[00:00:00] Speaker 00:
Okay, the next argued case is docket number 20, 1715, Omni Med Psi Incorporated against Apple Incorporated.

[00:00:09] Speaker 00:
Mr. Cushion.

[00:00:11] Speaker 05:
Good morning, Your Honors.

[00:00:13] Speaker 05:
Three aspects of Dr. Islam's 1992 contract with the University of Michigan demonstrate that it was a present assignment of title to his future inventions.

[00:00:21] Speaker 05:
First, it states that Bylaw 310 governs the assignment of his intellectual property rights.

[00:00:26] Speaker 05:
Second, it states that patents on his inventions shall be the property of the university if they meet the conditions in paragraph one.

[00:00:33] Speaker 05:
And third, nothing in his contract requires Dr. Islam to take any action after an invention is made to assign title to the university.

[00:00:41] Speaker 05:
Instead, when Dr. Islam makes an invention meeting the conditions in paragraph one, title to that invention transfers automatically to the university by operation of law.

[00:00:51] Speaker 05:
And Dr. Islam has acknowledged this is precisely how his contract works.

[00:00:55] Speaker 05:
In 2007, he agreed the university owned one of his inventions despite his attempt to assign that same invention to another one of his companies.

[00:01:04] Speaker 05:
He also testified that he did not execute an assignment that transfer title of that invention to the university after he had made it.

[00:01:12] Speaker 05:
Instead, as he acknowledged in this agreement, the invention and the patents on it automatically became property of the university by Operation Bylaw 310.

[00:01:22] Speaker 04:
Mr. Krishan, this is Judge Lynn.

[00:01:26] Speaker 04:
I understand your argument.

[00:01:28] Speaker 04:
I understand your focus on paragraph one of the bylaws, 3.10.

[00:01:35] Speaker 04:
But what about paragraphs four and five, and particularly paragraph five, which I think if read together, plays a fairly clear meaning in the phrase shall be.

[00:01:52] Speaker 04:
as not a statement of present action, but a statement of command or future intention.

[00:02:00] Speaker 04:
What do you say to that?

[00:02:03] Speaker 05:
So paragraph five is not implicated by this case.

[00:02:08] Speaker 05:
I mean, both parties agree to that.

[00:02:10] Speaker 05:
The language in paragraph five is also addressing a situation where there's

[00:02:15] Speaker 05:
a contribution of both the actions of the inventor and the support of the university as well as an independent source of support.

[00:02:25] Speaker 04:
But it uses the same phrase, shall be owned or shall be the property.

[00:02:32] Speaker 04:
So you can't read these paragraphs alone.

[00:02:37] Speaker 04:
They have to be read together, correct?

[00:02:40] Speaker 05:
Correct.

[00:02:40] Speaker 05:
You can look at the entire agreement and what you see in those three paragraphs are declarations of status of certain issues.

[00:02:47] Speaker 05:
And paragraph one is defining the status of patents that have been supported by university funding.

[00:02:53] Speaker 05:
Paragraph four is defining the status of patents that are supported by no UM funds.

[00:02:59] Speaker 05:
And paragraph five is addressing a situation where there has been a writing entered into by the parties to govern ownership and exploitation of the patent.

[00:03:09] Speaker 05:
In that instance, there's no timing requirement, there's no requirement that those agreements come actually into effect, and there's no requirement to secure such a writing.

[00:03:19] Speaker 05:
When you look at paragraph five, it says, if there is an agreement, that will control ownership, and that is true.

[00:03:26] Speaker 05:
If there's no agreement, and there's a single inventor as in this case, the default rules in paragraphs one and four dictate ownership.

[00:03:34] Speaker 03:
There's nothing in it.

[00:03:36] Speaker 03:
Mr. Cushion, this is Judge Chen.

[00:03:38] Speaker 03:
follow up on Judge Lynn's question because his question is very relevant to my own issues in this appeal.

[00:03:49] Speaker 03:
Are you basically saying that the phrase shall be operates in one way for paragraph one but operates in a different way for paragraph five?

[00:04:01] Speaker 05:
It has to because the sentences are different.

[00:04:04] Speaker 05:
The way that shall be is used in each of these three paragraphs is addressing a different condition.

[00:04:09] Speaker 05:
So in paragraph one, it's indicating that if an invention is supported by UM funding, that invention shall be the property of the university.

[00:04:19] Speaker 05:
In paragraph five, the words shall be are not dictating or addressing whether the funding dictates ownership.

[00:04:25] Speaker 05:
It's saying in that scenario in paragraph five,

[00:04:29] Speaker 05:
if there is a writing governing ownership and exploitation of the patent, that writing shall govern the issues of ownership and exploitation.

[00:04:40] Speaker 05:
And these are declarations.

[00:04:42] Speaker 05:
They're not identical sentences, and that's really important to understand where the error of the district court was.

[00:04:50] Speaker 05:
It is in the use of the word shall be in conjunction with the remaining passage of each clause that dictates what the effect of the language is.

[00:05:00] Speaker 03:
I mean, this area of law is difficult, and it's not very fun.

[00:05:08] Speaker 03:
But for 30 years now, since 1991, I think we have case law in the books that define how you construct these employment agreements to make it clear whether the intention is to make it an automatic assignment or to make it

[00:05:30] Speaker 03:
an assignment that's contingent or something that will take effect at a later time.

[00:05:37] Speaker 03:
And it's very clear through our case law over and over again, if you say something in the present tense in the active voice, I hear by a sign, I hear by grant, everybody will understand under our established case law what that means.

[00:05:58] Speaker 03:
You know, I look at arachnid.

