What if the Spouse of Every Inventor Living in a Community Property State has an Undivided Interest in an Invention?

By David Hricik
November 7, 2011

If you think the title only raises a wild possibility, consider what happened in a recent case decided by the Federal Circuit. [1]  After being sued for infringement, the defendant had the ex-wife of the inventor of the patent-in-suit sell to it any interest she had in that patent.  The defendant argued that as a result there could be no infringement, both because plaintiff lacked standing and because the defendant had acquired an undivided interest in the patent.

It almost worked.

The Federal Circuit stated that under California law the patent was “presumptively community property in which [the wife] had an undivided half interest.”[2] Fortunately for the accused infringer, however, the wife had not listed the patent as community property when she was divorcing.  Accordingly, the court held that res judicata precluded her from arguing that she in fact had an interest in the patent, and so that meant the defendant had acquired nothing from her.[3]

But, the odd facts of that case should not give great comfort. Instead, in my view it is almost impossible to reconcile the uniform body of state law which holds that patents (and sometimes even inventions) are community property with the routine practices and procedures of patent practitioners in the context of both transactions and prosecution.  That may be why one book on writing patents now states:  “If one of the inventors is married, consider obtaining an assignment from the inventor’s spouse.”[4]

If it is in fact necessary to obtain the assignment from the spouse of an inventor who assigns a patent then many patent owners… aren’t patent owners. Instead, they acquired either nothing from the inventor (if the transaction was void under state law) or at most they hold an undivided equal interest in a patent, and the co-owner may be an indispensable party, and someone who could freely license the patent or sell it to the defendant in a pending case.

Either, of course, is a problem.

This article first provides a basic primer on community property law principles.  Obviously it is not exhaustive. Second, this article shows that every court that has addressed the issue has held that a patent issued during marriage to one spouse is community property.  Third, many states hold that property rights can arise prior to issuance, and sometimes even at the time of conception of the invention.  Fourth, it shows that with some exceptions the general rule is that one spouse can alienate personal community property.   Fifth, it addresses the question of preemption of state community property law by the patent act. Along the way, it identifies some potential risks facing ostensible patent owners.

1. A Primer on Basic Community Property Law

Eleven states currently follow community property law:  Alaska, Arizona, California, Hawaii, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin. Obviously, the laws of these states likely vary significantly on some issues, but a few basic points seem true among them all:

The statutes of several community property states provide that each spouse has a present, vested, one-half ownership interest in community property with equal management…. The equal management statutes give each spouse managerial rights over community property.  A spouse may prevent the disposition of certain community assets by the other spouse. Further, either spouse may contract debts during the marriage that may be satisfied with community property. [5]

The concept expressed in the first sentence is worth repeating, since those unfamiliar with community property law often think of it as mattering only upon divorce. This is dangerously incorrect: when something is community property, each spouse owns it – then and there, not just in divorce court.  Also, it is important to emphasize that the community presumptively owns all property acquired during marriage, each spouse holding an undivided equal interest.[6]

With these basic principles in mind, the first question is what is “property” under these statutes, and does it include intellectual property and, most particularly, inventions, patent applications, and patents?

2. “Property” Includes Patents, and Sometimes Applications and Even Intangible Intellectual Property. 

As one would expect, “property” is construed very broadly.[7]  As one court stated:

The word “property” is in law a generic term of extensive application. It is not confined to tangible or corporeal objects, but is a word of unusually broad meaning. It is a general term to designate the right of ownership and includes every subject of whatever nature, upon which such a right can legally attach. It includes choses in action and is employed to signify any valuable right or interest protected by law and the subject matter or things in which rights or interests exists.[8]

An issued patent is, of course, by federal statute to be treated as personal property under state law.[9]  Thus, presumptively a patent acquired by one spouse during marriage belongs to the community, not separately to the inventor.[10]

Numerous divorce courts have divided patents issued during marriage as “property” under community property statutes[11]  Typically these courts assume a patent issued during marriage is community property and do not analyze whether that assumption is correct.[12]   Occasionally a court engages in at least a minor amount of analysis.  For example, a Florida appellate court stated that “[c]ourts outside Florida have reached the same logical conclusion — a patent is personal property that may be the subject of equitable distribution when the inventor and his or her spouse dissolve their marriage.”[13] The Kansas Supreme Court is the only court to have engaged in a lengthy analysis of the question, stating in part:

Vincent believes that the interest in the patents does not have the qualities listed [in the definition of property.] This is not self-evident….

