RESOLUTION 104-1

Resolved, that the Section of Patent, Trademark and Copyright Law favors in principle the adoption, by those states which choose to enact employee invention legislation, of the following Model State Law set out below:

PROPOSED MODEL STATE LAW REGARDING EMPLOYEE INVENTIONS
Any provision in an employment agreement which
provides that the employee shall assign or offer to
assign any of his rights in an invention to his
employer shall not apply to an invention that the
employee developed entirely on his own time without
using the employer's equipment, or supplies, or
facilities or proprietary information except for those
inventions that (i) relate, at the time of conception
of the invention, to the employer's business, or that
of its parent, subsidiary or related companies, or
actual or demonstrably anticipated research or
development of the employer or said companies, or (ii)
result from any work performed by the employee for the
employer. To the extent a provision in an employment
agreement purports to apply to the type of invention
other than those described in subsections (i) and (ii)
hereof, it is against the public policy of this State
and is unenforceable. The employee shall bear the
burden of proof in establishing that his invention
qualifies under this section.

An employer may not require a provision of an employment agreement made unenforceable hereunder as a condition of employment or continued employment. An employer, in an employment agreement, may require that the employee report all inventions developed by the employee, solely or jointly during the term of his employment to the employer, including those asserted by the employee as nonassignable, for the purpose of determining employee or employer rights. If required by a contract between the employer and the United States or its agencies, the employer may require that full title to certain patents and inventions be in the United States.

It was a pleasure meeting with you last week and Bob Frank and I appreciate the information you shared with us concerning the various legislative issues pending before Mr. Kastenmeier's Subcommittee.

At the luncheon, Bob referred to a study that John Stedman had prepared for our West Coast Patent Subcommittee which addressed Congress' jurisdiction to enact legislation dealing with permissible employee pre-invention assignment agreements. I have attached a copy of John's analysis of this issue as it related to HR 4732 and HR 6635 of the 97th Congress, the predecessors to HR 3285 and HR 3286 of the 98th Congress. I had hoped to be able to have the attached retyped prior to submitting it to you; however, I am leaving the country this weekend and wanted to be certain that it was in the mail to you prior to my departure.

Again, thank you for the time you spent with the two of us last week and we look forward to working with you, Michael and Mr. Kastenmeier on these and other legislative issues.

JCC--7/11/82

CONGRESS JURISDICTION TO ENACT II.R. 4732 AND H.R. 6635

A. Provisions of H.R. 4732 and F.R. 6635

(not going into detail as to provisions, except as necessary to the discussion)

1. H.R. 4732

a. Defines "inventions" subjrct to the bill

(1) Covers only "patentable" inventions

(2) Defincs "cmployment invention" (lists circumstances
that brings it within that term)

b. Prohibits (1.e., renders unenforceable) all "pre-invention
assignment agreements" other than those relating to
"employment inventions."

(1) "Pre-invention assignment agreement" is defined as
one that assigns rights in an invention not yet cade,
other than a shop right (which is defined, but not
in the term of "shop right" as such, as a non-trans-
ferable, non-exclusive license to practice an in-
vention which is conceived or made during actual
employment with substantial use of the employer's
"tire, materials, facilities or funds").

c. Requires an employee to disclose all inventions made by
him during employment (subject to the employer keeping
confidential).

d. In case of conflict, provides for mandatory arbitration
in the state of employment

2. H.R. 6635

a. Defines "service inventions" as thosc made during employment and growing out of the employce's type of work or derived from "experiences cained on the job related to operations carried out by the employcr".

t. Employer has a right to claim ownership of all "service
inventions", subject to payrent of "adequate" cor:pensa-
tion (defined as "fair market value" adjusted to take
into consideration (1) the crployee's duties and (2) the
employer's contribution).

c. Remaining provisions, designed to implement the fore-
going, include the employee's obligation to notify the
employer and the latter's duty to respond; employer's duty
to patent or admit patentability; provisions for arbi-
tration, court proceedingɛ, etc.; confidentiality rcquire-
ments; provisions re foreign rights; prohibitions against
conflicting contracts,' discrimination by the employer,
etc.; and cthers.

d. All inventions, other than "service inventions" are "frec
inventions", and belong to the employee.

(1) Lmployee's only duty with respect thereto is to disclose
free inventions made during employment to his employer
so the latter can contest the employee's claim that
it is "free."

3. Both H.R. 4732 and H.R. 6635 are introduced as amendments
to Title 35 (the "Patents" statute).

B. Constitutional Provisions and Issues

1. Under our Federal cystem of delegated authority, Congress
can enact only such legislation as the Constitution has
authorized it to enact.