[00:06:01] Speaker 03:
in 1991 and the phrase was shall be the property of and all rights thereto will be assigned to and we said that wasn't a present assignment, that was not an automatic assignment, that was something of an agreement to assign and I see that part of that phrase, part of that provision was shall be the property of which is the very phrase that we have here in

[00:06:32] Speaker 03:
Dr. Islam or in the bylaws 3.10 paragraph 1.

[00:06:37] Speaker 03:
So could you comment on that, how there is at least some facial similarity between what we have here in this case and what we've seen in the past and concluded there was no present assignment?

[00:06:55] Speaker 05:
Thank you for your question, Judge Chen.

[00:06:56] Speaker 05:
That point raises an important contrast between the contract that was at issue in Arachnid and the contract you're looking at here.

[00:07:04] Speaker 05:
What was critical to that decision in Arachnid was that the contract envisioned explicitly that the inventor would take an action after the invention is made to assign title to the invention.

[00:07:17] Speaker 05:
So it wasn't just the words shall be in isolation.

[00:07:21] Speaker 05:
It was the contract identifying an act

[00:07:25] Speaker 05:
of the inventor after the invention is made to transfer title.

[00:07:28] Speaker 05:
Here, there's no comparable clause.

[00:07:31] Speaker 05:
It's simply a statement that says if the condition specified in paragraph one is true for that future invention.

[00:07:39] Speaker 03:
I guess you're right, but nevertheless, going back to Arachnid, the provision also said not only will be assigned, but also said shall be the property of.

[00:07:55] Speaker 03:
You know, that apparently wasn't good enough to convert that overall provision into a present assignment or a present transfer or automatic transfer by some operation of law.

[00:08:11] Speaker 05:
Well, and again, thank you again.

[00:08:13] Speaker 05:
The question really does have to focus on the operation of the contract as a whole.

[00:08:18] Speaker 05:
And that's really a critical point that you see throughout this court's jurisprudence.

[00:08:23] Speaker 05:
When you look at the contract, you have to define the intention of the parties and whether there is expected to be an action of the inventor after the invention is made to transfer title or whether it's going to operate by law when that condition is true in the future.

[00:08:42] Speaker 05:
And in here, you have extrinsic evidence, which is in the form of this 2007 agreement between Dr. Islam and the university.

[00:08:50] Speaker 05:
where he's acknowledging that the title in his case transfers without him taking that affirmative act of transferring title after the invention is made, but instead it's transferring by operation of paragraph 3.1.

[00:09:03] Speaker 05:
I'll also note that there are other cases which have employed this kind of shall-be language and have been found to be present assignments in the Supreme Court.

[00:09:13] Speaker 05:
Actually, two examples are addressed in the Roche case where the court observed that the shall-be language in those provisions

[00:09:20] Speaker 05:
unambiguously divested inventors titled to their future inventions.

[00:09:25] Speaker 05:
And in this case, in film tech, in this court, there was a similar form of expression where the invention shall vest in the United States.

[00:09:34] Speaker 05:
And in that instance, it was found to be a present assignment.

[00:09:37] Speaker 05:
So you have to look at the entirety of the agreement and decipher if there is an obligation of the inventor to act in the future or if that transfer is going to occur.

[00:09:47] Speaker 05:
as an operation of law when the condition is true for that future invention.

[00:09:51] Speaker 05:
And I will make one last point.

[00:09:53] Speaker 05:
The court below, the Texas court in particular, noted that the future events were the critical thing that it had focused on, you know, that there was a need to determine if there was funding or not.

[00:10:05] Speaker 05:
Every invention that is governed by these provisions is going to be something that happens in the future.

[00:10:10] Speaker 05:
So the question is really focused on

[00:10:12] Speaker 05:
Is the condition true as specified in the contract that will trigger the operation of the provision causing transfer of title?

[00:10:20] Speaker 05:
Or is there something else the inventor has to do in the future after the invention is made?

[00:10:26] Speaker 05:
So here we believe the language is clear.

[00:10:30] Speaker 05:
There's no additional requirement from Dr. Islam to assign title to his inventions after he makes them.

[00:10:38] Speaker 05:
And the language is very much aligned with

[00:10:42] Speaker 05:
the film tech and the other examples from the Roche case.

[00:10:47] Speaker 04:
Mr. Krishan, this is Judge Lynn again.

[00:10:50] Speaker 04:
I certainly agree with you that you have to look to the agreements as a whole or look to the documents as a whole to determine what the intention was.

[00:11:03] Speaker 04:
But if you look at the circumstances and the situations that were referenced by the Supreme Court in the Roche case,

[00:11:12] Speaker 04:
where Shelby was used, those documents taken as a whole make it pretty clear that the rights vest immediately.

[00:11:23] Speaker 04:
They either use that expression or otherwise indicate that rights vest immediately.

[00:11:30] Speaker 04:
And we don't have that here.

[00:11:33] Speaker 04:
Isn't that a problem for you?

[00:11:35] Speaker 05:
Well, I think I might disagree with your suggestion that the language in paragraph one isn't of the same character.

[00:11:41] Speaker 05:
I believe that language is straightforward and declarative.

[00:11:45] Speaker 05:
If the condition is true of UM funding, that invention is the property of the University of Michigan.

[00:11:53] Speaker 04:
But there's no other language that doesn't say, and shall best, or and shall hereby assign, or words to that effect.

[00:12:03] Speaker 05:
There is no additional language like that, and that is actually a signal that it's operating the way we believe it is.

[00:12:09] Speaker 05:
And this is also something which the University of Michigan believes is how their provision works.

[00:12:15] Speaker 03:
Mr. Cushion, before you go, there's also the question of this invention report form that professors like Dr. Islam have to sign.