[I]ntellectual property, once it has been created, is less inextricably related to its creditor than other assets now characterized as marital property, such as pensions and professional goodwill. Unlike pensions and professional goodwill, rights in intellectual property are highly transferable, and title may be placed in the name of one who did not originally produce them.[14]

The point here is that state courts either assume or readily conclude that patents issued during marriage are community property.

In some states, a spouse has interests even before the patent issues, depending on which approach to the “inception of title” doctrine the jurisdiction takes:

Arguably, inception [of title] may occur at any of three times:  (1) when the concept is sufficiently developed to generate a plan to build the invention [i.e., conception]; (2) when the invention is actually built [i.e., actual reduction to practice]; or (3) on the effective date of the patent [i.e., constructive reduction to practice].[15]

Courts have applied each view, though often not using the bracketed terms of art that patent practitioners would find comforting.

As an example of the first view, a California court divided patents that had been “perfected” during marriage but issued afterward.[16]  In addition, in a rare case that provided somewhat extended discussion, a Florida appellate court reasoned that a patent application was property that was subject to equitable division because it had been “deemed sufficiently well developed to submit to the federal patent authorities on a non-provisional basis.”[17]

As an example of the third view, a Washington appellate court held that a patent issued during the marriage was community property even though the invention had been conceived prior to marriage.[18]

Some courts adopt a muddled view that seems to reflect both the third and first views.  For example, the Supreme Court of Hawaii stated that “a patent does not exist until it is granted,” and so there was no property right “unless and until the patent issues.”[19] Nonetheless, it recognized that in making equitable division trial courts should determine “whether there was value in the pre-patent intangible intellectual property and the patent itself.”[20]

This shows that patents, and in some states applications and even merely conceived inventions, are “property.” All property acquired during marriage is presumptively community property, belonging to both spouses, not just the inventor.

3. With Significant Exceptions, in Many States One Spouse Can Alienate Personal Community Property.

Most states allow one spouse to alienate certain community property. Several states, for example, allow one spouse to alienate personal community property – with exceptions – but not real community property.[21]  Other states recognize similar doctrines, recognizing that some community property is subject to the “sole management” of one spouse.[22]  Under this doctrine, an invention might qualify as “sole management” community property, and so be subject to assignment by only one spouse.

The fact that one spouse can assign both helps and hurts patent practitioners.

It helps because, if an inventor is permitted to transfer ownership of an application without the spouse’s signature or agreement, then employers can rely solely upon the inventor’s assignment to transfer full title.  Contrary to the patent book quoted above, it may not be necessary to obtain an assignment from the spouse.

It hurts because it may permit the other spouse to transfer away the invention before the patent application is even filed, or before the assignment is executed.  Suppose Susie invents a new product while under an obligation to assign that invention to the future to BigCo. Under those circumstances, there is no agreement by Susie’s spouse to assign the invention, and if the state permits one spouse to alienate this form of community property, the spouse could sell the entire application to a third party. Or suppose there is an absolute obligation by the inventor to assign, but the application is filed, without an assignment having been made.  Again, the spouse may have a current, alienable interest.

In addition, there are exceptions to the right of one spouse to alienate community property.  Of particular import, in some states the assets of a business in which both spouses are involved may not be alienated without a signed agreement from both spouses.  For example, a Washington statute prohibits one spouse from alienating “the assets… including the good will of a business where both spouses… participate in its management.”[23]  Significantly, the statute on its face bars alienation even if the non-inventor spouse is not an owner, officer, or director – so long as the spouse “participates” in its “management.”

