Yesterday I wrote about an interesting situation: patent practitioner X listed himself as an inventor on an application he drafted and filed on behalf of Z, and assigned all his rights to Z. X was asked by Y, the practitioner to whom the case was subsequently transferred, to confirm in writing that X was not an inventor, at least with respect to a new set of claims that Y planned to file in the USA. In this post I discuss another statement that Y asked X to make.
Y wrote, “My client further notes that while you point out that you have assigned your rights, you have not confirmed as requested that you have no demands of any kind toward my client in respect of the above-identified patent application. My client requires your positive confirmation of this fact.”
This is a bizarre statement, and it took me a while to puzzle it out, but as best as I can determine, Y has confused two different situations. But before continuing, some background on Israel law is in order.
Under Israel law, the inventor of an invention is the owner of that invention and the right to patent it. However, if the inventor was employed by someone else, and he developed the invention during the period of his employment and as a result of that employment, then the default setting under the statute is that the employer owns the invention and the right to patent it; the employer and employee can contract around this provision. Usually, in cases where there’s no explicit contractual provision about ownership of employee-developed IP, the contract is also silent about compensation to the employee-inventor for inventing things, so the statute establishes an ad hoc committee that the Patents Commissioner assembles as needed to determine how much, if any, compensation the employee-inventor is entitled to, in the event the employer and employee-inventor can’t reach an agreement on that question on their own.
Typical employment agreements in Israel in companies where things are being invented explicitly stipulate that the company owns all IP developed by the employee as a result of his employment, including inventions and patents on those inventions. Until a few years ago it was assumed that the general compensation provisions of the employment agreement also covered compensation for IP developed in this setting. But then the ad hoc committee got involved in a few cases and decided that in these situations, employees may be entitled to compensation beyond their normal compensation. Needless to say, this threw a wrench into the works, as companies that thought they had paid everything they needed to pay for their IP were now faced with the possibility of further, unanticipated payouts to employees of valuable inventions. Most companies have, presumably, addressed this by modifying the language of their employment contracts.
In the context of an employer-employee relationship, Y’s statement makes sense: notwithstanding the assignment from X to Z, which assures Z ownership of the invention and the patents on it, Z wants to be sure that X won’t approach the ad hoc committee seeking additional compensation. Or at least, Y told Z that Z wants to be sure of that. Because, you know, he’s a senior guy at a Big Office, so he must know what he’s doing. And he can bill time, and look great in front his new client, for giving this advice, and for writing a letter to X about it.
The problem here is that X is not an employee of Z. The relationship between X and Z is that of outside contractor – he’s a third party supplier just like the parties that provide Z with printer ink or toilet paper or hot lunches to Z’s employees. And therefore the question of the ad hoc committee never arises: X assigned his rights to Z, he sent Z his bill and Z paid, and X can’t have any claims against Z before the ad hoc committee, because that provision of the statute only applies in the context of an employer-employee relationship.
But Y still gets to bill Z for giving this advice and writing to X about it.