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Consulting Agreements and Patent Rights

Posted by James Juo | May 17, 2022 | 0 Comments

When founders leave their company, they often remain involved as consultants to ensure a smooth transition for the business. These consulting agreements also often include a patent assignment provision where any inventions developed during the consulting period are to be disclosed and assigned to the company.

The Eighth Circuit's decision in Sleep Number Corp. v. Young, No. 21-1784 (8th Cir. May 11, 2022), illustrates why it is important to not sleepwalk through such agreements.


Steven Young and Carl Hewitt developed technology that monitors biometric data of sleeping infants. Sleep Number, a Minnesota-based corporation specializing in the manufacture and sale of adjustable air beds, partnered with their company, BAM Labs, to create SleepIQ technology for Sleep Number smart beds measures biometric data such as breathing patterns, movements, and blood flow through the use of sensors. Sleep Number later acquired BAM Labs, renaming it SleepIQ LABS; and Young and Hewitt continued to develop sleep technology for SleepIQ LABS, serving as the Chief Technology Officer and Vice President of Engineering, respectively.

After two years as employees of SleepIQ LABS, Young and Hewitt informed Sleep Number that they wished to pursue their own medical-technology venture. Sleep Number asked that Hewitt and Young remain involved as consultants to ensure a smooth transition; so Young and Hewitt entered into consulting agreements with Sleep Number in December 2017.

The consulting agreements required Young and Hewitt to disclose and assign to Sleep Number the rights to inventions within a defined Product Development Scope (“PDS”) that were developed or ideated during the period of the consulting agreements. The PDS covered “any ideas, conceptions, inventions, or plans relating to sleep, mattresses, bedding, sleep monitoring, health or wellness as it relates to sleep (including biometric monitoring relating to sleep), or bedroom or sleep technologies.” The PDS expressly excluded “monitoring technologies for sudden infant death syndrome” (“SIDS”) and “blood pressure monitoring technologies.”

About a month after entering into the Sleep Number consulting agreements, Young and Hewitt incorporated their new medical-technology venture, UDP, in January 2018.

In view of express PDS exclusions in the consulting agreements, presumably the focus of UDP was to be in those specific areas. But UDP's focus then apparently expanded.

Patent Applications Filed

In October 2018, Young and Hewitt filed a provisional patent application (the “`613 provisional application”) with the USPTO on behalf of UDP. The `613 application disclosed an invention using load‐bearing sensors placed under a substrate―such as a bed, couch, or examination table―to measure biometric data including respiration, heart rate, and weight. This biometric data may be gathered while the user is asleep or awake in a medical setting.

After filing the '613 application, Young and Hewitt met with executive officers of Sleep Number and informed them that they wished to terminate their consulting agreements. Additionally, Young and Hewitt sought an addendum to the consulting agreements declaring that their work at UDP did not fall within the PDS. Sleep Number declined, believing that Young and Hewitt's work on behalf of UDP fell within the PDS. Young and Hewitt formally terminated their consulting agreements in November 2018.

UDP later filed a second provisional application (the `623 provisional application) in February 2019. Later on, four non-provisional patent applications that claimed priority going back to both provisional applications.


In July 2020, Sleep Number sued Young, Hewitt, and UDP, where Sleep Number sought to control the prosecution of those patent applications because of Sleep Number's ownership through the consulting agreements with Young and Hewitt.

Four months later, UDP amended the four non-provisional patent applications to remove the priority claim to the earlier `613 provisional application, so that the non-provisional applications would only claim priority to the later `623 provisional that was filed after the termination of the consulting agreements.

The District of Minnesota issued a preliminary injunction preventing the defendants from further prosecuting or amending any patent claims in the applications with the USPTO.

On appeal, the Eighth Circuit held that Sleep Number had shown that the inventions described in the patent applications fall within the PDS as defined in the consulting agreements.

Here, the plain meaning of the language in the consulting agreements clearly and unambiguously places the inventions described in the patent applications within the PDS. The PDS includes “any ideas, conceptions, inventions, or plans relating to sleep, mattresses, bedding, sleep monitoring, health or wellness as it relates to sleep (including biometric monitoring relating to sleep), or bedroom or sleep technologies,” except for “monitoring technologies for [SIDS]” and “blood pressure monitoring technologies.” . . . The '613 and '623 applications pertain to inventions that monitor biometric data while a person is lying down, including data relevant to sleep apnea. And the '087, '367, '385, and '848 applications describe devices and methods for collecting this data by means of sensors affixed to bed legs or bed frames. Thus, all six inventions plainly relate to sleep-related biometric monitoring, bedroom technologies, or both.

Nor was there any evidence that the patent applications fell within the SIDS or blood-pressure-monitoring exceptions in the consulting agreements beyond the defendants' bare assertions.  Noting that patent applications are required to provide a written description of the inventions in “full, clear, concise, and exact terms,” under 35 U.S.C. § 112(a), UDP's patent applications “did not indicate in any way—whether by using the words ‘SIDS' or ‘monitoring blood pressure' or otherwise—that their inventions were directed at detecting SIDS or monitoring blood pressure.”

Although the non-provisional applications were all filed after the termination of the consulting agreements, they all had initially claimed priority to the earlier `613 provisional that was filed while the consulting agreements were still in effect.

Just because the defendants filed certain patent applications after the termination of the consulting agreements does not mean that that they did not conceive of the inventions while Young and Hewitt were consulting with Sleep Number.

Not persuaded by the defendants' claim that giving up priority to the earlier `613 provisional application was simply honoring their duty of candor to the USPTO rather than being a “strategic litigation move,” the Court found “there is at least a fair chance that Sleep Number will succeed on the merits of its claim. Cf. Bio-Rad Labs., Inc. v. Int'l Trade Comm'n, 996 F.3d 1302, 1319 (Fed. Cir. 2021) (rejecting former employees' claim of patent coownership because, unlike in this case, the inventors' ideas were not yet concrete enough when they were employed).”

The litigation attorneys at Thomas P. Howard, LLC are experienced in litigating patents nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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