Failed Assignment Documents → NO STANDING TO SUE

erieinsuranceIntellectual Ventures v. Erie Indemnity (Fed. Cir. 2017)

In yet another Intellectual Ventures loss, the the Federal Circuit has affirmed the W.D. Pennsylvania district court ruling that the asserted patents are invalid as ineligible under 35 U.S.C. § 101.[1] This decision was issued in parallel with IV v. Capital One discussed previously. I’m going to put-off the Section 101 discussion for another post, however, and write here about the assignment debacle.

Intellectual Ventures: XML Patent Invalid

Assignment of Patent Rights: In before reaching the Section 101 eligibility issues, the district court dismissed IV’s infringement case related to the ‘581 patent for lack of standing – finding that IV didn’t actually own the patent.

The ‘581 patent (while still an application) was assigned to AllAdvantage.com.  Several months later, AllAdvantage.com expressly assigned the parent patent of the ‘581 patent to Alset (along with several other patents and pending applications), but did not expressly list the ‘581 patent (still then pending as an application).  Believing it owned the ‘581 patent, Alset recorded its assignment rights back in 2002 and later assigned the patent to an  IV-owned-entity that later recorded the assignment with the PTO.  Meanwhile, IV has defended four IPR petitions against the patent and asserted the patent in two other cases. 

Based upon the assignment documents as interpreted under California law, the district court found that Alset never obtained title to the ‘581 patent, and that under the rules of derivative title, IV likewise could not own the patent.  Thus, the ‘581 infringement claims were properly dismissed on appeal.

Looking through the actual assignment agreement, it does indeed appear to be very specific in terms of what patents and applications are included: assignment-of-patent. The assignment document does not include any broad statements regarding “technology grant” or “all of the assignor’s patents” or even “including family member patents and patent applications.”  Further, the assignment does not express any warranties that might require the assignor to fix the problem.  In those counter-factual situations, the court may well have flipped its decision and gone with the usual industry practice that patent family member ownership is kept together.

Bottom line here is (1) the assignment document was not well written and (2) the due diligence completely failed. And, the result is that the patentee holds no patent rights.

Although not raised by the parties, the case reminds me of redecoration statute issues. Section 261 of the patent act states that

[A]n assignment . . . shall be void as against any subsequent purchaser … without notice, unless [the assignment] is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.

35 U.S.C.  § 261.  Of course, the statute does not directly apply to this case since the fight is not between competing chains of title as we had in Stanford v. Roche, but rather is simply the question of whether the Intellectual Ventures was assigned rights rights in the first place.

The notion of adverse possession and other potential estoppel doctrines also come to mind.  Here, IV at least has ‘color of title’, based upon its assignment rights, has been paying its taxes (maintenance fees), and protecting the rights against challengers. Perhaps California Law may allow a title-by-estoppel in this situation.

= = = = =

[1] All claims of U.S. Patent Nos. 6,510,434; 6,519,581; and 6,546,002 ineligible under 35 U.S.C. § 101 (eligibility).

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

38 thoughts on “Failed Assignment Documents → NO STANDING TO SUE

  1. one more troubling thing about this case is that a terminal disclaimer was filed in ‘581 against its parent ‘983. The ‘581 would not be enforceable if alienated without ‘983. The Decision mentioned the terminal disclaimer a couple times for tangential reasons but didn’t mention the restriction upon alienation aspect. Did the attorneys for IV not argue this point?

    If intent of the parties controls, why would Alladvantage want to keep the ‘581 patent?

      1. LOL. People can say what they will about Rader, but he wouldn’t have issued a decision like this one. Prost is 65, unfortunately that is young by CAFC standards.

  2. Bogus.

    The assignment agreement specifically assigned the “common law rights” in the patents and applications listed. The opinion gives no analysis of what these “common law rights” might be. However, the common law rights in an invention are in fact discussed in the Supreme Court case of Crown Co. v. Nye Tool Works, 261 US 24 (1923) link to scholar.google.com. These are the rights of the inventor (and his assignee’s) to make and use and sell the invention. (A patent only confers upon its owner the right to exclude others.)

    [T]he indispensable condition of the granting and establishment of a patent right and patent property [is] that the patentee shall have himself the common law right of making, using and vending the invention.