[00:12:27] Speaker 03:
And I guess in that form,

[00:12:32] Speaker 03:
makes it very clear it actually has the hereby assigned language, that active voice present tense language.

[00:12:41] Speaker 03:
And I'm now wondering why shouldn't we look at the invention report form along with the bylaws as some kind of two-step process where the first step is the bylaws which they, perhaps the way to understand the bylaws is

[00:12:59] Speaker 03:
this is what we intend and I agree that I am ultimately obligated to assign these rights over.

[00:13:07] Speaker 03:
And then comes at a later date the actual invention report form which undoubtedly unquestionably represents an actual present automatic assignment because it's now saying I hereby assign the invention to the university.

[00:13:27] Speaker 03:
Is there something there that we should be looking at these two pieces as a two-step process overall?

[00:13:37] Speaker 05:
So the form is not part of the agreement that Dr. Islam signed with the university in 1992.

[00:13:45] Speaker 05:
It is actually not even part of the tech transfer policy that has been implemented by the university.

[00:13:50] Speaker 05:
It's something one step below that.

[00:13:52] Speaker 05:
What you see in that contract, which

[00:13:57] Speaker 05:
sorry, that form is, as I said, not part of the contract.

[00:14:01] Speaker 05:
So it can't override the contractual obligations Dr. Islam has.

[00:14:07] Speaker 05:
More directly, you've actually addressed a scenario like this in your DDB Tech case in footnote three on page 1290.

[00:14:16] Speaker 05:
You make an observation that there was an obligation

[00:14:20] Speaker 05:
in the contract, in that case, for an inventor to issue a specific assignment after inventions were made.

[00:14:26] Speaker 05:
And you found that to be inconsequential, because the primary agreement that dictated the transfer of title was clear.

[00:14:33] Speaker 05:
And we believe that's the situation we have here.

[00:14:36] Speaker 05:
That form is different than the footing, and it's not on the same footing as the contract that dictates the ownership question.

[00:14:44] Speaker 03:
And that primary document, that one actually said,

[00:14:49] Speaker 03:
hereby grant and assign, is that right?

[00:14:52] Speaker 03:
That is part of the PDB.

[00:14:54] Speaker 05:
Yes, yes, your honor.

[00:14:55] Speaker 05:
And that helps the court reach the conclusion it was a present assignment.

[00:14:58] Speaker 05:
But again, you can reach that conclusion as well.

[00:15:02] Speaker 05:
My last point before, and I'd like to reserve some time for rebuttal, that form is extrinsic evidence.

[00:15:09] Speaker 05:
And there's a lot more probative extrinsic evidence as to the operation of this contract in the words of the two sides.

[00:15:18] Speaker 05:
and I'll just reserve my time.

[00:15:20] Speaker 00:
Okay, no, we'll save you rebuttal time.

[00:15:21] Speaker 00:
Any more questions at the moment for Mr. Cushing?

[00:15:27] Speaker 03:
No, thank you.

[00:15:28] Speaker 03:
No.

[00:15:29] Speaker 00:
Okay, then let's hear from, on behalf of the University, Ms.

[00:15:32] Speaker 00:
Weidlich.

[00:15:33] Speaker 06:
Thank you, Judge Newman.

[00:15:35] Speaker 06:
Good morning, Your Honors.

[00:15:36] Speaker 06:
May it please the Court, Sarah Weidlich on behalf of the Regents of the University of Michigan.

[00:15:40] Speaker 06:
I'd like to touch on a couple of things that came up in your discussion with Mr. Cushion.

[00:15:46] Speaker 06:
The first is paragraph five of bylaw 3.10.

[00:15:49] Speaker 06:
I want to make sure that, you know, the university's position and understanding of that is in the record for the court.

[00:15:56] Speaker 06:
The way paragraph five operates is it's permitting the university and, you know, any university member to agree in advance to some deviation from bylaw

[00:16:09] Speaker 06:
3.1 and bylaw 3.10-4.

[00:16:12] Speaker 06:
So in advance, the parties could agree that bylaw 3.10 is not going to apply as it normally would.

[00:16:20] Speaker 06:
In the absence of any such advance agreement, bylaw 3.10 paragraph 1 and bylaw 3.10 paragraph 4 would be operative.

[00:16:32] Speaker 06:
The second point I'd like to make is that

[00:16:35] Speaker 06:
Bylaw 3.10, as Mr. Christian mentioned, does not require an additional step be taken to effectuate the transfer.

[00:16:43] Speaker 06:
And I think that that is a key line of reasoning that has followed from this Court's cases on this issue since 1991.

[00:16:53] Speaker 06:
In many of the cases the Court has considered will be assigned language, shall be assigned

[00:17:00] Speaker 06:
clear language that's indicating some additional step needs to be taken to effectuate the transfer.

[00:17:06] Speaker 06:
We simply do not have that here.

[00:17:08] Speaker 06:
The District Court made that finding at Appendix 6.

[00:17:12] Speaker 06:
It specifically said that Bylaw 3.10 is silent as to how the transfer is to occur.

[00:17:19] Speaker 06:
And we think, especially in light of the language that the Supreme Court found

[00:17:23] Speaker 06:
unambiguous in the Sanford v. Roche decision.

[00:17:27] Speaker 06:
We think that's very clear evidence that bylaw 3.10 is a present automatic assignment.

[00:17:34] Speaker 04:
Ms.

[00:17:34] Speaker 04:
Wydeck, this is Judge Lynn.

[00:17:37] Speaker 04:
You referred to paragraph 5 of 3.10 as relating to the situation where the parties agree in advance.

[00:17:50] Speaker 04:
That's in advance of any

[00:17:52] Speaker 04:
research activity or any work?

