Omni Medsci, Inc. v. Apple Inc.

• Citation: 7 F.4th 1148
• Decision Date: 02 August 2021
• Docket Number: 2020-1715, 2020-1716
• Parties: OMNI MEDSCI, INC., Plaintiff-Appellee v. APPLE INC., Defendant-Appellant
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

7 F.4th 1148

OMNI MEDSCI, INC., Plaintiff-Appellee

v.APPLE INC., Defendant-Appellant

2020-1715, 2020-1716

United States Court of Appeals, Federal Circuit.

Decided: August 2, 2021

Thomas A. Lewry, Brooks Kushman PC, Southfield, MI, argued for plaintiff-appellee. Also represented by John S. Leroy, Christopher C. Smith.

Jeffrey Paul Kushan, Sidley Austin LLP, Washington, DC, argued for defendant-appellant. Also represented by Joshua John Fougere ; Brooke Shanelle Boll, Los Angeles, CA; Michael Roberts, Dallas, TX; Irene Yang, San Francisco, CA.

Sarah E. Waidelich, Honigman LLP, Ann Arbor, MI, argued for amicus curiae The Regents of the University of Michigan. Also represented by J. Michael Huget ; Rian Dawson, Detroit, MI.

Before Newman, Linn, and Chen, Circuit Judges.

Dissenting opinion filed by Circuit Judge Newman.

Linn, Circuit Judge.

In this certified interlocutory appeal, Apple seeks to overturn the denial of its motion to dismiss Omni MedSci's ("Omni") patent infringement complaint for lack of standing. For the reasons below, we affirm the district court's holding that the University of Michigan ("UM") bylaws did not effectuate a present automatic assignment of Dr. Islam's patent rights and therefore affirm the district court's denial of Apple's motion to dismiss.

BACKGROUND

Dr. Islam is a tenured professor of electrical and computer engineering at UM. In 2011, Dr. Islam received an additional appointment to the Cardiovascular Center ("CVC") at UM's medical school. J.A. 895. When Dr. Islam joined the UM faculty, he executed an employment agreement that included a provision agreeing to abide by UM's bylaws. UM Bylaw 3.10, the focus of the issues in this appeal, "stipulates the conditions governing the assignment of property rights to members of the University Faculty and Staff." J.A. 592. It provides the disposition of intellectual property under three distinct conditions:

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.

* * *

4) Patents, copyrights, and property rights in computer software resulting from activities which have received no support, direct or indirect, from the University shall be the property of the inventor, author, or creator thereof, free of any limitation which might otherwise arise by virtue of University employment.

5) In cases which involve both University-supported activity and independent activity by a University staff member, patents, copyrights, or other property right in resulting work products shall be owned as agreed upon in writing and in advance of an exploitation thereof by the affected staff member and the Vice-Provost for Research in consultation with the Committee on Patents and Copyrights and with the approval of the University's Office of the General Counsel. It is understood that such agreements shall continue to recognize the traditional faculty and staff prerogatives and property rights concerning intellectual work products.

Id. (emphases added).

In 2012, Dr. Islam took an unpaid leave-of-absence from UM to "start[ ] a new Biomedical Laser Company." J.A. 603.¹ During his leave, Dr. Islam filed multiple provisional patent applications. Upon returning to UM in 2013, he filed non-provisional applications claiming priority to those provisional applications. After those applications issued as patents, Dr. Islam assigned the patent rights to Omni on December 17, 2013 and recorded their assignment with the Patent and Trademark Office. One of those patents is an ancestor of the patents-in-suit here.