    Id. at 35.

    By transferring to the assignee the common law right, the assignee alone obtained the right to receive the patent covering those common law rights. Necessarily, therefore, the rights in the continuation were assigned.

    It is also interesting that Prost cites no authority at all for the proposition that continuations automatically assigned assigned if the invention is assigned. The case she cites, DDB Techs, in support, is completely off point. The original case to discuss the assignment of an invention and the right to a patent Gayler v. Wilder, 51 US 477 (1851) link to scholar.google.com

    Rough justice from an ….

    1. Crown v. Nye doesn’t address the issue here. Nobody is suggesting that there wasn’t an assignment of any right to exclude anybody. Many patent rights were, in fact, assigned. The right to “make use and vend” the invention claimed in the patented parent of the ‘581 patent were certainly assigned, correct?

      The narrower issue is whether an assignment of patents using the language seen here and a list of the sort that was provided here (which included both patents and applications, some of which were in the same family if I’m not mistaken) suffices to assign rights to every pending application in the family of every granted patent in the list.

      1. MM, perhaps I was unclear.

        Common law rights are the rights of the inventor to make, use and sell the invention. Only the holder of these rights has a right to receive a patent on application. (The inchoate right to a patent is held by the inventor or the assignee of his common law rights.)

        By assigning the common law rights in the parent, with the disclosure of both the parent and the continuation being the same, the assignee necessarily was the party to whom the right to receive the patent in the continuation was assigned.

        Assigning the invention as described in a specification is the most common way a continuation is assigned — dating from Gayler. But assigning common law rights is also an equivalent way, at least from Continental Paper Bag and Crown Co.

        But I agree, absent the assignment of the common law rights or the rights to the invention (alternative language), the assignment of a list of patents and application does not, without something about continuations, etc. include anything not listed.

        1. By assigning the common law rights in the parent, with the disclosure of both the parent and the continuation being the same, the assignee necessarily was the party to whom the right to receive the patent in the continuation was assigned.

          I don’t see why that’s “necessarily” the case. Patent families can be split up between assignees and licensees becuause the claimed inventions are distinct. You can have the parent which claims X. I own the child patent which claims Y. We’re both free of each other’s IP.

        2. To be clear: I’m making the other side’s argument here because it seems reasonable and I’ve never seen an assignment like the one here. I think that IV should have at least attempted your argument (maybe they did?).

          Also, you gotta love the signatures on that assignment.

          1. Doesn’t look like it from reading the Federal Circuit opinion. They argued good will and some “inclusive” language. But not common law rights AFAIK.

            If there was a failure here, it was by the litigators, not by IV’s or Alset’s patent counsel. But, I am sure the litigators will, like Dennis did above, point the finger at anybody and everybody but themselves.

        3. Only the holder of these rights has a right to receive a patent on application.

          No.

          Do you have a cite for that proposition?

  3. interesting that the CAFC Opinion didn’t mention MPEP 306: “In the case of a division or continuation application, a prior assignment recorded against the original application is applied (effective) to the division or continuation application because the assignment recorded against the original application gives the assignee rights to the subject matter common to both applications”

    This could be used as extrinsic evidence that both Alladvantage and Alset intended to transfer the ‘581 application with the (doomed) assignment. After all, Alset took over prosecution and paid the issue fee without objection by Alladvantage, which in my opinion is weight that both parties thought MPEP 306 was effective.

    Anyway, I guess someone has to amend MPEP 306 now.

    1. But does MPEP306 apply to the assignment of patents? i.e., if you assign a parent patent, does that necessarily mean that you assign rights to all the continuations and divisionals filed off that patent (including both applications as well as granted patents that claim inventions which are distinct from the invention claimed in the parent?). The real world doesn’t work like that.

      1. MM, the section reads, “In the case of a division or continuation application, a prior assignment recorded against the original application is applied (effective) to the division or continuation application because the assignment recorded against the original application gives the assignee rights to the subject matter common to both applications.”

        Key words: Prior Assignment Original Application Recorded.

        The assumption is that the “prior assignment” included the common law right to make, use and sell the invention because only the owner of the common law right had a right to obtain the patent.

        But the assignment in this case did assign the common law rights.

