Who Owns Your Intelligence: A Company Should Explicitly Draft a Continuations-in-Part Clause in an Employment Agreement If It Intends to Retain That Part of a Patent
Recently, the Federal Circuit held that a continuations-in-part is materially different from a continuation in patent assignment. This holding suggests companies to explicitly mention continuations-in-part in its employment agreement with an employee if the companies want to capture any intelligence more than a continuation.
I. Introduction
When executive officers change companies that they work with, the ownership of intellectual property can be disputed.i This problem is distinctive in patent law.ii Specifically, an inventor first assigns a patent to their original company. After they leave the original company and apply for continuations-in-part (CIP) instead of continuation, the ownership of the CIP becomes a problem without a contract explicitly addressing CIP between the inventor and the original company. Fortunately, the Federal Circuit has provided a path to solve this problem in Causam Enters. v. Int’l Trade Comm’n.iii Because a CIP is legally distinct from a continuation, “continuation” language alone can leave later CIP rights outside of a contract, making it necessary for companies to draft a CIP explicitly in the contract if they intend to include the CIP.
II. Background
a. CIP vs. Continuation
Both terms, CIP and continuation, appear in the process of the second application of the same invention in a prior, non-provisional application.iv The prior patent application must not be abandoned or already patented.v For a continuation application, anything disclosed in it cannot be a novel matter compared to the prior application.vi In contrast, a CIP allows an applicant to disclose some matters not mentioned in the prior application as long as the CIP contains substantial portions of matters disclosed in the prior application.vii
b. Facts
On August 24, 2007, Joseph Forbes assigned the patent application No. 11/895,909 (’909) to America Connect, Inc. (AC).viii The assignment transferred ownership of the invention of the ’909 application and “all patents which may be grated thereof” and “all divisions, reissues, continuations and extensions thereof.”ix However, a CIP clause was not mentioned when Mr. Forbes’s assigned the ’909 application to AC.x
In 2009, Consert, Inc. (Consert) came after as a successor of AC’s interest in the ’909 application.xi In 2010, Mr. Forbes, a co-founder and an employee of Consert, executed an agreement with Consert and assigned to Consert rights in inventions he had developed or would develop as its employee.xii Due to a dispute about the ownership of intellectual property between Mr. Forbes and Consert, those two parties reached a new agreement in 2013 superseding the agreement in 2010.xiii In the new agreement, Mr. Forbes assigned Consert various patents and patent applications, including the application ’909 itself.xiv Nevertheless, the new agreement also excluded some patents, such as the application No. 13/463,761 (’761), which was a descendent CIP of the application ’909.xv
In 2014, Mr. Forbes assigned patent applications No. 10,394,268 (’268) and ’768 to Causam Enterprises, Inc. (Causam).xvi Patent ’268 is a descendant continuation of the patent application ’761.xvii In other words, patent ’268 is a descendent CIP of the application ’909. In 2019, patent ’268 was issued.xviii Causam claims ownership of ’268 patent.xix
III. Legal Analysis
a. Opinion from Causam
One important question in this case is whether Mr. Forbes’s assignment of application ’909 to AC in 2007 included a CIP assignment even if the assignment contract did not mention CIP.xx If the assignment did include a CIP assignment, then Mr. Forbes did not have the ownership of the applications ’761 and ’268 in 2014. Hence Mr. Forbes could not assign the applications ’761 and ’268 to Causam, which means Causam does not have the ownership of the patent ’268. In contrast, if the assignment in 2007 did not include CIP, then Mr. Forbes had the ownership of the applications ’761 and ’268 when assigning the application ’268 to Causam in 2014. In this case, Causam does have ownership of the patent ’268.
Federal Circuit finally held that the assignment contract in 2007 did not include any CIP assignment.xxi Federal Circuit first reasoned that the interpretation of a contract should begin with the plainly written language.xxii The assignment contract in 2007 had the plain language as “invention of the ’909 application” and “all divisions, reissues, continuations and extensions thereof.”xxiii There was no “continuations-in-part” or CIP mentioned in the assignment contract.xxiv Federal Circuit held that the omission of CIP in the plain assignment contract was dispositive since CIP carries significantly different meaning compared with the word “continuation.”xxv
To elaborate on the difference, Federal Circuit referred to the Manual of Patent Examining Procedure (MPEP) published by United States Patent and Trademark Office (USPTO).xxvi Federal Circuit reasoned that CIP and continuation are practically and legally different.xxvii Practically, CIP allows an inventor to add new matter to the parent patent application as long as the CIP repeats significant portions of the parent patent application.xxviii Contrarily, a continuation may not add new matters to its parent patent.xxix Legally, recordation of assignment of the parent patent is effective as to the child in case of continuation, while it is not true for a CIP.xxx Based on the practical and legal difference between a CIP and a continuation, the Court held an assignment contract with mere continuation is significantly different from the one specifying CIP.xxxi
b. Significance
Causam clarifies that CIPs are significantly different from continuations.xxxii For companies that intend to extend their ownership of patent to CIP, a mere continuation clause in employment contract no longer suffices. Furthermore, by holding a recordation that proves history of ownership transfers not applicable to CIP issue, Federal Circuit in Causam emphasizes plainly written languages in contract.xxxiii As a result, to ensure an ownership of CIP, a company must draft an explicit clause for CIP.
Despite further instructions on CIP issues, Causam leaves one important question unanswered. Although Federal Circuit held that AC’s omission of a CIP clause retained Mr. Forbes’s later right to assign the CIP to Causam, it does not specify whether it is possible to infer a CIP right from a “continuation” clause if the wording of the clause varies.xxxiv After all, before concluding the omission of a CIP was decisive in this case, Federal Circuit read into “the plain and unambiguous meaning of a written agreement” without providing a rule determining what language is plain and unambiguous.xxxv Hence, there could possibly be some area where a “continuation” clause does not specify a CIP ownership but could reasonably infer it.
IV. Conclusion
A CIP is legally distinct from a continuation. The Court finally held that Mr. Forbes had the ownership of the patent application ’268 in 2014. Therefore, Mr. Forbes legally assigned the application ’268 to Causam in 2014, and Causam in this case owned the patent ’268. Based on the Court’s ruling in Causam, it is necessary for a company to draft a CIP clause explicitly in a contract if the company intends to capture the CIP.