2. The delegated authority to enact patent and patent-related
laws, 1 to 1:c found primarily in Article I, Section 2,
Clause 8 (hereinafter referred to as "Clause 8"), which
reads as follows:

"The Congress shall have power.

to promote the proress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoverics."

3. QUESTION: Does the above-quoted Clause & empower Congress
to enact statutes that

a. Allocate rights in patentable inventions (including the
allocation of "shop rights", provided for in H.R. 6635)
as between employers and employees, in the manner provided
by H.R. 4732 and H.R. 6635?

b. Require employers to pay "adequate compensation" for
those patent rights to which the bill declares he is
entitled, as provided in H.R. 6635?

c. Render unenforceable agreements that conflict with its
provisions?

d. Include miscellaneous provisions reasonably designed to
implement its requirements and policy?

C. Constitutional Doctrine and Interpretation, As It Applies to
the Proposed Legislation

1. Specific provisions of Clause 8, literally interpreted,
contain five conditions:

a. The purpose must be to "promote the progress of
useful arts."

b. Legislation must be limited to "inventors"

c. Legislation must be limited to "exclusive rights"

d. Legislation must relate to "discoveries"

e. Rights granted must be for a "li:ited time" only

2. Inasmuch as both .R. 4?? and H... 6535 ir posc con itions and liritations so to patented and patentable inventions only (i.e., inventions that comply with the provisions of Title 35), it is indisputable that the proposals come within the Constitutionally-delegated authority of Clause 8, insofar as subject matter is concerned.

3. The only question, then, is whether the Constitutional provision limits Congress strictly to the granting of patents, or is broad cnou h to enable Congress to:

a. Provide for, limit, and impose conditions with respect to
the assignment of such patents ( Jo Loth !!.3. 4772
and R. 3635);

b. Frohibit agreements that conflict with such provicions (25
do both H.R. 4732 and H.R. 6635);

c. Require the employer to pay "adequate" compensation for
the assignment to it of inventions made by employees;

HvR. 4/52 and H.K. Gʊ

d. Impose "housekeeping" provisions (re notice, arbitration, etc.) designed to implement enforcement of the substantive provisions and render them operable and enforceable.

4. The Gencral, settled doctrine of Constitutional interpretation is as follows:

a. Congress may not enact legislation that is in conflict with expross limitations contained in the Constitution. Clause 8 contains no such express liritation on the power to implement the provisions contained therein re "inventions"--provisions that are reflected in the langua; e of itle 55.

b. Congress may enact legislation reasonably designed to
implement and further the carrying out of legislation
that is enacted pursuant to, and lies within, the authority
delegated to it by the Constitution. Sec, e.g., Katzenbach
v. McClung, 379 U.S. 294 (1964) holdinɛ Conɛtitutional
under the commerce clause, a statute that prohibited racial
discrimination in restaurants offering service to inter-
state travelers. Some of the Court's comments were as
follows:

Congress is empowered to legislate "appropriate
cans to the attainment of a legitimate end, the effec-
tive execution of the granted power to regulate inter-
state commerce. . . . The activities that are beyond
the reach of Congress are 'those which are completely
within a particular State, which do not affect other
States, and with which it is not necessary to interfere,
for the purpose of executing some of the general powers
of the government. Gibbons v. Ogden, 9 het. 1, 195,
6 Led 23, 70 (1824). This rule is as good today as
it was when Chief Justice Marshall laid it down
almost a century and a half ago." (p. 302)

"... In passing on the validity of legislation of
the class last mentioned the only function of courts
is to determine whether the particular activity requ
lated or prohibited in within the reach of the federal
power." (p. 305)

"... where we find that the legislators, in light of the facts and testimony before them, have a rational basis for finding a chosen regulatory scheme necessary to the protection of commerce, our investication is at an end. (pp. 305-304)

"e thin!.... Congress acted well within its
power to protect and foster commerce
(p. 304)

"The power of Congress in this field is broad and sweeping; where it keeps within its sphere and violates no express constitutional limitation it har baca the rule of this Court, coing back tmost to the founding days of the Republic, not to interfere. The Civil Rights Act of 1964, as here applied, we find to be plainly appropriate. ... We find it in no violation of any express limitations of the Constitution and we therefore declare it valid." (r. 305)

5. The "reasonableness" of the provisions of H.R. 4732 and
H.R. 6635 conforms to

a. The expressed Constitutional purpose of Clause 3;
b. Established general doctrine of Constitutional interpre-
tation expressed in authoritative legal decisions;