        1. Key words: Prior Assignment Original Application Recorded.

          Except the prior application was not assigned in this case. The parent patent was assigned.

          the assignment in this case did assign the common law rights

          Yes, the common law rights to make and use and sell the invention claimed in the parent patent were assigned. Is there some suggestion in the opinion that this didn’t happen?

          1. MM, the question the court should decide is whether the assignment of the common law rights in an issued patent automatically assigned pending continuations.

            I think it does, and everyone surrounding the transaction here did as well.

            1. the question the court should decide is whether the assignment of the common law rights in an issued patent automatically assigned pending continuations.

              I think the situation gets more complicated than that when, e.g., there is an accompanying list of “assigned” patents and applications and some of the pending applications in the granted patent family are listed … and some are not.

              That’s why the expansive language that attorneys typically use today is so much better.

  4. (From the Drug prices thread) anon: “words sounding in function were permitted FAR more extensively by Congress in the Act of 1952.”

    I for one haven’t seen you back up this assertion. Awhile ago you vaguely referred to Federico’s comentary, which turned out to be silent on the subject. When that was pointed out, you declared that the 1952 act’s silence on the subject left the prior jurisprudence allowing terms sounding in function intact.

    You seem to be misrepresenting the 1952 act as reinforcing or broadening the permissibility of non-means functional claiming when it was silent on the subject. You statement appears to be as true as “The 1952 patent act permited claims to incorporate the word xylophone.” While a weasle can assert this is true in a sense, it is untenable to say there was any effect or intent regarding claims involving the word xylophone. Likewise, the 1952 act at BEST had no effect on claims sounding in function.

    1. You for one have not looked where I have directed you to look (either in the case law I have supplied – the babyseat case – or in the writings of Federico.

      And no, Federico was NOT silent on the matter.

      I can not – and will not – be responsible for your lack of knowledge.

      1. I can not – and will not – be responsible for your lack of knowledge

        Why did Federico love xylophones so much? The marimba arts have stagnated ever since.

      2. I have looked. I have quoted the most relevant portions I could find to evidence both effort and ernestness, and yet still you refuse to specifically you are referencing. That is the behavior of a charlatan.

        Federico has exactly one paragraph regarding functional claiming, and it is specifically about 112 6th paragraph claims. There is no discussion of limitations sounding in function.

        1. I have quoted the most relevant portions I could find to evidence both effort and ernestness, and yet still you refuse to specifically you are referencing. That is the behavior of a charlatan.

          Also the behavior of a tr 0ll. Not a coincidence.

          1. You know what we call people who make unsourced assertions and then refuse to provide evidence while demanding others validate their claims?

            “Mr. President.”

            1. Lol – except for the fact that I have in the past provided a variety of sources, from Congressional notes, Federico commentaries and even court cases.

              Your wanting to play d u m b (again) is just a YOU problem.

    1. DC: the due diligence completely failed

      Maybe IV needs to hire an in-house attorney to double-check this kind of thing. 😉

      1. this is surprising because IV has spends a ton on lawyers and is very sophisticated (or at least gives off this impression). They look everything over with a fine toothed comb. Someone at IV is going to lose their job (assuming they haven’t been laid off already).

  5. Thanks for the write-up, Dennis. That is a strangely obtuse assignment. Perhaps the drafter believed that “all rights” to “the patent” would suffice to transfer the right to all of the family members?

    It’d be nice to have a summary of the state laws relating to the treatment of patent assignments, at least for those states where there are significant tech strongholds. I assume, for instance, that minor mis-spellings or typos (e.g., leaving some randomly capitalized letter uncapitalized, or leaving “Inc.” off the end) don’t usually have a disastrous effect on the chain of title absent some other evidence. I’ve encountered large portfolios where the cost of fixing a typo like that seemed greater than the cost of addressing it in litigation (assuming that the defendant would bother bringing it up).

    ————————-
    Fyi, a typo that is probably obvious but just in case:

    but did not expressly list the ‘518 patent (still then pending as an application).

    Should be ‘581.

    1. Also always worth noting (since it’s not intuitive) that “all rights and title” is insufficient to convey the right to sue for past infringement, which to be effectively conveyed, must be specifically stated.

    2. Transposed digits is most definitely not an ordinary typo when it comes to identification of a property.

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