Handshake Agreement to Assign Does Not Provide Basis for Common Ownership to Exclude Prior Art | Akin Gump Strauss Hauer & Feld LLP
The Patent Trial and Appeal Board recently found claims directed to a web-based point of sale system and method unpatentable as obvious after conducting a thorough examination of whether a reference with one common inventor constituted prior art. In doing so, the board relied on its finding that there was no enforceable obligation of assignment to provide the basis for common ownership, and therefore the reference qualified as prior art.
The challenged patent had two named inventors. One of those inventors was also the sole inventor listed on the reference in question, which was a patent application that never issued. The petitioner thus asserted the published application as a prior art reference under pre-AIA 35 U.S.C. § 102(e).
In response, the patent owner disputed that the reference qualified as prior art. Specifically, the patent owner claimed that the reference should be excluded under pre-AIA § 103(c)(1), which provides that subject matter does not preclude patentability where the subject matter and claimed invention were owned by the same person or subject to an obligation of assignment to the same person at the time the claimed invention was made. Although it was undisputed that the application actually “was never assigned to anyone,” the patent owner argued that the published application was subject to an obligation of assignment to the same assignee as the challenged patent, and therefore the application could not invalidate the challenged patent.
As support for this position, the patent owner cited testimony from both named inventors and the prosecuting attorney for the published application. Notably, however, the patent owner failed to address or discuss the declarations substantively. Nevertheless, the board elected to review each of the submitted declarations, but found no support for an enforceable obligation of assignment. While the prosecuting attorney attested to his “understanding” that there would be an assignment upon issuance, there was no reference to any actual assignment or document otherwise evidencing an obligation of assignment. Additionally, one of the inventors explained that any potential assignment resulting from issuance of the published application was based on a “handshake relationship” and “moral obligation” but that “[n]othing was formalized.” According to the board, because the evidence demonstrated at best an unenforceable obligation to assign the published application upon issuance, the patent owner provided no basis for common ownership of the subject matter. Thus, the board held that the reference qualified as prior art.
Practice Tip: A patent owner seeking to disqualify a reference as prior art under 35 U.S.C. § 103(c)(1) based on an obligation of assignment must provide evidence showing that such obligation is enforceable, not merely an informal agreement or understanding. Patent owners oftentimes can show that terms of employment dictate such an obligation. However, in cases where such evidence does not exist, parties must appreciate the difference between enforceable and unenforceable assignment obligations, and take care to fully demonstrate that the obligation to assign was truly enforceable to exclude a reference as prior art.
Lightspeed Commerce Inc. f/k/a Lightspeed POS Inc. v. CloudofChange, LLC, IPR2022-00997, Paper 29 (P.T.A.B. Oct. 19, 2023)
