Employment Agreements Create an Automatic Assignment to the Company Under Texas Law
In February 2008, the Federal Circuit in DDB Techs., L.L.C. v. MLB Advanced Media L.P., noted that an automatic patent assignment clause requires no further act on the part of an assignee, whereas a mere promise to assign depends on the contractual language. If the contractual language expressly grants rights in future inventions, then no further acts are required once an invention comes about. Although the Federal Circuit did not rule on the ultimate issue of whether that patents in suit fell within the former employer’s employment agreement, the Federal Circuit noted that under Texas and general contract law, the conduct of the parties could be considered when assessing the true intent and scope of the agreement.
Mr. Barstow, while an employee of Schlumberger Technology Corporation (“Schlumberger”), invented a software system for simulating a live event, such as a baseball game. At the time, Schlumberger’s general counsel for software agreed that Barstow’s software was his own personal work and was not related to Schlumberger’s business. Barstow eventually applied for and was awarded U.S. patents for his invention. Later, MLB subsequently bought “any interest that Schlumberger had in the patents” along with a retroactive license. The ultimate issue before the Federal Circuit was whether Barstow, now with DDB Technologies, L.L.C. (“DDB”), had previously assigned any interest in the patents to his former employer, Schlumberger.
At the start of employment, Barstow entered into an employment agreement with Schlumberger in which the employee agreed to assign to Schlumberger his entire right, title, and interest in and to ideas, inventions, and improvements made or first disclosed during his employment at Schlumberger. The Federal Circuit remarked that the employment agreement was ambiguous and remanded the case for further discovery of the extrinsic evidence to assess the true intent and scope of the agreement.
What does this mean? Most employment agreements create an automatic assignment to the company under Texas law. Employees should seek out an assignment from their employer prior to inventing even if the invention would be outside the scope of employment or founded in an unrelated area of technology. Otherwise, employees run the risk of retroactively negotiating a deal in which the company is likely to be reluctant in giving up their rights. Employers, on the other hand, need to regularly review the company’s employment agreements and be cognizant of the language used to describe their rights in any future inventions by employees.
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