4. State Courts Have Rejected Preemption as a Basis to Hold Patents are Not Subject to Community Property Laws.

Courts have uniformly held that federal law does not determine ownership of patents – in every context in which the issue has arisen. “It is important to note that only inventorship, the question of who actually invented the subject matter claimed in a patent,’ is a question of federal patent law.  ‘Ownership, however, is a question of who owns legal title to the subject matter claimed in the patent, patents having attributes of personal property.’”[24] Given this, there arguably is no federal law to apply, and so nothing to preempt state law.

In fact, the few courts that have analyzed whether federal law preempts state law have each rejected it, though without rigorous analysis.[25]   Divorce lawyers believe there is no conflict between state and federal law.  As a commentator wrote:

The federal statute on the transfer of patents, 35 U.S.C. § 261, states generally that patents constitute property and that they are subject to assignment. Courts considering the issue have held that an inventor’s creditors can reach the inventor’s patents, although with somewhat more difficulty than other types of assets. Given these points, there is general agreement that federal law does not prevent a court from treating a patent as divisible property in a divorce case.[26]

Significantly, state courts have not analyzed preemption at length, but instead seem to accept the proposition that patent law does not preempt state community property law.

The text of Section 261 as quoted above suggests that applications and patents can be assigned only by written instrument. A patent owner seeking to avoid assignment could argue that operation of state law to transfer ownership without a writing conflicts with federal law.  On the other hand, the statute only states that “assignments” must be in writing, and the Federal Circuit has held that transfer of title to a patent by operation of state law is not an “assignment” and so need not be in writing.[27]  Further, if state community property laws are preempted, then so too might be myriad state laws that are relied upon to transfer title to patents.[28]

Nonetheless, state laws such as intestacy statutes operate to determine who succeeds to ownership of the inventor’s property. That is a very different effect than community property statutes, which divest the inventor of an undivided right in the invention.

Clearly, the last word on preemption has not yet been written. However, a corporation may not want to pin the value of its intellectual property portfolio on an unresolved question of Constitutional law.

5. What to Do

So, what if the spouse of every inventor living in a community property state has an undivided interest in an invention?  Lawyers should, no doubt, at least consider whether to obtain assignment (or “quite claims”) from spouses of inventors, and to do so in an enforceable manner.  Likewise, defendants in infringement suits should consider whether the patentee actually holds clear title.

Beyond that, however, it is only clear that there is risk to those who acquire patents from or through inventors married in community property states.  How great that risk is turns on unanswered questions of law and, further, the fact that myriad circumstances arise in patent practice that could implicate ownership issues.

* * * * * * * * * * * *

[1] Enovsys LLC v. Nextel Com., Inc., 614 F.3d 1333, 1343 (Fed. Cir. 2010).  The Federal Circuit previously affirmed, on procedural grounds, the dismissal of a complaint that sought to collaterally attack a state court’s award of patents as community property.  Weres v. Weres, 2005 WL 44921 (Fed. Cir. Jan. 11, 2005).

[2] Enovsys, 614 F.3d at 1343.

[3] Id.

[4] Jeffrey G. Sheldon, How to Write a Patent Application, 2011 PLIREF-PATAPP § 2:3.3 (Release 3, April 2011).

[5] Katherine D. Black, Mary K. Black, & Julie M. Black, Community Property for Non-Community Property States, 24 Quinnipiac Probate L.J. 260, 265-66 (2011) (footnotes omitted).

[6] E.g., Weingarten v. Superior Court, 102 Cal. App.4th 268, 277 (Cal. Ct. App. 2002); Estate of Madsen v. Comm’r of Internal Rev., 650 P.2d 196 (Wash. 1982).

[7] For a more complete discussion of the issues that intellectual property creates in divorce and related cases, see, e.g., Jonathan W. Wolfe & Kimber L. Gallo, The Treatment of Intellectual Property in Divorce, 258 N.J. Lawyer 24 (June 2009); Brett R Turner, Intellectual Property Interests, 20 Equitable Distribution J. 1 (2003).

[8] Mears v. Mears, 406 S.E.2d 376, 378 (S.C. 1991).

