Core Optical v Nokia: Risks of Colloquial Contract Construction

The Federal Circuit vacated and remanded the Central California District Court’s summary judgement in Core Optical v Nokia after finding that the colloquial phrase of “one’s own time” in an employment agreement is not an unambiguous term as it relates to employer-sponsored research programs.[1]

Core Optical sued Nokia for infringement of US Patent No. 6,782,211, which names Dr. Mark Core as the sole inventor. Nokia responded by moving for a summary judgement on the basis that Core Optical did not actually own the ‘211 patent because Dr. Core’s assignment to Core Optical was ineffective. Nokia asserted that Dr. Core had already assigned the invention to TRW, his previous employer. Core Optical responded by arguing that the invention was not covered by the employment agreement because it fell under an exception. The employment agreement included a three-pronged exception for those inventions which, inter alia, were developed “entirely on [Dr. Core’s] own time,” referred to as the “entirely-own-time” provision.[2] Since Dr. Core developed the invention during his employer-sponsored PhD, and sponsorship of Dr. Core’s PhD research program was conditional upon several obligations to the employer, including periodic reporting on his progress and at least one year of employment following completion of the PhD program, the District Court concluded that the exception did not apply and that the patent should have been assigned to Dr. Core’s employer.

On appeal to the Federal Circuit, Core Optical disputed whether these obligations to the employer were sufficient to label at least some of Dr. Core’s time spent on his PhD program as not entirely his own.[3] Dr. Core asserted, “the relevant notion of accountability is limited to on-the-clock company-assigned work for the hourly pay,”[4] whereas Nokia maintained that the transactional nature of the PhD sponsorship – funding in exchange for progress reports and contractual employment – rendered Dr. Core’s PhD time as not entirely his own.

In their analysis, the Federal Circuit identified the nature of the issue as “Dr. Core was generally free of accountability to TRW [the employer] for how he used any particular hour or even day… [but he] was not free to use the entirety of his off-the-clock hours any way he wished without accountability to TRW.”[5] The invention-assignment contract did not provide any indication whether this relatively low level of accountability prevented the PhD time from being considered entirely Dr. Core’s “own time”. The Federal Circuit looked at the entirely-own-time provision, as well as the context surrounding the contract, and case law, and remanded the suit for further investigation, concluding that the entirely-own-time provision was not unambiguous. None of the evidence decisively favored one interpretation over the other, and “inquiry beyond the language of the contract is needed to determine the ultimate construction to be placed on the ambiguous language.”[6] While the suit awaits resolution, the prudent and pervasive lesson is that to the extent reasonable, contract terms should always be defined with precise language, which usually means avoiding the use of idioms and turns of phrase, or providing further definitions when such phrases are used.

In their final guidance, the Federal Circuit concluded the opinion with a note on the contra proferentem principle, which bears “that any ambiguities must be construed against the drafting employer and in favor of the nondrafting employee,” and which the U.S. Supreme Court also has described “as a default rule to be applied when mutual intention cannot be discerned.”[7] When adhered to, this doctrine may put Nokia at a significant disadvantage in showing that the phrase in the contract should be construed to TRW’s advantage. For drafting parties in particular, this should only further encourage the careful selection of the language to be used in contracts.

[1] Core Optical Technologies, LLC. v Nokia Corp., ADVA Optical, and Cisco Systems, No. 2023-1001, 1002, 1003, Fed. Cir., May 21, 2024
[2] Id. at p. 11, 13, 15-17, 19
[3] Id. at p. 12-13
[4] Id. at p. 14
[5] Id. at p. 14
[6] Id. at p. 19
[7] Id. at p. 22-23