Patent Contracts Hokey PokeyIt makes sense that in order to sue for patent infringement, you have to own the patent rights. But when there’s a string of contracts involved, it can be hard to tell which parts are put into the final contract, and which parts are taken out. In the following case, the Federal Circuit weighed in, but the panel couldn’t agree on what the contract provisions were all about.

Abbott Point of Care, Inc. v. Epocal, Inc., No. 2011-1024 (Fed. Cir. Jan. 13, 2011) (Chief Judge Rader, Circuit Judges Lourie and Bryson)

The patents in this case cover a system that lets doctors and nurses quickly test blood samples without having to send them to a lab. The inventor listed on the patents is Dr. Lauks.

Dr. Lauks worked for Abbott’s predecessors, Integrate Ionics and i-STAT, until 1999. During that time, he signed two employment agreements, one in 1984 and one in 1992. The 1984 agreement included provisions about confidentiality, non-competition, non-solicitation, disclosure, and assignments. In that agreement, he assigned all of his invention rights to the company. The 1992 agreement addressed employment duties, compensation, benefits, termination, and severance.

Dr. Lauks resigned on September 1, 1999, but he signed an 18-month consulting agreement when he left. The 1999 consulting agreement allowed Dr. Lauks to pursue other opportunities as long as they didn’t conflict with or violate the confidentiality agreement. This agreement didn’t talk about assigning any invention rights.

Dr. Lauks applied for the patents involved in this suit in June 2001 and assigned them to Epocal in December 2003. Abbott acquired i-STAT in 2004.

In 2009, Abbott sued Epocal for infringement, saying that it, not Epocal, owned the patents. To explain why it owned the patents Abbott argued that the 1999 agreement included (silently) the 1984 agreement—the one in which Dr. Lauks assigned his rights to Integrate Ionics—and that Dr. Lauks came up with the idea of the invention before the 18-month consulting agreement was up. The district court disagreed and said that Abbott didn’t have standing to sue for infringing these patents because it didn’t own the rights.

At the Federal Circuit, two of the judges agreed with the district court. The court said that the 1999 agreement only talks about confidentiality, non-solicitation, and non-competition. It says nothing about assignment. Plus, the 1999 agreement allowed Dr. Lauks to work on other, non-conflicting projects. Based on this language and the flexibility of the agreement, Chief Judge Rader and Judge Lourie said that the 1999 agreement didn’t incorporate the assignment provisions of the 1984 agreement. So, the 1999 agreement doesn’t create a duty to assign these patents; those provisions are out.

Judge Bryson interpreted the contracts differently. Apparently, both parties agreed that everything in the 1984 agreement became part of the 1992 agreement. The 1992 agreement referred to the 1984 agreement in shorthand as “Confidentiality and Non-Competition Agreement.” The 1999 agreement referred to the 1992 agreement as the “Existing Confidentiality Agreement.” In Judge Bryson’s mind, these are the same types of shorthand references, which could imply that all sections of the 1984 and 1992 agreement should be included in the final contract. Maybe, then, the assignment provisions are in, but they just turned themselves around. To Judge Bryson, this uncertainty at least justifies sending the case back to the district court to poke around with further discovery.

Read the Epocal opinion, if you’d like.