[9] 35 U.S.C. § 261 provides in pertinent part (with emphasis added):

Subject to the provisions of this title, patents shall have the attributes of personal property.

Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing. The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States.

[10] Section 261, quoted above, provides that a patent or patent application can be assigned only in writing.  Thus, arguably Section 261 conflicts with state law and so should be supreme. As explained below, however, the state courts have uniformly held that federal patent law does not preempt state community property law.

[11] Cases from many community property states have, implicitly or otherwise, held that patents are “property” subject to division.  See Frank J. Wozniak, Copyright, patent, or other intellectual property as marital property for purposes of ali-mony, support, or divorce settlement, 80 A.L.R.5th 487 (2000).  See also Brett R. Turner, Division of Intellectual Property Interests Upon Divorce, 12 No. 2. Divorce Litig. 17 (2000) (citing cases).

[12] E.g, Estate of Madsen v. Comm’r of Internal Rev., 650 P.2d 196 (Wash. 1982).

[13] Gulbrandsen v. Gulbrandsen, 22 So.3d 640 (Fla. Ct. App. 2009).

[14] In re Marriage of Monslow, 912 P.2d 735, 744-45 (Kan. 1996) (quoting 2 Arnold H. Rutkin, Valuation and Distribution of Marital Property ‘ 23.07[1] at 23-135).

[15] Alsenz v. Alsenz, 101 S.W.3d 648, 652-53 (Tex. Ct. App. 2003) (holding that because all three events had occurred prior to marriage, patents were husband’s separate property), quoting 2 Valuation & Distribution of Marital Property § 23.07[2] (Matthew Bender & Co. ed. 1997).

[16] In re Marriage of Weres, 2000 WL 34472234 (Cal. Sup. Ct. Jan. 18, 2000).

[17] Gulbrandsen v. Gulbrandsen, 22 So.3d 640 (Fla. Ct. App. 2009).

[18] Estate of Madsen v. Comm’r of Internal Rev., 650 P.2d 196 (Wash. 1982) (a patent that was conceived prior to marriage but

[19] Teller v. Teller, 53 P.3d 240, 250 (Haw. 2002) (quoting GAF Bldg. Materials Corp. v. Elk Corp. of Dallas, 90 F.3d 479, 483 (Fed. Cir. 1996).

[20] Id.  Further, that court has held that a trade secret became community property when the trade secret had presently existing value.  Teller v. Teller, 53 P.3d 240, 249 (Haw. 2002). “[O]ne ‘owns’ a trade secret when one knows of it….”   DTM Research LLC v. AT&T Corp., 245 F.3d 327, 332 (4th Cir. 2001). This holding could, of course, create a conflict between the spouses over whether to file for a patent application or to maintain protection of the invention only as a trade secret. The employer’s interests may conflict with the spouse’s.

[21] A recent article, 24 Quinnipiac Probate L.J. at 265 .n30, collected these statutes:  Ariz. Rev. Stat. Ann. § 25-214(C) (2007) (joinder required for transactions for the acquisition, disposition, or encumbrance of an interest in real property and any transaction of guaranty, indemnity, or suretyship); Cal. Fam. Code §§ 1100(b)-(c), 1102 (West 2004) (written consent of a spouse required for gifts of community personal property; the sale, conveyance, or encumbrance of community personal property used as the family dwelling or household furnishings; and transactions involving community real estate); Idaho Code Ann. § 32-912 (2006) (joinder required for the sale, conveyance or encumbrance of community real estate); La. Civ. Code Ann. art. 2347 (2010) (concurrence of both spouses is required for the alienation, encumbrance, or lease of community immovables, furniture, or furnishings while located in the family home, or all or substantially all of the assets of a community enterprise and movables issued or registered in the names of the spouses jointly); Nev. Rev. Stat. § 123.230(2)-(5) (2008) (joinder required for gifts of community property; sale, conveyance, encumbrance, or purchase of community property; and sale or encumbrance of household goods); N.M. Stat. Ann. § 40-3-13 (LexisNexis 2010) (joinder required for transactions concerning community real property); Wash. Rev. Code Ann. § 26.16.030(2)-(5) (West 2005) (joinder required for gifts of community property; sale, conveyance, encumbrance, or purchase of community real estate; sale or encumbrance of household furnishings or a community mobile home); Wis. Stat. Ann. § 766.53 (West 2009) (joinder required for gifts aggregating more than either $1,000 or a larger amount, if reasonable, made to any one person during a calendar year).

