by Dennis Crouch
Gellman v. Telular Corp. (Fed. Cir. 2011)
Issues of standing continue to arise in patent infringement litigation. Well established precedent requires that plaintiffs suing for infringement collectively hold "all substantial rights" in the patent being asserted. Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24 (1923). Thus, if two entities jointly own a patent, standing would only be proper if both entities jointly filed the infringement action. A lesser explored area of the law relevant to this case involves the requirements to prove ownership and the potential burden-shifting effect of assignment recordation.
Gellman's lawsuit involves U.S. Patent No. 6,075,451 which lists Mayer Lebowitz and Jim Seivert as co-inventors. (Seivert's name is misspelled as Sievert on the patent document). Both inventors are now dead. Lebowitz's rights to the patent are being held in trust and the trustee has argued that Seivert's rights to the patent were previously assigned to Lebowitz as well. Supporting that assertion is an assignment from Seivert to Lebowitz that was recorded in the USPTO assignment database in 1998. Unfortunately for the Lebowitz Trust, the assignment document filed with the PTO had a blank signature line and the Trust has been unable to produce any evidence that the assignment document was ever signed.
Three important consequences flow from a conclusion that Seivert never transferred his interest to Lebowitz. First, Seivert's heirs, beneficiaries, or their assigns now share ownership in the patent. In this case, it appears that Seivert did not designate a beneficiary and therefore ownership is split amongst his heirs according to state intestate law. Second, the Lebowitz trust has no standing to sue because it does not hold substantially all interests in the patent. Third, absent prior agreement, each co-owner of a patent has the full right to offer a license to the defendants to practice the invention, normally without any accounting or compensation to the other patent owners. Here, in a filing with the district court the defendants have asserted that they have each obtained a patent license and release from the Seivert estate.
The Lebowitz Trust (Gellman) made two additional arguments in an attempt to prove that rights had been transferred: (1) the consulting contract and (2) the hired-to-invent doctrine.
The consulting agreement between Seivert and Lebowitz included a clause that any “ideas, discoveries, [or] inventions” by Seivert “shall be and remain the exclusive property” of Lebowitz. And, in addition, Seivert agreed “to execute any and all assignments” necessary. The agreement had a major problem in that the only record available was unsigned. In examining the contract, the Federal Circuit additionally found that the agreement was inadequate to prove that a transfer occurred even if it had been properly executed. In particular, the court indicated that the future promise to execute an assignment suggested that no transfer had previously occurred. The court wrote (I would argue incorrectly) that “[o]therwise, the 'execute any and all assignments' language in the contract is surplusage without relevant meaning.”
In reading the promise to assign, the court agreed that it may create an equitable claim to title in favor of Lebowitz. However, the law is clear that equitable title is insufficient to confer standing.
Of note, the court's interpretation of the contract appears to be based entirely upon Federal Circuit law rather than state law.
Hired to Invent: Normally patent rights are held by the inventors until those rights are assigned in a written agreement. This is true even when the inventor is an employee and the invention was created within the scope of the employment. There are a few limited exceptions to this practice that transfer patent rights through operation of law rather than through written assignment. One historic exception is the “hired-to-invent” doctrine that some courts have used to transfer ownership of patent rights to an employer when the employee is hired to make a particular invention. See, e.g., Solomons v. United States, 137 U.S. 342, 346 (1890). This hired to invent doctrine cannot help the Lebowitz Trust here because the doctrine has been interpreted to create “creates only an obligation for the employee to assign to his employer.”
Affirmed. Case Dismissed for Lack of Standing.
Next Steps: If the Lebowitz Trust wants to pursue the lawsuit, it will need to first force transfer of rights from the Seivert estate and then refile the suit against the accused infringers.