Federalism and Intellectual Property: Certainly Important, but Possibly Boring

We have all been there. You go out on a date or to a cocktail party. You make a witty observation about how people get confused between inherency under Section 102 and obviousness under Section 103. Then, instead of chuckling like you would expect, the person that you are talking to you looks bored to death, and maybe even a little confused. You shouldn’t feel bad if something like this has happened to you - it happens to all of us.

An unfortunate fact of life seems to be that the things that are important are not necessarily the things that are interesting to most people. While patent law is a subject of incredible importance that actually impacts most people every day in terms of what technologies they use and how much those technologies cost, most people still find patent law incredibly boring. While the press has devoted increasing coverage to patent topics over the last few years, the coverage is still far less extensive than, say, a big game. Most people still just don’t care about patent law in any detail whatsoever.

An incredibly important - but almost certainly boring to most people - topic receiving attention recently goes well beyond general patent law in terms of esoteric specificity, but it matters quite a bit to how the U.S. patent system actually functions: federalism and patent law. 

The classic, but by no means only, example of issues surrounding federalism and patent law involves the assignment of a patent. For example, if Amy from Alabama assigns a patent to Bill from Boston while both are on vacation in Florida, what law applies when there is a dispute over the terms of the assignment? Does federal law preempt state law? What if the assignment clearly states “this assignment shall be construed under the laws of the state of New Mexico” under a “Choice of Law” heading in the assignment document? What if something quirky about the assignment would render the transfer of the patent valid in one state but invalid in another state? 

In the United States we have a long history of applying state law to issues such as contract law, and a patent assignment is a contract. On the other hand, the United States also has a constitution with one clause that reserves to Congress the power to create a patent system and another clause that makes federal law trump state law. The notion that a patent might be legally assigned in one state but not in another would seem to frustrate the very notion of a federal patent system (not to mention plenty of patent attorneys), but the Constitution does not instruct the Federal Courts to strike out on their own in interpreting contracts assigning patents either. Striking the correct balance is no easy task, but striking the right balance matter a lot - you might even say that it is important that we find the right balance between federalism and patent law.

Most companies understandably want to own the patent rights to their employees’ inventions, so understanding the law governing the contracts assigning rights from employees to their employers is important. The chief asset in many corporate acquisitions is patents and patent applications, so both buyers and sellers have an interest in clear and understandable rules for patent transfers. Having a system that grants and enforces patents is great, but there also needs to be clear rules for how those patents are transferred. Perhaps most patent assignments are straightforward enough as to be legitimate under any conceivable choice of law, but some deals may not be able to be straightforward. Also, never underestimate the ability of a talented attorney to find flaws in what seemed like a simple and straightforward agreement when the value of the deal turns out to have been far different than was expected.

Bored yet? Most people would be bored by now, to be sure, but that does not imply that these issues do not matter. Fortunately, Written Description provides a summary of the discussion and links for those who are not bored by the discussion. It might provide us all with good cocktail chatter for the weekend.