Assigning Future Rights

I find that the notion of categories of contract language (considered in detail in chapter 2 of MSCD) often provides a useful framework for analyzing substantive drafting issues.

Take an issue I was asked about twice recently, once at the ACC annual meeting, once by one of my Penn Law students. It’s routine for contract provisions to assign future rights, but what’s the best way to accomplish that? I see three possibilities; here they are, in skeletal form:

Language of Performance: Acme hereby assigns any Future Rights.

Language of Obligation: Acme shall assign any Future Rights.

Language of Policy: Acme will be deemed to have assigned any Future Rights.

Which works best? I’m relying on you, dear reader, to enlighten me. For one thing, language of performance would seem the safest option, but is there any problem with assigning now something that doesn’t exist?

By the way, if you’re into licensing, you might find of interest this August 2008 post on granting language and the extensive comments it received.

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.

9 thoughts on “Assigning Future Rights”

  1. In the patent world, assignments and employment agreements routinely use language of performance. There is caselaw that specifically distinguishes the obligation (which the obligee may refuse to perform in the future) from the performance. If the inventor is only obligated to assign, but for whatever reason fails to do so, the company never gets the assignment, but if the language was of performance, then it does. So language of performance is strongly preferred, at least in that scenario. I don’t think I’ve ever seen language of policy.

    I’m not aware of any caselaw that has a problem with a present assignment of future rights.

  2. Richard Schafer is correct. The language that has been smiled upon by courts is something like: “Inventor shall assign, and does hereby assign, to Company all rights in Future Inventions.”

    The obligation language without the performance language only transfers equitable title to future inventions. This is a problem if you happen since equitable title does not get you standing to sue for patent infringement. There are a line of cases stemming from Filmtec Corp. v. Allied-Signal, Inc. (939 F.2d 1568) and Arachnid Inc. v. Merit Industries (939 F.2d 1574) that discuss these issues in detail. I believe there was even a new Fed. Cir. opinion on this topic issued within the last couple months.

  3. Mike: Mixing language of obligation and language of performance in the manner you propose is, in terms of semantics, problematic. Ken

  4. Mike is right. I think there was a more-recent case on this issue (which is probably what Mike is thinking of), but the “big one” last year was DDB Technologies, Inc. v. MLB Advanced Media, L.P., No. 2007-1211 (Fed. Cir. Feb. 13, 2008).

    From Mondaq’s summary

    In applying federal law, the court looked to the language of the assignment-of-inventions clause in the employment contract, which provided that Barstow “agrees to and does hereby grant and assign” to Schlumberger all inventions falling within the scope of the agreement, together with their related patent rights. The Federal Circuit, citing Speedplay and Filmtec, held that where an employment contract contains such a present grant of rights in future inventions and related patent rights (as opposed to a mere promise to assign in the future), title to the patent transfers to the employer immediately and by operation of law upon the invention’s creation.

    From that, it seems clear that choices b and c (obligation and policy) are decidedly inferior to choice a (present assignment of future inventions).

  5. I would also use the formula of “hereby assigns and agrees to assign.” But this is another area where the underlying law needs to be considered before deciding which approach to take.

    From the comments above, it seems that the US courts will interpret a present assignment of future rights as coming into effect when the rights come into existence. To my mind, this is a convenient legal fiction, and does not follow normal principles of what words mean. I am not saying this is wrong, but it does require a knowledge of law in order to interpret the words used. This potentially strays into Ken’s “magic words” territory.

    Under UK copyright legislation (s91, CDPA 1988, a present assignment of future copyright will take effect when the copyright comes into existence. There is no equivalent to this provision in UK patent legislation.

  6. Ken –
    I’m not going to disagree with you that the mixing of language types may not be perfect, but that’s the way the language was structured in the early cases and repeatedly approved of by the Fed. Cir. Dare I say “tested.”

    Nevertheless, focusing on what the court says in those cases, all you really need is the language of performance: Inventor does hereby assign to Company all rights in all Future Inventions. The courts refer to this as a “present assignment of future expectant interest.”

    But, in practice, no one uses the “present assignment of future expectant interest” as the ONLY assignment except as a back-up when someone forgets to follow-up with a “traditional” assignment. There are lots of reasons for this. Generally speaking, the language of the present assignment of future expectant interest is too squishy because of the nature of the “future expectant interest.” So relying solely on the present assignment simply moves the fight to whether a particular invention fits within the definition of a “Future Invention.” But by simply getting a straight-forward, traditional assignment at the time there is “future” invention, you put those questions to rest.

    In addition, the present assignment of a future expectant interest doesn’t “record well” at the Patent Office. It’s better to have the straight-forward, traditional assignment that lists with specificity the application and the invention.

  7. Mike: I’m sure you’d be disappointed if I didn’t get all schoolmarmish on you and mention that the construction does hereby assign is archaic. Use instead hereby assigns. Ken

  8. Under continental European legal systems (both French and German oriented) the distinction Mike makes is very clear. A completed transfer (of rights, goods real estate or what have you) requires:
    (i) a valid title (e.g., obligations to sell vs. purchase),
    (ii) an agreement to transfer, and
    (iii) the actual formality of the transfer (e.g., a notarial deed or the factual handing over of the goods.
    The distinction between (i) and (ii) and its effects is what Mike signals and, as I understand Common Law, what in fact distinguished European legal systems. Indeed the distinction permits non-transfer as a consequence of the seller not transferring/assigning its rights. Under European systems this would not be problematic, since specific performance is preferred over damages, also in case of a transfer of goods or rights. Including the words hereby emphasizes that the act of transfer is effected by the same writing that reflects the sale and purchase. See my blog on this contract drafting matter:

    As regards future rights, the new Dutch Civil Code (1992) explicitly allows such transfer, provided that the future rights are sufficiently determined or determinable (which is generally interpreted broadly, so as to cover many aspects).



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