Preston v. Marathon Oil Co.

684 F.3d 1276, 34 I.E.R. Cas. (BNA) 11, 103 U.S.P.Q. 2d (BNA) 1353, 2012 WL 2752542, 2012 U.S. App. LEXIS 14096
CourtCourt of Appeals for the Federal Circuit
DecidedJuly 10, 2012
Docket2011-1013, 2011-1026
StatusPublished
Cited by12 cases

This text of 684 F.3d 1276 (Preston v. Marathon Oil Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Preston v. Marathon Oil Co., 684 F.3d 1276, 34 I.E.R. Cas. (BNA) 11, 103 U.S.P.Q. 2d (BNA) 1353, 2012 WL 2752542, 2012 U.S. App. LEXIS 14096 (Fed. Cir. 2012).

Opinion

O’MALLEY, Circuit Judge.

Decision

This case presents the question of whether Plaintiff-Appellant Yale Preston (“Preston”) owns United States Patent Nos. 6,959,764 (“the '764 patent”) and 7,207,385 (“the '385 patent”), or whether he assigned rights in those patents to DefendanWCross-Appellant Marathon Oil Company (“Marathon”) pursuant to an employment agreement entered into shortly after he began work as an at-will employee. In the alternative, Marathon asserts that it has a common law shop right to use the invention or otherwise owns the invention because Marathon Engineer Thomas Smith, one of the defendants in this action, is a co-inventor.

Following several summary judgment motions and a bench trial, the district court entered the following judgments relevant to this appeal: (1) declaring that Preston is the sole inventor of the '385 patent and that Smith was misjoined as an inventor; (2) ordering the PTO to issue a new certificate reflecting that Preston is the sole inventor of that patent; (3) declaring Marathon the owner of the '764 and '385 patents pursuant to Preston’s employment agreement and that Preston is in breach of the agreement for failing to assign his rights, as he promised to do. The district court also entered summary judgment in favor of Marathon on its shop right claim, finding that, even if Marathon did not own the rights to the patents- — by assignment or otherwise, it had a shop right to practice the inventions reflected therein.

On appeal, Preston challenges the district court’s summary judgment ruling regarding Marathon’s asserted shop right and the post-trial judgment regarding the assignment of his ownership interest in the relevant technology to Marathon. We affirm-in-part and vacate-in-part. We affirm the district court’s judgment that Preston assigned his rights in the '385 and '764 inventions to Marathon pursuant to his employment agreement with Marathon. Because that assignment was automatic, however, we vacate the district court’s judgment that Preston is in breach of that agreement. For the reasons explained below, we do not reach the lower court’s other judgments.

Background

1. Preston’s Employment Agreements

In a letter dated February 22, 2001, Pennaco Energy, Inc. (“Pennaco”), a wholly-owned subsidiary of Marathon (collectively, Pennaco and Marathon are referred to as “Marathon”), offered employment to Preston as a relief pumper in Marathon’s coal bed methane well operation in the Powder River Basin in northeastern Wyoming. In addition to describing Preston’s proposed responsibilities, compensation, and benefits, the letter indicated that Preston was being hired “under the policy of ‘employment at will’ whereby you or the Company is free to terminate the employment relationship at any time and for any reason without cause or liability other than as prescribed by law.” Preston countersigned the letter on February 27, 2001.

Preston started work for Marathon sometime in March 2001, although there is *1279 a factual dispute as to the precise date. 1 On April 5, 2001, Preston signed a document entitled Marathon Oil Company and Subsidiaries Employee Agreement (the “April Employee Agreement”). Brenda Williams signed on behalf of Marathon on the same date. The parties agree that the April Employee Agreement was executed after Preston began employment and constitutes a separate employment document from the February letter. The April Employee Agreement contained the following provisions relevant to this dispute:

1. Definitions
* ;!: *
(d) “Intellectual Property” means all inventions, discoveries, developments, writings, computer programs and related documentation, designs, ideas, and any other work product made or conceived by EMPLOYEE during the term of employment with MARATHON which (1) relate to the present or reasonably anticipated business of the MARATHON GROUP, or (2) were made or created with the use of Confidential Information or any equipment, supplies, or facilities of the MARATHON GROUP. Such property made or conceived by EMPLOYEE (or for which EMPLOYEE files a patent or copyright application) within one year after termination of employment with MARATHON will be presumed to have been made or conceived during such employment.
3. Disclosure and Assignment of Intellectual Property.
EMPLOYEE agrees to promptly disclose to MARATHON and does hereby assign'to MARATHON all Intellectual Property, and EMPLOYEE agrees to execute such other documents as MARATHON may request in order to effectuate such assignment.
4. Previous Inventions and Writings.
Below is a list and brief description of all of EMPLOYEE’S unpatented inventions and unpublished writings. MARATHON agrees that such inventions and writings are NOT Intellectual Property and are NOT the property of MARATHON hereunder. If no listing is made, EMPLOYEE has no such inventions or properties.

Under Paragraph 4, Preston wrote “CH4 Resonating Manifold.” 2

Although the agreement provides that it “shall be governed and construed in accordance with Ohio law,” both parties agree that Wyoming law applies pursuant to the appropriate choice of law rules. It is undisputed that Marathon did not provide any additional consideration to Preston for signing this document beyond his continued employment by Marathon.

2. The Patented Technology

The technology at issue relates to the improvement of machinery used to extract methane gas from water-saturated coal in a coal bed methane gas well. One way to extract the gas is to pump water out of a *1280 coal seam aquifer, which relieves the pressure holding the methane and allows the methane to escape up the well. The wells include an inner tubing that runs through the center of the well casing to the surface of the coal formation. Water is pumped up through the inner tubing, allowing methane gas to be produced through the “annulus” of the well, or the area surrounding the inner tubing inside the well casing. Once the methane reaches the top, it is collected by gathering lines at a “manifold,” from which it is transferred through downstream market pipelines.

One problem that occurs in coal bed methane gas wells is that water columns form in the annulus, which is the path by which gas flows to be released from the well. The water can push the gas down into the well bore and cause gas to enter the “water conduit,” which causes what is known as “gas locking.” “Gas locking” is undesirable because it makes the pump less efficient and causes the pump to age quickly with less water in the pump for lubrication and cooling purposes. The invention at issue in this case includes the placement of baffle plates in the annulus of the well. The baffle plates contain holes that function to separate the water and gas, thereby allowing the gas to escape more easily.

Figure 1 of the '764 patent is a diagram of a typical coal bed methane well.

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684 F.3d 1276, 34 I.E.R. Cas. (BNA) 11, 103 U.S.P.Q. 2d (BNA) 1353, 2012 WL 2752542, 2012 U.S. App. LEXIS 14096, Counsel Stack Legal Research, https://law.counselstack.com/opinion/preston-v-marathon-oil-co-cafc-2012.