[00:17:55] Speaker 04:
Is that what you're saying?

[00:17:58] Speaker 06:
Right.

[00:17:58] Speaker 06:
The way that it would work is if there is no agreement in writing in advance that modifies the default provisions of paragraph 3.10, paragraph 1, or paragraph 4, those provisions apply.

[00:18:11] Speaker 04:
So what would happen if there was an invention made and at the time the invention was completed,

[00:18:20] Speaker 04:
there was a dispute as to who contributed what.

[00:18:25] Speaker 04:
How is that resolved?

[00:18:26] Speaker 06:
So that would be resolved, you know, by the tech transfer office would do an investigation, a detailed investigation similar to what they did here.

[00:18:34] Speaker 06:
And they would determine, you know, to contact the stakeholders, contact the fact witnesses, do the investigation, and determine if university resources were used pursuant to paragraph one.

[00:18:46] Speaker 06:
If they were, then the university owns it.

[00:18:48] Speaker 06:
If there had been an agreement in advance that Bylaw 3.10 is not going to apply as it normally does, there could be a deviation from that.

[00:18:59] Speaker 06:
The university could agree that a faculty member could use the university resources and the university would not own it.

[00:19:05] Speaker 06:
But that would need to be agreed to in advance as Paragraph 5 permits.

[00:19:10] Speaker 04:
Yeah.

[00:19:11] Speaker 04:
I'm still confused because it sounds to me like either way, whether it's in advance or whether it's after the fact,

[00:19:18] Speaker 04:
there would have to be some agreement and some resolution in writing, which is exactly what Paragraph 5 relates to.

[00:19:28] Speaker 06:
So I think Paragraph 5, a couple of points, I think Paragraph 5 is quite clear that the agreement needs to happen in advance of, you know, the work or the exploitation of the invention.

[00:19:39] Speaker 06:
And the second point is that in many... I'm sorry, where does the language say that?

[00:19:45] Speaker 03:
Why does it have to be done

[00:19:47] Speaker 03:
Just curious, in advance of the work undertaken that leads to a patent as opposed to after the work has been conducted and then a determination is how does the ownership split work?

[00:20:05] Speaker 06:
So, again, I, paragraph five works such that if there is no other writing in advance of the work being done,

[00:20:14] Speaker 06:
Bylaw 3.10 paragraph 1 and paragraph 4 are the governing provisions.

[00:20:21] Speaker 06:
So in the absence of something changing those, those are the governing provisions.

[00:20:26] Speaker 03:
Does paragraph 5 say that?

[00:20:28] Speaker 03:
I mean, I guess I'm just asking.

[00:20:30] Speaker 03:
I don't know the answer.

[00:20:32] Speaker 06:
We believe it says that, yes.

[00:20:34] Speaker 06:
So that is what is said by it, shall be owned as agreed upon in writing and in advance.

[00:20:38] Speaker 06:
And if there is no such writing.

[00:20:40] Speaker 03:
And in advance of an exploitation thereof.

[00:20:44] Speaker 06:
Yes.

[00:20:45] Speaker 03:
So that seems to be saying that the writing, the agreement on ownership, co-ownership has to be done before the invention is commercialized.

[00:20:58] Speaker 03:
Exploitation, isn't that what that means?

[00:21:00] Speaker 03:
It doesn't mean in advance of the activity research undertaken that leads to the resulting claimed invention.

[00:21:12] Speaker 03:
Am I missing something?

[00:21:13] Speaker 06:
We think it would also apply to exploitation.

[00:21:18] Speaker 06:
May I continue, Your Honor?

[00:21:20] Speaker 06:
Yes, please continue.

[00:21:21] Speaker 06:
We think it would also apply to the exploitation, but we think that what this is intending to do is, you know, provide that there is an opportunity to change the default rules of paragraph one and paragraph four.

[00:21:34] Speaker 06:
And I would just like to touch on one thing, if I may, the point from Judge Lynn.

[00:21:39] Speaker 06:
Many of this court's cases finding automatic assignments of future inventions, you know, have a condition subsequent that needs to be determined in the future.

[00:21:52] Speaker 06:
You saw that in the DDB Tech case where there was needed to be a determination of whether the conduct fell into the provisions set forth in the employment contract.

[00:22:03] Speaker 06:
So the idea that we have to make a determination in the future of whether the factual predicates are present

[00:22:09] Speaker 06:
That's very common in all of these agreements, and we don't believe that it suggests that there's only a promise to assign in the future.

[00:22:17] Speaker 03:
One final question before you go.

[00:22:20] Speaker 03:
Bylaw 3.10 has been amended in recent years to replace or amend the shall be the property of language.

[00:22:31] Speaker 03:
Is that right?

[00:22:32] Speaker 06:
Bylaw 3.10 has not, no.

[00:22:35] Speaker 03:
It still says shall be the property of this, shall be the property of that.

[00:22:39] Speaker 06:
Yes, that's correct, Your Honor.

[00:22:40] Speaker 03:
And it doesn't say anything more definitive or what I would call definitive, you know, hereby assign or assigns or transfers?

[00:22:53] Speaker 06:
No, this language dates back at least until the 1970s.

[00:22:57] Speaker 06:
It predates the Bayh-Dole Act and the university is obviously aware of its obligations under the Bayh-Dole Act.

[00:23:04] Speaker 06:
under the Stanford v. Roche decision that interpreted that.

[00:23:08] Speaker 03:
I thought I read somewhere in the brief that the university has, since the time this litigation commenced or sometime in, say, the past five years, amended something to further clarify what the university wants.

[00:23:26] Speaker 06:
There have been, you know, you mentioned, it came up earlier, the discussion about some of the changes to the form.