Neither UM nor Apple substantively dispute that the patents at issue are not directly related to Dr. Islam's teaching, but rather grew out of his time on leave. In 2013, Dr. Islam requested that UM's Office of Technology Transfer ("OTT") confirm Dr. Islam's ownership of his inventions. OTT denied the request, noting the expenditure of medical school funds to support the cost of Dr. Islam's space and administrative time required to process Dr. Islam's appointment to the CVC. J.A. 895. In internal communications, UM also noted that UM provided "medical school faculty partners who have helped springboard ideas with him." J.A. 885. After a number of communications, various officials at UM—including the Director of Licensing at OTT, the Executive Director of OTT, an Associate Dean at the Engineering School, and the University's Director of Licensing—reiterated that they considered UM to be the owner of the patents and noted that Dr. Islam and Omni considered Omni to be the owner of the patents. Dr. Islam was notified of a formal appeals process to challenge UM's determination of its ownership, but he did not pursue that appeal process.

In 2018, Omni sued Apple in the Eastern District of Texas, asserting infringement of U.S. Patent Nos. 9,651,533 and 9,861,286 (the "asserted patents"). Apple filed a motion to dismiss for lack of standing under Fed. R. Civ. P. 12(b)(1), alleging that UM, not Omni, owned the asserted patents.² Apple argued that Dr. Islam agreed "to abide by all University rules and regulations" including UM bylaw 3.10 when he joined the UM faculty. Apple specifically argued that paragraph 1 of bylaw 3.10 automatically transferred legal title to the patents at issue to UM, leaving Dr. Islam with no rights in the invention to assign to Omni. Apple thus contended that Omni lacked standing to assert the patents against Apple.

The Eastern District of Texas concluded that paragraph 1 of bylaw 3.10 was not a present automatic assignment of title, but, at most, a statement of a future intention to assign. Omni Medsci, Inc. v. Apple Inc. , No. 2:18-cv-00134, ECF No. 276 (E.D. Tex. Aug. 14, 2019) ("District Court Op. "). The district court thus concluded that dismissal was improper. Id. at 1. The case was thereafter transferred to the Northern District of California. Apple filed for reconsideration, which the district court denied, finding "no manifest error" in the Eastern District's decision. Omni MedSci, Inc. v. Apple Inc. , No. 19-cv-05924, ECF No. 346 (N.D. Cal. Nov. 25, 2019). Apple filed an unopposed motion for certification of the standing question to this court, which the Northern District granted. ECF No. 354 (Feb. 14, 2020). Apple appeals the denial of dismissal. We have jurisdiction under 28 U.S.C. §§ 1292(c)(1) and 1295.

DISCUSSION

We review the district court's determination regarding patent ownership based on the interpretation of an employment contract de novo. DDB Techs., L.L.C. v. MLB Adv. Media, L.P. , 517 F.3d 1284, 1289 (Fed. Cir. 2008). We review any underlying factual determinations for clear error. Id. We apply federal law to determine whether the contract here created an automatic assignment or created an obligation to assign, because that question is "intimately bound up with the question of standing in patent cases." Id. at 1290.

Omni's standing to assert the patents at issue turns on whether it has an exclusionary right in the asserted patents. This turns on a legal question of contract interpretation: whether paragraph 1 of bylaw 3.10 automatically and presently assigned legal title of Dr. Islam's inventions to UM.³ 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. Id. at 1289. Which type of assignment is intended "depends on the contractual language." Id. "In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights." Bd. Of Trustees of Leland Stanford Jr. Univ. v. Roche Mol. Sys., Inc. , 563 U.S. 776, 786, 131 S.Ct. 2188, 180 L.Ed.2d 1 (2011) (" Roche "). Further, we note that the general rule is that rights in an invention belong to the inventor. Id. at 785, 131 S.Ct. 2188.

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." See District Court Op. at 6.

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. See id. 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. See Arachnid, Inc. v. Merit Indus., Inc. , 939 F.2d 1574, 1580 (Fed. Cir. 1991). 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. See FilmTec Corp. v. Allied-Signal Inc. , 939 F.2d 1568, 1573 (Fed. Cir. 1991) (" FilmTec I ") (explaining that the contract "expressly granted to the Government MRI's rights in any future invention").

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." J.A. 592. (emphasis added) ("Regents’ Bylaws 3.10 stipulates the conditions governing the assignment of property rights to members of the University faculty and staff."). It does not purport to effectuate...