Background
Dr. Mohammed Islam was a tenured professor of electrical and computer engineering at the University of Michigan who also held a secondary appointment in the university’s medical school. When he joined the faculty, he signed an employment agreement and agreed to abide by the university’s bylaws, which provided that patents “issued or acquired as a result of or in connection with administration, research, or other educational activities supported directly or indirectly by funds administered by the University… shall be the property of the University.”
Dr. Islam later invented technologies related to near-infrared spectroscopy for health monitoring—the sort of technology used in smartwatches and wearable devices—and assigned those inventions to Omni MedSci, Inc., a company he founded. Omni sued Apple for patent infringement. Apple moved to dismiss for lack of standing, arguing that the university’s bylaw automatically assigned all rights in the patents to the University of Michigan before Dr. Islam ever purported to assign them to Omni. If the patents had been automatically assigned to the university, Omni would have no standing to sue.
The district court denied Apple’s motion, and Apple appealed. The case turned entirely on a close reading of the bylaw’s language and whether it operated as a present assignment of future patent rights or merely a contractual promise to assign in the future.
The Court’s Holding
The Federal Circuit affirmed the district court and upheld Omni’s standing. Writing for a unanimous panel, Judge Lourie explained that there is a well-established distinction in patent law between two types of assignment language. Language such as “hereby assigns” or “assigns and conveys” effectuates a present, automatic assignment of future patent rights the moment those rights come into existence—the inventor never holds title because it passes directly to the assignee. By contrast, language such as “shall assign” or “shall be the property of” creates only a contractual obligation to assign in the future, not an automatic transfer of title.
The court concluded that the university bylaw’s phrase “shall be the property of the University” fell into the second category—it expressed a future-looking expectation or obligation, not an immediate transfer of ownership. Because the bylaw did not automatically vest title in the university, Dr. Islam retained title to his inventions until he voluntarily assigned them to Omni. The court therefore held that Omni was the proper owner of the patents and had standing to sue Apple for infringement.
Key Takeaways
- Whether an employment agreement automatically assigns patent rights depends on precise contract language: “hereby assigns” is a present automatic assignment, while “shall assign” or “shall be the property of” is only a future obligation.
- University bylaws and policies incorporated by reference into employment agreements can affect patent ownership, but the language must be clear and unambiguous to effectuate an automatic assignment.
- Inventors, startups, and universities should carefully review the exact language of employment agreements and IP policies to understand when and whether patent rights automatically transfer to an institution.
- Patent standing challenges based on employment agreement assignments can be raised as late as at trial, making title chain clarity essential from day one.
Why It Matters
University technology transfer is a multi-billion-dollar industry, and the question of who owns a professor’s inventions sits at the center of countless startup formation deals, licensing agreements, and spin-off negotiations. This decision provides important clarity: university policies that use prospective “shall be” language do not automatically seize ownership of faculty inventions at the moment of creation. Inventors at universities with such policies may have a brief window—before any formal assignment process runs its course—during which they retain title.
For startups built on university research, the case is both reassuring and cautionary. Reassuring because policies that merely say patents “shall be the property” of the institution may not immediately transfer ownership. Cautionary because the precise words of every policy, bylaw, and employment agreement matter enormously—a single word like “hereby” versus “shall” can determine whether a startup’s core patents belong to it or to a university. Companies acquiring patents from university spin-offs should conduct careful due diligence to confirm the inventor-to-assignee title chain is unbroken.