[00:23:32] Speaker 06:
I believe that that may be what you're referring to.

[00:23:35] Speaker 06:
There have also been amendments to the tech transfer policy over the years, particularly to make changes to revenue sharing and different things like that.

[00:23:44] Speaker 06:
The tech transfer policy has been amended.

[00:23:46] Speaker 06:
And there are the confirmatory assignments with the invention disclosure form.

[00:23:52] Speaker 06:
that does have some additional hereby assigned language.

[00:23:58] Speaker 03:
How about the ownership of intellectual property section of the tech transfer policy?

[00:24:03] Speaker 03:
Was that amended?

[00:24:05] Speaker 06:
I don't recall off the top of my head if and when it was amended, you know, as it currently stands and as it has stood since at least 2009.

[00:24:15] Speaker 06:
That section does make clear that the Bylaw 3.10 effectuates the automatic transfer because it talks about the university retaining ownership of IP produced by... Oh, that's a different argument.

[00:24:27] Speaker 03:
I was talking more about the shall be the property of language that also existed in the section for policy.

[00:24:36] Speaker 06:
I don't recall off the top of my head if that has been amended.

[00:24:40] Speaker 06:
My understanding is that the shall be language has almost followed verbatim from Bylaw 3.10 in the tech transfer policy.

[00:24:48] Speaker 04:
Okay, thanks.

[00:24:50] Speaker 04:
Just one quick question, Ms.

[00:24:53] Speaker 04:
Wyzek.

[00:24:54] Speaker 04:
Again, going back to paragraph five.

[00:24:59] Speaker 04:
Let's suppose there was no writing in advance and there was work undertaken

[00:25:06] Speaker 04:
And an invention was produced.

[00:25:10] Speaker 04:
And there was some dispute.

[00:25:12] Speaker 04:
And as a result of that dispute, it was determined that paragraph four should be the operative paragraph, that there was no support by the university.

[00:25:24] Speaker 04:
Under those circumstances, would the inventor have to execute an assignment to the university?

[00:25:33] Speaker 06:
No, no.

[00:25:34] Speaker 04:
If paragraph four is operable and it's shown that the inventor did not use any university resources, but if there's no agreement in advance and the inventor undertakes some work, then wouldn't paragraph one, if your argument is that these are default paragraphs and paragraph one would default ownership to the inventor,

[00:26:00] Speaker 04:
And then there's a dispute.

[00:26:02] Speaker 04:
My hypothetical is there's a dispute later on.

[00:26:05] Speaker 04:
And it's determined after the fact that, well, no, the university, the inventor received no support.

[00:26:15] Speaker 04:
And therefore, ownership should be for the university.

[00:26:18] Speaker 04:
Would there have to be an assignment?

[00:26:22] Speaker 04:
In other words, if your argument is that these paragraphs 1 and 4 are default paragraphs and that

[00:26:29] Speaker 04:
titled vests automatically, and paragraph five only kicks in in advance.

[00:26:36] Speaker 04:
And my hypothetical is there is no understanding in advance.

[00:26:40] Speaker 04:
So one of these two paragraphs, one and four, operate as a default.

[00:26:46] Speaker 04:
And then if that's the case, it would seem to me that there would have to be an assignment later on if there was some sort of a dispute and a different resolution.

[00:26:59] Speaker 04:
other than the default?

[00:27:03] Speaker 04:
Is that correct or not?

[00:27:05] Speaker 06:
I don't believe that that is correct and I think the circumstance that we have in this record, the extrinsic evidence of the 2007 reassignment is a good example of that.

[00:27:18] Speaker 06:
Dr. Islam believed that he had not used any university resources in 2003 and he attempted to

[00:27:25] Speaker 06:
assign the rights to that patent to his company, Chita Omni.

[00:27:31] Speaker 06:
He later acknowledged that the university, he had used university resources and that title had vested automatically with the university.

[00:27:39] Speaker 06:
He was not required then to assign to the university.

[00:27:43] Speaker 06:
He simply acknowledged in the 2007 reassignment agreement that the university did own it automatically by virtue of Bylaw 3.10 paragraph 1.

[00:27:55] Speaker 00:
Okay.

[00:27:55] Speaker 00:
Thank you.

[00:27:57] Speaker 00:
Okay.

[00:27:58] Speaker 00:
Thank you.

[00:27:58] Speaker 00:
Thank you.

[00:27:59] Speaker 00:
Thank you, Your Honor.

[00:28:01] Speaker 00:
We'll hear from the other side.

[00:28:04] Speaker 00:
Yes.

[00:28:05] Speaker 01:
Good morning.

[00:28:07] Speaker 01:
Thank you, Your Honor.

[00:28:08] Speaker 01:
Good morning.

[00:28:10] Speaker 01:
Let me start by giving a disclaimer.

[00:28:12] Speaker 01:
I'm an avid Michigan Wolverine.

[00:28:15] Speaker 01:
I got my engineering and law degrees from U of M, and I like the U of M very much.

[00:28:19] Speaker 01:
But in this case, I have to disagree with them and with Apple.

[00:28:25] Speaker 01:
There's no question that in order for Apple to prevail here, they have to win on both the facts and the law.

[00:28:33] Speaker 01:
We've been talking a lot about the law in the last few minutes here, but the facts here make it clear that even if only paragraphs one and four applied, and they don't, that paragraph five is clearly relevant here,

[00:28:53] Speaker 01:
that this falls under paragraph four, under the facts, because the only record... I'm sorry, Council, could you just focus on the law?

[00:29:01] Speaker 03:
Sure.

[00:29:01] Speaker 03:
That's where the debate has been so far.

[00:29:04] Speaker 03:
I agree.

