## Facts

- White River Technologies, Inc. (WRT) and Max C. McElmurry asserted infringement of U.S. Patent No. 4,527,714, covering a pressure-responsive hopper level detector used in coal-burning power-plant operations.
- The invention was developed to address Arkansas Power & Light Company’s (AP&L’s) operational needs, with AP&L providing facilities, access, and cooperation.
- The invention work was performed by an outside consultant (Bowman) and an AP&L employee (Roberts) while working for and at the direction of AP&L.
- After the patent issued, Bowman assigned the patent to WRT; WRT sought to market the system, including attempting to sell and install it at AP&L plants.
- WRT did not obtain the AP&L contract; AP&L instead provided specifications to a third-party contractor, which built and installed the system for AP&L.
- WRT sued AP&L in federal district court; AP&L moved for summary judgment on the ground that it held a shop right (an implied, royalty-free right to use the invention).

## Issues

1. Whether AP&L acquired a shop right in the patented detector system, permitting AP&L to use it in its business and to have third parties build and install it without infringement liability.
2. Whether any genuine dispute of material fact precluded summary judgment on AP&L’s shop-right defense.

## Decision

- The Federal Circuit affirmed summary judgment for AP&L.
- The court held that, under the undisputed circumstances surrounding development of the invention, equity supported finding a shop right in favor of AP&L.
- The court held that AP&L’s actions—using the invention in its plants and having it built and installed by a contractor—fell within the scope of its shop right and therefore were not infringement.
- The court found no genuine issue of material fact on the circumstances of development and AP&L’s role; AP&L was entitled to judgment as a matter of law.

## Legal Principles

- A shop right is an equitable doctrine functioning as a nonexclusive, royalty-free implied license, commonly analyzed as a combination of implied license and equitable estoppel.
- Whether a shop right exists turns on the totality of circumstances, with the question being whether equity and fairness require recognizing the employer’s right to use the invention in its business.
- In evaluating shop rights, courts consider the circumstances surrounding development of the invention, including whether the invention was developed at the employer’s direction and with the employer’s facilities or support.
- A shop right permits the employer to use the patented invention in its operations and to have it made for that use, but it does not transfer patent ownership or create a general license for third parties.

## Conclusion

The court affirmed that AP&L held a shop right arising from the invention’s development at AP&L’s direction and with its support, and that this equitable, nonexclusive right defeated the patent infringement claims as a matter of law on summary judgment.


McElmurry v. Ark. Power & Light Co., 995 F.2d 1576 (Fed. Cir. 1993)