure yet, but it is highly likely that the two patents overlap company’s business
since he asked the company paying licensing fee if granted. F) He and company didn’t sign any patent assignment agreement. G) He claims that he doesn’t want to admit the shop right and argue that the company should pay license fee. The company’s thoughts and
questions i) We believe the company has shop right, the right to use the patents for free, if granted, in other words company won’t infringe the two patents because of the shop right. https://en.wikipedia.org/wiki/Shop_right http://www.wiggin.com/5847 ii)
Is my understanding in i) right although he is not employee but interim CEO and a board director? iii) Is there any situations or conditions where the company is not able to have the shop right? iv) Is there any judicial precedent that a company successfully
utilize shop right and avoid infringement dispute? I would like to utilize the precedent at negotiation table. v) In this discussion, I want to focus on the shop right. We want to know if the company can legally exercise shop right to keep doing business without
infringement concern, as bot***** *****ne. If we know we are able to secure the bot***** *****ne shop right, we can negotiate assignment and other better deals from him. I would like to discuss ownership issue with you after making sure shop right for this case. Thanks
Submitted: 1 year ago.
Category: Intellectual Property Law
Expert:  Delta-Lawyer replied 1 year ago.

We believe the company has shop right, the right to use the patents for free, if granted, in other words company won’t infringe the two patents because of the shop right.

That would be correct if you have evidence that shows that he developed these patents on your watch, using your time, facilities and information in the developmental process. If there is no license and agreement in place to the contrary and the idea approximates the work that he was privy to as a result of his employment, then the shop has equal rights here to make, use and sell the product. One can argue that the shop's right actually trump his rights under the circumstances.

Your shop right is well settled in IP jurisprudence. The argument here is that he developed products that result from his work with the company and that this development was not protected by an agreement which would allow him to lay claim to the apparatus or invention. This is a well settled area of the law.

I am about to have to step out for a meeting (actually on a similar issue). When I return I will give you some legal tools to argue your case in this area.

I look forward to working with you on this issue. In leaving for the moment, understand that you guys are in the driver seat here. All will be well.

By the way, I am a licensed IP attorney with over a dozen years experience.

Best!

Expert:  Delta-Lawyer replied 1 year ago.

As you likely know, shops rights are determined on a case by case basis and those facts are interjected into a framework or test by courts.

When determining whether a shop right exists in a particular situation, a court will consider several factors to determine whether equity and fairness should entitle the employer to use the invention without paying a royalty. These factors include “the contractual nature of the relationship between employer and employee, whether the employee consented to the employer’s use of the invention, and whether the employee induced, acquiesced in, or assisted the employer in the use of the invention.” U.S. v. Dubilier Condenser Corp.289 U.S. 178 (1933).

Shop rights are essentially nothing more than a defense to patent infringement for the employer. Some courts refer to it an implied license, while others call it a form of equitable estoppel. In either situation, a shop right is non-exclusive, royalty-free, and personal to the employer.

When there is no written agreement specific to the invention at a minimum, three general common law principles apply:

1. If an employee is not hired specifically for the purpose of inventing anything, then whatever he or she may invent during the course of employment will be owned by the employee. No implicit agreement to assign any patent to the employer arises. This general rule applies even if the invention is related to the employer’s business.

2. When an employee is hired to invent, but the employer has no more in mind than a desired result and does not give the employee instructions as to the means the employee must use to accomplish the particular result, then any resulting invention, even if related to the employer’s business, will again be owned by the employee.

3. If an employee is hired to create a specific invention and the employer can demonstrate that the means to bringing the idea into practical form were clearly spelled out for the employee, the employer will be deemed the owner of the invention where the invention is within the scope of the inventor’s employment and relates to the employer’s business.

In short, you need to bring this to the attention of the individual and plug the specific circumstances and facts of your issue into this framework as a component of the argument.

Unfortunately, in my experience, many times litigation actually has to ensue before an agreement is reached. Most of the time there is a settlement, however. With that being the case, you do not have to summarize your arguments in a letter, but it is a good idea to send a demand letter to him relative to your overall rights to the IP. This can and will be valuable evidence of your attempts to avoid the court system if you have to file suit.

Please rate my answer positively and let me know if you have any additional questions.

Best!

Expert:  Delta-Lawyer replied 1 year ago.

Just checking on you to see if you had any additional questions. I want you to be as comfortable as possible as you move forward. Thanks!

Customer: replied 1 year ago.
thanks>> With that being the case, you do not have to summarize your arguments in a letter, but it is a good idea to send a demand letter to him relative to your overall rights to the IP. This can and will be valuable evidence of your attempts to avoid the court system if you have to file suit.It is difficult for me to imagine what you mean by demand letter. Could you explain your details of demand letter? What exactly should we demand on the letter? How does the demand letter work in order to achieve both demanding our right and avoiding suit?
Expert:  Delta-Lawyer replied 1 year ago.

This is not so much a demand letter as it is a letter in which you clearly articulate the accepted legal framework for the situation that all parties find themselves within. In essence, you are laying out the law to show him that he has no other choice but to accept your premise and that if he later tries to bring suit against you for use of these ideas, he will surely lose.

Moreover, the letter is also there as evidence should he ever try to sue wherein you can show the court that you tried to establish the lay of the land for him and prevent any suits...but he persisted anyway. It would show you to be the adult in the room...so to speak.

So, this is not a demand letter. It is more of a recitation of rights relative to applicant law that would prevent him from thinking about and pursuing a suit against you if you were to utilize these ideas he has claimed as his own. It is intended to subvert his will to fight more than anything else.

Let me know if you have any other questions. Please also rate my answer positively so that I can receive credit for my work. Thanks!

Customer: replied 1 year ago.
ThanksThere are two point summarized in the case but I’m afraid I don’t get clear opinion.a) He was hired as employee and promoted to board director and interim CEO. Does his position as a board director and CEO would fortify company’s argument on shop rights? How about ownership of the two patents?
b) He filed provisional patent in June and July 2015. Within a year he would brush up and complete his patents. Is there anything we’d better to act or pay attention in the mean time because of provisional status?
Expert:  Delta-Lawyer replied 1 year ago.

(a) Yes, it would fortify the shop rights. He, in theory, had access to any of the proprietary information of the company at his disposal through that position. This fact fortifies the company's shop rights as well as ownership rights to the two patents. The reason is that he developed this on the company's time (perhaps) with company resources (likely) and with company knowledge of the art to which the patents pertain (very likely). In short, he would have a large evidentiary hurdle to overcome to state that the company does not have shop rights and does not likely have ownership interests in the patents.

(b)

Expert:  Delta-Lawyer replied 1 year ago.

(b) Not really. Just pay attention to the status and see if he converts them to non-provisional apps at a later date. That said, you can attempt to lay claim to the ideas in this interim period and then be listed as an owner or co-owner if and win it is time to convert to a non-provisional application. This can be done through a formal legal threat of action...which should be handled by an IP attorney and would consist of a nasty letter and the threat of a lawsuit and injunction if he does not comply.

You don't really lose any rights by not taking that approach, but this would be a more aggressive approach that may pay off down the line because it starts a process that will have to start eventually anyway.

Expert:  Delta-Lawyer replied 1 year ago.

Let me know if you have any other questions. Please also rate my answer positively. Thanks!

Expert:  Delta-Lawyer replied 1 year ago.

Just checking in. Are there other questions?