[00:29:05] Speaker 03:
I'd like you to focus on that.

[00:29:07] Speaker 01:
I'm happy to do that.

[00:29:08] Speaker 01:
Thank you.

[00:29:09] Speaker 01:
So, let's talk about paragraph five, this in advance concept that U of M was arguing.

[00:29:16] Speaker 01:
It says, in advance of an exploitation thereof.

[00:29:22] Speaker 01:
And going back a little bit in paragraph five, it says, in cases which involve both university supported activity and independent activity by a university staff member, patents shall be owned as agreed upon in writing in advance of an exploitation thereof of the patents by the affected staff member.

[00:29:43] Speaker 01:
This isn't talking about making an agreement before any work is done.

[00:29:47] Speaker 01:
You have to know what the invention is before you can decide

[00:29:51] Speaker 01:
who owns what and what work relates to what.

[00:29:54] Speaker 01:
You couldn't possibly do this in advance of any work.

[00:29:59] Speaker 01:
And so I disagree with U of M's analysis of paragraph five.

[00:30:02] Speaker 01:
This is about doing things in advance of exploitation of the patents.

[00:30:07] Speaker 01:
And so it does fit within the same structure as paragraphs one and four, that after the inventive activity is done, there are three possibilities.

[00:30:19] Speaker 01:
One is it was all done

[00:30:21] Speaker 01:
with U of M resources.

[00:30:24] Speaker 01:
Second, it was done all with non-U of M resources.

[00:30:27] Speaker 01:
Or third, it was done with a combination of U of M resources and non-U of M resources.

[00:30:32] Speaker 01:
Those are the three possibilities covered by the bylaws and there can't be an automatic assignment under that scenario because you have to decide whose resources were used and then figure out which of these paragraphs apply.

[00:30:49] Speaker 01:
The other thing that I think is critical here

[00:30:51] Speaker 01:
is the no added step concept that UM and Apple have promoted.

[00:30:58] Speaker 01:
The university, the bylaws are high level concepts, right?

[00:31:04] Speaker 01:
And the university implements those concepts in the tech transfer policy.

[00:31:09] Speaker 01:
That's exactly what the tech transfer policy says and that was contemplated from the beginning that there would be some way to implement these bylaws steps.

[00:31:18] Speaker 01:
The tech transfer policy requires

[00:31:22] Speaker 01:
inventors or employees to disclose their inventions to the Office of Tech Transfer.

[00:31:30] Speaker 01:
And the way that is implemented by the university is with the invention report form.

[00:31:37] Speaker 01:
That invention report form is a required additional step that must be done under the university rules.

[00:31:45] Speaker 01:
And Apple argued, well, Dr. Rhythm wasn't required to follow that.

[00:31:52] Speaker 01:
But he was.

[00:31:53] Speaker 01:
His agreement says he will abide by the bylaws of the university and their regulations and rules.

[00:32:01] Speaker 01:
And this is one of the rules.

[00:32:03] Speaker 01:
On page eight of the blue brief, Apple says the policy requires university inventors to report inventions immediately to the Office of Technology Transfer.

[00:32:14] Speaker 01:
Bryce Pills, the U of M 30b6 witness, was deposed.

[00:32:19] Speaker 01:
He said explicitly that

[00:32:22] Speaker 01:
If the invention falls under U of M policies, then they're required to report those to the university.

[00:32:27] Speaker 01:
That's appendix page 525.

[00:32:29] Speaker 01:
He also said the same thing at appendix page 571.

[00:32:33] Speaker 01:
So there's no doubt that if the dividing line is doing an additional step, and I don't think that's the right dividing line, by the way, but if that's the dividing line, there's clearly an additional step required under the university policies and regulations.

[00:32:50] Speaker 01:
But I think the better approach and the right approach, the cases have followed is does the language of the agreement call for some future act or is it a present act?

[00:33:02] Speaker 01:
And, and that ought to, there ought to be a clear message from this court about how to apply these kinds of contracts.

[00:33:11] Speaker 01:
We shouldn't be in these debates and these shouldn't be in the future either.

[00:33:15] Speaker 01:
There should be, if the language is future tense language, if it says shall be,

[00:33:19] Speaker 01:
which is future tense, then that is not a present assignment.

[00:33:24] Speaker 01:
If the language is present tense language, like the University of Florida uses, is the property of, and that comes out of the Alzheimer's Institute case from the Eastern District of Pennsylvania, then that is present tense language.

[00:33:42] Speaker 01:
That's an automatic assignment.

[00:33:44] Speaker 00:
But you have property which doesn't yet exist.

[00:33:48] Speaker 00:
So how can you define it?

[00:33:50] Speaker 01:
Well, that's a good point.

[00:33:53] Speaker 00:
The dissent... That's what it's all about, isn't it?

[00:33:55] Speaker 00:
Well, it is.

[00:33:56] Speaker 00:
That's why the language is written as I read it, the way it is, because it doesn't exist.

[00:34:03] Speaker 01:
The invention doesn't exist, but the action exists, right?

[00:34:09] Speaker 00:
So even though the invention does not yet exist... You can't report an invention you haven't yet made.

[00:34:18] Speaker 01:
You can't, and you can't assign an invention you haven't yet made.

[00:34:22] Speaker 01:
The dissent in the Roche Supreme Court case sort of makes this point that film tech may not be the right, and I'm not asking this court to overturn film tech, but the dissent in the Roche case says film tech is probably not the right solution to this.

[00:34:41] Speaker 01:
They point out that before film tech, the way the law worked was

[00:34:46] Speaker 01:
any assignment, regardless of how it was worded, for future rights and invention gave only equitable title, and there had to be some further act to give legal title.

