Thursday, August 20, 2009

Assignments aren't the only way to transfer ownership of patents -- operation of law also works

The owner of U.S. Patent Nos. 6,141,653; 6,336,105; 6,338,050; 7,162,458; and 7,149,724 granted a security interest in the patents to Silicon Valley Bank and to Cross Atlantic Capital Partners. Silicon Valley Bank assigned its interest to Cross Atlantic. Once the owner defaulted on its loan obligation, Cross Atlantic foreclosed and auctioned the patents off. Cross Atlantic -- the only bidder at the auction -- bought the rights, and then assigned them to Sky Technologies.

Sky then sued SAP for patent infringement. SAP challenged whether Sky had standing to sue, since there was no written assignment document assigning the rights from the owner to Cross Atlantic (and thus the chain of title was "broken"). The trial court found that the foreclosure transferred the rights to Cross Atlantic by operation of law, and thus denied SAP's motion to dismiss. SAP asked for an interlocutory appeal, which the trial court allowed.

35 U.S.C. § 261 provides, in part:
Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing.
The Federal Circuit explained the law:
In order to seek damages for infringement of a patent, a party must have standing at the inception of the lawsuit. Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991). A party that has been granted all substantial rights under the patent, “regardless of how the parties characterize the transaction that conveyed those rights,” is considered to have legal title, and therefore standing. Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1249–50 (Fed. Cir. 2000). Thus, it is the “substance of what was granted” that determines the rights in the patent, not the form. Id. at 1250; Vaupel Textilmaschinen KG v. Meccanica Europa Italia S.P.A., 944 F.2d 870, 873–76 (Fed. Cir. 1991). ...
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We have previously held that patent ownership is determined by state, not federal law. Akazawa [v. Link New Technology International, Inc., 520 F.3d 1354, 1357 (Fed. Cir. 2008)] (citing Jim Arnold Corp. v. Hydrotech Sys., Inc., 109 F.3d 1567, 1572 (Fed. Cir. 1997) (“[T]he question of who owns the patent rights and on what terms typically is a question exclusively for state courts.”)). ...
* * *
Even though a transfer of patent ownership, if through an assignment, must be in writing, this court has held, “[T]here is nothing that limits assignment as the only means for transferring patent ownership. . . . [O]wnership of a patent may be changed by operation of law.” Akazawa, 520 F.3d at 1356.
Finally, the Court held:
We find that Akazawa controls in the instant case, and that the district court’s reliance on its reasoning was appropriate because transfer of patent ownership by operation of law is permissible without a writing.
Decision affirmed.

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