Another Case on Verb Structures in Assigning Intellectual Property: Omni MedSci v. Apple

Thank you to the readers who told me about Omni MedSci v. Apple (Fed. Cir. 2 Aug. 2021) (PDF here). They heard about it from this post on Patently-O. And in this post on IP Draughts, Mark Anderson expresses interest in having me comment on this case. Who am I to disappoint Mark?

I’ll leave you to read those posts or the opinion for the details; let’s cut to the chase.

The Background

The question was whether Dr. Islam’s employment agreement with the University of Michigan (UM) automatically transferred his inventorship rights to UM.

When Dr. Islam joined the UM faculty, he signed an employment agreement saying that he agreed to abide by UM’s bylaws. UM bylaw 3.10 provides for disposition of intellectual property under three distinct conditions. Here’s the most relevant one, paragraph 1 (emphasis added):

1) Patents and copyrights issued or acquired as a result of or in connection with administration, research, or other educational activities conducted by members of the University staff and supported directly or indirectly (e.g., through the use of University resources or facilities) by funds administered by the University regardless of the source of such funds, and all royalties or other revenues derived therefrom shall be the property of the University.

The Court’s Take

Here’s a stripped-down version of the court’s analysis, with all citations omitted:

We agree with the Eastern District of Texas that paragraph 1 of bylaw 3.10 does not presently automatically assign Dr. Islam’s rights to the patent but rather, at most, “reflects a future agreement to assign rather than a present assignment.”

A patent assignment clause may presently assign a to-be-issued patent automatically—in which case no further acts to effectuate the assignment are necessary—or may merely promise to assign the patent in the future. Which type of assignment is intended “depends on the contractual language.”

On its face, paragraph 1 of bylaw 3.10 does not unambiguously constitute either a present automatic assignment or a promise to assign in the future. It does not say, for example, that the inventor “will assign” the patent rights—language that this court has previously held to constitute an agreement to assign rather than a present assignment. Nor does it say that the inventor “agrees to grant and does hereby grant” title to the patent—language that this court has previously held to constitute a present automatic assignment of a future interest.

We conclude that paragraph 1 of bylaw 3.10 is most naturally read as a statement of intended disposition and a promise of a potential future assignment, not as a present automatic transfer. This is evident from both the text of bylaw 3.10 taken as a whole and a comparison of the language therein to language interpreted in our precedent. First, by its own terms, bylaw 3.10 merely “stipulates the conditions governing the assignment of property rights.” It does not purport to effectuate the present transfer of a present or future right.

Second, paragraph 4 of bylaw 3.10 shares the same operative language, “shall be the property of,” as paragraph 1, but cannot logically be read as a present automatic assignment. Paragraph 4 directs that patents “resulting from activities which have received no support, direct or indirect, from the University, shall be the property of the inventor.” The only reasonable reading of this operative language is as a statement of an intended outcome rather than a present assignment. … The similar operative language in paragraph 5 of bylaw 3.10, “shall be owned as agreed upon in writing,” also cannot reasonably be read as a present automatic assignment of a future right because paragraph 5 explicitly calls for a future determination of ownership after a negotiation between UM and the inventor. Apple proffers no convincing reason to read the “shall be” language differently between paragraph 1 on the one hand and paragraphs 4 and 5 on the other. Because the operative language of “shall be the property of” and “shall be owned” cannot be a present automatic assignment in paragraphs 4 and 5, the same language in paragraph 1 also should not be read as a present automatic assignment.

Third, the language of paragraph 1 of bylaw 3.10 does not use present tense words of execution. Each case in which this court found a present automatic assignment examined contractual language with a present tense executing verb. Such present-tense active verbs effectuate a present action.

Fourth, the language in paragraph 1 of bylaw 3.10 stands in contrast to language used by UM’s OTT in the Invention Report. That form asks for information about contributors to the invention and includes a declaration referencing bylaw 3.10, which states: “As required, I/we hereby assign our rights in this invention and all resulting patents … to the Regents of the University of Michigan.”

My Take

The court’s focus on “present assignment” isn’t surprising, as that’s what caselaw has centered on. See for example my posts on Stanford v. Roche (here) and IpVenture v. Prostar (here). But the court doesn’t take the opportunity to explore the semantics.

Let’s revisit the language at issue:

Patents and copyrights issued or acquired as a result of or in connection with … and all royalties or other revenues derived therefrom shall be the property of the University.

Indeed, that’s not a present assignment. The court says that instead, it’s a statement of intended disposition and a promise of a potential future assignment.

In terms of my categories of contract language, it’s language of policy, which is used to state rules that the parties must observe but that don’t, at least expressly, require or permit action or inaction. (If you’d like to know more about the categories of contract language, go here.) That can be roughly equated with the court’s term “a statement of intended disposition.” And because the language at issue relates to a contingent future event—namely whenever patents and copyrights arise—I recommend using will. In traditional contract drafting, with its chaotic verb structures and chronic overuse of shall, it’s not surprising to see shall used in this context. (There’s no way to see the language at issue as constituting an explicit promise of a potential future assignment. That can only be inferred.)

But the categories of contract language offer alternative ways of saying the same thing. Consider these alternatives:

  • Patents and copyrights issued or acquired as a result of or in connection with … will be the property of the University.
  • The Employee hereby assigns to the University all the Employee’s rights to all patents and copyrights issued or acquired as a result of or in connection with ….

The first is language of policy and is the language at issue. The second is a version using language of performance. In terms of semantics, saying you’ll own something that arises in the future is equivalent to my saying I give you now rights to that thing. It’s also less awkward and more economical—the first alternative is 21 words, the second is 28 words. That’s why you find the language-of-policy version in colloquial English—for example, Someday, this will all be yours, a staple of New Yorker cartoons (go here for one).

Ideally, courts would recognize that sometimes you can use different categories of contract language to say the same thing. Unfortunately, the legalistic mind is inclined to attribute different meanings to different words. A good example of that is the significance attributed to no-reliance language at the expense of other ways of saying essentially the same thing; see this 2011 blog post. That’s what seems to have happened here.

Getting that genie back in the bottle will not be easy. Despite any economy offered by language of policy, the much safer option is to use language of performance to assign rights in intellectual property.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.