[00:34:57] Speaker 01:
Now, FilmTech changed that.

[00:34:58] Speaker 01:
I understand that.

[00:34:59] Speaker 01:
But there needs to be some bright line now that FilmTech is the law, unless we're going to overrule FilmTech.

[00:35:07] Speaker 01:
So the bright line that's clear from the cases is if the assignment language is present tense

[00:35:15] Speaker 01:
then it's an automatic assignment.

[00:35:16] Speaker 01:
If the assignment language like here is future tense, then it's not an automatic assignment, and it requires some further action to assign legal title.

[00:35:26] Speaker 00:
Now you left out an alternative, and that is after the invention is made, it is an automatic assignment.

[00:35:34] Speaker 00:
And isn't that how all of these cases that have come up have been resolved?

[00:35:41] Speaker 01:
Well, yes, but it's an automatic assignment based on the language of the contracts.

[00:35:46] Speaker 00:
And the intention of the parties.

[00:35:48] Speaker 00:
And the intention of the parties.

[00:35:50] Speaker 00:
Really what we're trying to figure out in this complex of tech transfer structures of the universities, which have produced all sorts of benefits to all concerned, as to how to avoid debates such as the one before us.

[00:36:10] Speaker 01:
Right.

[00:36:11] Speaker 01:
The university does have the power to do that, both by, if they wanted to, changing the bylaws, but they could also do it the way they have done it, by changing their forms.

[00:36:24] Speaker 01:
So I was a visiting scholar in 2014 at the University of Michigan.

[00:36:28] Speaker 01:
They taught the patent law class there.

[00:36:30] Speaker 01:
And my form said what the bylaw language says, which is, you know, any inventions I make shall be the property of the university.

[00:36:39] Speaker 01:
Well, in 2016, they changed that language and said, instead, it shall be the property of the university and hereby assigns.

[00:36:47] Speaker 01:
So the university has a way to do exactly what you're saying.

[00:36:50] Speaker 01:
They can use the language of present tense assignment, and they have done that in all their forms now.

[00:36:57] Speaker 00:
They were trying to adjust to the evolution of the jurisprudence, but that didn't change the basic structure of the relationship.

[00:37:09] Speaker 00:
It perhaps refined the paperwork so that future debates might not arise.

[00:37:19] Speaker 00:
didn't see anywhere that it was thought that they were changing the foundation of the relationship to the extent that faculty are employed inventors.

[00:37:31] Speaker 00:
They're certainly employed.

[00:37:34] Speaker 01:
I agree.

[00:37:35] Speaker 01:
Now, remember that this bylaw was created in the 1970s.

[00:37:39] Speaker 01:
And that was at a time when, as the Roche Descend explains,

[00:37:43] Speaker 01:
The law was that only equitable title would transfer.

[00:37:48] Speaker 01:
No legal title would transfer without some further act.

[00:37:51] Speaker 01:
So until 1991, after this bylaw was adopted, there was no question that this only transferred equitable title, this bylaw.

[00:38:00] Speaker 00:
Because we purists thought that you couldn't assign a piece of property whose meets and bounds you had no idea of and might never exist.

[00:38:11] Speaker 01:
Exactly.

[00:38:12] Speaker 01:
And that's still true today.

[00:38:14] Speaker 01:
That's why these three paragraphs are important, because until the invention's made, you don't know which of the three buckets this falls into, paragraph one, paragraph four, or paragraph five.

[00:38:26] Speaker 01:
And without that invention, you can't have an assignment of rights, because you have to decide which bucket it falls into.

[00:38:36] Speaker 00:
Okay, now let's take this case.

[00:38:38] Speaker 00:
We know exactly

[00:38:40] Speaker 00:
what the inventions are.

[00:38:41] Speaker 00:
We know who made them, when they were made, and I believe it's no longer disputed that university resources were used.

[00:38:52] Speaker 00:
Is that correct?

[00:38:54] Speaker 01:
It's absolutely disputed.

[00:38:55] Speaker 01:
In fact, there's no evidence that any resources were used.

[00:38:58] Speaker 00:
I thought that was behind us, that these inventions were made while Dr. Islum was on the payroll.

[00:39:07] Speaker 01:
Actually, he took a leave of absence.

[00:39:08] Speaker 01:
He was not paid.

[00:39:09] Speaker 01:
He received no salary, he was not paid, and the only people with any knowledge of the work he, so let me step back, he was doing research unpaid at the Cardiovascular Center with several doctors.

[00:39:26] Speaker 00:
Doesn't the record show that other doctors at the center who were connected with the university participated?

[00:39:38] Speaker 01:
They worked on different research.

[00:39:41] Speaker 01:
Bryce Pills says several times in his deposition that the three doctors who worked with Dr. Islam at the CVC looked at the patent applications and said they did not relate to the work they did with Dr. Islam.

[00:40:02] Speaker 01:
That's undisputed testimony that the patent applications that we're talking about here

[00:40:06] Speaker 01:
did not relate in any way to the work Dr. Isham was doing at the CVC.

[00:40:11] Speaker 00:
There's no evidence to the contrary.

[00:40:13] Speaker 00:
Are you saying then that this turns on the question of fact as to whether any university resources were involved rather than a question of law as to what would happen if any university resources were involved?

[00:40:30] Speaker 01:
I am.

[00:40:31] Speaker 01:
Apple has to win both of those prongs to win.

[00:40:34] Speaker 01:
The district court held, and there's not been any showing that it's clear error, that this, on the facts, this was not use of university resources.

[00:40:46] Speaker 01:
That's the footnote one in the district court opinion, which is not contested, and there's been no, shown no clear error in that fact finding.

