• Defining Terms (Especially the “Agreement”)

    by  • January 29, 2012 • patent

    Sometimes you read a decision and don’t know what the arguments really are until you read the dissent.  Abbott Point of Care, Inc. v. Epocal, Inc. is one of those cases. Out of the Federal Circuit, it’s a question about whether a former employee’s duty to assign inventions survived various changes in the relationship and various agreements between the inventor and his employer.

    Dr. Imants Lauks, the inventor and founder of defendant Epocal, Inc., had been employed by Integrated Ionics, a predecessor to the plaintiff Abbott Point of Care, Inc.  There were ultimately three agreements in play. First, in 1984 Lauks executed an agreement that covered confidentiality, non-competition, non-solicitation, disclosure and assignment provisions. There didn’t appear to be any dispute that, had Lauks invented something while this agreement was operative, Integrated Ionics would own it.

    Integrated Ionics became i-STAT and in 1994 Lauks executed an employment agreement with i-STAT that covered employment duties, compensation, benefits, termination and severance payment. In 1999 Lauks resigned from i-STAT and instead entered into an eighteen-month consulting relationship that expired on March 1, 2001.  The consulting agreement defined Lauks consulting services and also said, in a section entitled “Continuation of Employee Confidentiality, Non-Solicitation and Non-Competition Covenants” that:

    The existing agreement between Lauks and [i-STAT] regarding confidentiality, non-solicitation and non-competition (the ‘Existing Confidentiality Agreement’) shall remain in place as if Lauks remained employed by [i-STAT], except that the covenants regarding non-competition shall run 18 months after the execution of the Consulting Agreement.
    Lauks filed the applications on the patents-in-suit on June 4 and 8, 2001, three months after his consulting relationship ended, and assigned the resulting patents to Epocal. Abbott acquired i-STAT and now claims that the 1984 agreement, including the assignment provision, was operative until March, 2001. It claims that Lauks conceived of the inventions before then and therefore Abbott owns the patents.
    The appeals court held that the 1999 Consulting Agreement didn’t continue the assignment provision of the 1984 agreement, but only the confidentiality, non-solicitation and non-competition provisions. The court considered the above language unambiguous.

    The dissent saw it differently. The dissent informs us that the 1984 agreement was untitled, but that the 1992 employment agreement referred to the 1984 agreement in its entirety as “The Confidentiality and Non-Competition Agreement,” and that Lauks and Epocal also referred to it (although it’s not clear where) as the “certain letter agreement . . . concerning employee confidentiality and non-competition.”  These instances of using a shorthand reference to the entire agreement makes it less clear what the use of the term “Existing Confidentiality Agreement” in the 1999 Consulting Agreement means – whether it was to the “confidentiality, non-solicitation and non-competition” provisions of the agreement only or the agreement as a whole.

    There is more, though. The 1999 Consulting Agreement also recognized that

    [t]he Consulting Agreement does not extend to work on new products, whether or not based on [i-STAT’s] core technology and whether or not for point-of-care blood analysis applications.

    These provisions would be inconsistent with a duty on Lauk’s part to assign inventions on all his work. The dissent doesn’t address this, but then it also only disagreed about granting the motion to dismiss rather than remanding for additional factfinding.

    Lawyers are generally anal about defining terms, and this case demonstrates why it’s good practice. Had the dissent carried the day and the contract been interpreted differently, Lauks might have lost his entire business because of ambiguity about whether he succeeded in retaining his invention for his new company.

    Abbott  Point of Care, Inc. v. Epocal, Inc., No. 2011-1024 (Fed. Cir. Jan. 13, 2012).

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