[22] See Gray v. U.S., 553 F.3d 410 (5th Cir. 2008) (applying Texas law).

[23] Rev. Code Wa. § 26.16.030(6).

[24] E.I. DuPont de Nemours & Co. v. Okuley, 344 F.3d 578, 582 (6th Cir. 2003).

[25] See also Sheshtawy v. Sheshtawy, 150 S.W.3d 772, 775 (Tex. Ct. App. San Antonio 2004) (finding nothing to support argument that federal law preempted state community property law); In re Marriage of Worth, 195 Cal. App. 768, 776-77 (Cal. Ct. App. 1987) (federal copyright law did not preempt state community property law).  The Hawaii Supreme Court stated:

Because the United States Supreme Court has determined that Federal case law does not preempt the states’ right to impose regulation on patents, we do not address federal preemption. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 479, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974) (“The only limitation on the States is that in regulating the area of patents and copyrights they do not conflict with the operation of the laws in this area passed by Congress[.]”); Aronson v. Quick Point Pencil Co., 440 U.S. 257, 266, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979) (defining factors to determine if state law conflicts with the federal patent law); Rodrique v. Rodrique, 218 F.3d 432, 439 (differentiating between total preemption, such as ERISA, from limited preemptive scope of copyright law).

Teller, 53 P.3d at 250 n. 22.  See also Stein v. Soyer, 1997 WL 104967 (S.D. N.Y. March 10, 1997) (analyzing similar issues with respect to copyrights).

[26] Brett R Turner, Intellectual Property Interests, 20 Equitable Distribution J. 1 (2003).

[27] Sky Technologies LLC v. SAP AG, 576 F.3d 1374, 1380–81 (Fed. Cir. 2009), cert. denied, 130 S. Ct. 2343 (2010) ( public foreclosure sale under state law allowed the secured party who had bid at the sale to receive the debtor’s rights in the patent collateral).

[28] State intestacy laws, or the laws of foreign countries, determine who owns patents of deceased owners, for example.  E.g., Akazawa v. Link New Tech. Int’l, Inc., 520 F.3d 1354, 1357-58 (Fed. Cir. 2008) (“Thus, interpreting Japanese intestacy law, not United States patent law, is the first step in determining whether [the plaintiff] possessed standing to bring the suit.”).

The Author

David Hricik

David Hricik

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 10 Comments comments.

  1. Gene Quinn November 7, 2011 2:06 pm

    Excellent article David!

    I wonder what implications this has for professional inventors who routinely assign their rights in an employment agreement? Should the spouse co-sign the employee assignment provisions to make sure the employer owns the property created in Community Property States? I suppose an argument could be made that the wife derived benefit from the employment and through some kind of implication consented to the transfer, perhaps through something like a partial performance contract theory? Yikes! I don’t like the sound of that, particularly since these things are supposed to be in writing.

    -Gene

  2. David Hricik November 7, 2011 3:09 pm

    Gene,

    That one author already says people should be getting assignments from spouses; I honestly think that today, from what I have seen of state’s laws, the inventor can alienate the invention without the spouse’s signature (because it’s a chattel) and so , at least in the routine employed inventor context, an assignment is unnecessary, but there are so many wrinkles on this….

  3. Kevin Mako of Mako International November 7, 2011 4:10 pm

    Great article and thank you for the clarficiation on the relating legal background. We have a had a few clients that we’ve developed products for that have brought up similar questions, especially pertaining to spouse ownership. The added complexity of community property states. I’m hoping that you can expand upon Gene’s question relating to employment and potentially similar implications. I also wonder how prenuptual agreements are applied in practice, pertaining to these issues.