[00:40:55] Speaker 01:
There were no university resources used to make these inventions.

[00:41:00] Speaker 01:
And so we win on that fact alone.

[00:41:03] Speaker 01:
You don't have to reach the law even.

[00:41:05] Speaker 01:
But we also went on the law in our view as well.

[00:41:14] Speaker 01:
If there are no other questions, I have nothing else to add.

[00:41:18] Speaker 00:
Okay.

[00:41:19] Speaker 00:
Any more questions for Mr. Lurie?

[00:41:23] Speaker 01:
No.

[00:41:23] Speaker 00:
Thank you.

[00:41:25] Speaker 00:
All right.

[00:41:25] Speaker 00:
Okay.

[00:41:26] Speaker 00:
Well, then you have your rebuttal time, Mr. Cushion.

[00:41:31] Speaker 05:
Thank you, Your Honors.

[00:41:32] Speaker 05:
I will just take up a few points.

[00:41:34] Speaker 05:
First, the district court's decision did not rest on a finding that there was no UM funding support.

[00:41:40] Speaker 05:
The comment that Mr. Lurie made is referring to a footnote.

[00:41:45] Speaker 05:
The language in the decision at appendix 11 says the court expressly says it's not reaching the other issues besides the contract interpretation.

[00:41:54] Speaker 05:
And in the footnote, it's prefaced by the statement that

[00:41:57] Speaker 05:
this decision does not rest on defining a factual determination.

[00:42:02] Speaker 05:
So that is not a correct portrayal of what the basis of the district court's decision was.

[00:42:07] Speaker 05:
Second thing I'd like to point out is that it is absolutely disputed that the Omniposition is disputed.

[00:42:14] Speaker 05:
There was no funding support.

[00:42:17] Speaker 05:
What the university did in 2013 through 2018 is conduct two different investigations into the question of whether there was funding support.

[00:42:26] Speaker 05:
And it found both times that there was.

[00:42:28] Speaker 05:
And one of the things that's really important to note is that the university found a variety of types of funding support.

[00:42:36] Speaker 05:
Use of facilities was one of them, and that is, if you look in the language of paragraph one of the bylaw, it's explicitly identified as a form of indirect or direct funding support.

[00:42:47] Speaker 05:
So, and you heard Mr. Lurie point out that

[00:42:50] Speaker 05:
Dr. Islam was using the facilities during a sabbatical, and that's what the university also found.

[00:42:55] Speaker 05:
That's at A880 and A886 in the appendix.

[00:43:00] Speaker 05:
So there's plenty of evidence supporting the university's finding that it made and communicated to Dr. Islam that there was funding support.

[00:43:10] Speaker 05:
It's also important to recognize Dr. Islam and the university are not parties to this case.

[00:43:14] Speaker 05:
The dispute between them about whether there's funding support or not

[00:43:18] Speaker 05:
as it's between those two has been resolved.

[00:43:20] Speaker 05:
The university made a determination there was, and Dr. Islam never invoked the appeal procedure in the tech transfer policy that he had to use to change that determination, and he never thought to transfer the title to those inventions either.

[00:43:34] Speaker 05:
Now on the central question, which is what's the effect of this language?

[00:43:38] Speaker 02:
Mr. Cushion, has the university sued Dr. Islam?

[00:43:43] Speaker 05:
Not to my knowledge, but it would be somewhat odd for the university to sue Dr. Islam, given that they've already made a determination that they own the patents.

[00:43:51] Speaker 03:
Right, but the patents are currently assigned and are being asserted here.

[00:43:55] Speaker 05:
Right, but the university has found that they own the patents, and it's up to them to decide how to deal with a breach of the contract.

[00:44:04] Speaker 05:
They've concluded they don't need to intervene.

[00:44:07] Speaker 05:
Up until this point, they hadn't.

[00:44:09] Speaker 05:
But the bottom line is that

[00:44:11] Speaker 05:
If you look at the situation on the question of funding, you have a determination by the university that has not been contested by the party that's adversely affected by it, which is Dr. Islam.

[00:44:22] Speaker 05:
And that, again, is not the basis of the district court's decision.

[00:44:27] Speaker 05:
So the last point I'd like to flag is the language that was discussed about the phrase, shall be the property of, or shall best in,

[00:44:38] Speaker 05:
Keep in mind that the bylaw is not the only operative element of this contract.

[00:44:42] Speaker 05:
The contract is actually the 1992 contract, which starts with the observation that assignment of property rights of Dr. Islam are governed by the various provisions of Bylaw 3.10.

[00:44:53] Speaker 05:
And that's equivalent to the I hear by a sign perhaps, but it's definitely a clear signal that the assignment is going to be implemented according to the rules of the bylaw.

[00:45:04] Speaker 05:
The language that you had mentioned, and I think Dr. or Mr. Lurie had talked about the shall be the property of, actually that type of language, one instance of it was addressed by the court in the majority opinion of the Supreme Court in Roche.

[00:45:20] Speaker 05:
That's the NASA language.

[00:45:22] Speaker 05:
And it is very similar to the language that's in Bylaw 3.1.

[00:45:27] Speaker 05:
It refers to the invention shall be the property of NASA if the condition is true.

[00:45:33] Speaker 05:
That's what you see in Bylaw 3.1, paragraph 1.

[00:45:39] Speaker 00:
So I'll... Okay.

[00:45:41] Speaker 00:
Any more questions for Mr. Cushion?

[00:45:44] Speaker 04:
No.

[00:45:45] Speaker 00:
Nothing.

[00:45:46] Speaker 00:
Okay.

[00:45:47] Speaker 00:
Thanks to all counsel.

[00:45:49] Speaker 00:
The case is taken under submission.