  4. Gene Quinn November 7, 2011 4:32 pm

    David-

    I think you are probably right, but a lot could be at risk. I wonder if this is going to become the new defense de jour, and if it isn’t why not? Out an abundance of caution I think I would be advising corporate clients to get the signature of the spouse at the time of hire.

    -Gene

  5. Joint & Several Liability? November 7, 2011 5:24 pm

    Great article; thanks David.

    How applicable; if at all; is all this to other IP assets such as trademarks and copyrights?

    Relatedly when it comes to patent litigation, do you, Gene, or others have any thoughts on whether or not the spouses of inventors have joint and several (financial) liability to the prevailing party(ies); e.g. under 28 U.S.C. § 1920, attorney’s fees, court costs? Whether being in a community property state make a difference here?

    Any specific laws/court cases out there?

  6. David Hricik November 7, 2011 6:35 pm

    Joint & Several- hadn’t thought of the liability angle. My instincts are that if you didn’t push the lawsuit you can’t be liable, but if the spouse agrees to join…. I don’t see why they wouldn’t be liable, but that’s top of the head.

    I saw the copyright issue here and there — there is a split, I think, and one case is out of California called Worth v. Worth, I think, and another is “Rodrigue” or “Rodriguez” out of the fifth circuit, if memory serves.

    Again, I don’t know that this is a viable defense — depends on the facts and the state-specific law, but if almost worked for one defendant…

  7. Smead November 8, 2011 8:34 am

    Thanks for the great article; I had thought of community property as only being relevant to movie stars’ mansions in California. What happens, though, if a couple gets married in a community property state but then moves to a non-community-property state, and the property is acquired after the move? Is there a general rule?

  8. patent leather November 9, 2011 2:56 pm

    Hi Prof., it’s nice to see one of your articles in IPW. One question,

    “It hurts because it may permit the other spouse to transfer away the invention before the patent application is even filed, or before the assignment is executed. Suppose Susie invents a new product while under an obligation to assign that invention to the future to BigCo. Under those circumstances, there is no agreement by Susie’s spouse to assign the invention, and if the state permits one spouse to alienate this form of community property, the spouse could sell the entire application to a third party”

    What if Susie’s employment contract states that, “Susie automatically assigns all IP as soon as it is created and Susie is under the obligation to formally assign such IP to BigCo.” In this scenario, Susie never really owned the IP (regardless of whether she filled out an assignment or not), so then her spouse cannot assign it away. Correct? Maybe this is how employment contracts should now be worded.

    Also, this raises some ethical issues– I have some clients in those community property states, but if I start advising my clients on state law (where I am not admitted), wouldn’t that be unauthorized practice of law? Seems like a sticky situation for a patent attorney to be in.

  9. David Hricik November 9, 2011 3:13 pm

    Smead, I don’t know… I don’t even want to know!

    Patent leather, I think using an absolute obligation of assignment would, I think, avoid these issues, since there would be nothing “possessed” by the community – no title would ever vest. That would, I think (notice I keep saying “I think” because I don’t know) mean no CP interest for the spouse to transfer. But you still end up with a lot of potential problems, such as in acquisitions of business where the assignment was made after creation, etc.

    As for the unauthorized practice issue, not UPL to give advice in a state you’re licensed in about the law of another state. But there’s a competency issue — I for example would hesitate to give advice to someone in California about almost anything, let alone community property law!

  10. step back November 10, 2011 2:15 pm

    Speaking of marriage, love and other emotions, have any of you read this following case (pro se complaint):

    http://news.priorsmart.com/api/0.1/litigations/dcdce-151070/Complaint.pdf?oauth_body_hash=2jmj7l5rSw0yVb%2FvlWAYkK%2FYBwk%3D&oauth_nonce=41612470&oauth_timestamp=1320936339&oauth_consumer_key=2037219&oauth_signature_method=HMAC-SHA1&oauth_version=1.0&lituser=2656363&oauth_signature=eLU07hGum2aVEGlHqI2qsW4VENs%3D&ls=2011-11-10

    I think that it provides a good example of why inventors should not have themselves as their own patent counsel. Any thoughts?