One thing that can be good when working as a lawyer is to have a way with words. As a patent prosecutor, you must also be very careful with your words.
It is well known that prosecution history estoppel can be used to limit the scope of patent claims. A recent decision from the Middle District of New Carolina also reminds prosecutors of the need to have caution in drafting a patent’s specification.
In BASF Agro B.V., Arnhem (NL), Wädenswil Branch, et. al. v. Makhteshim Agan of North America, Inc., et. al., the accused infringer (Makhteshim) argued that the patentee (Kimura, who assigned his patent rights to BASF) disclaimed claim coverage over Makhteshim’s method of applying insecticide. Interestingly, Makhteshim argued that the disclaimer was in a single sentence of the patent’s specification (U.S. Pat. No. 6,414,040), in which the patentee described the objects of the invention.
In its decision finding noninfringement, the court agreed.
The court stated (at pp. 18-19):
The use of an exterior barrier as a required element of treatment is prior art as defined and clearly disclaimed by Mr. Kimura. Under Northern Telecom, because Mr. Kimura clearly and unmistakably disclaimed the use of a prior art barrier, the prior art barrier and Mr. Kimura’s invention became “mutually exclusive.” See Northern Telecom Ltd., 215 F.3d at 1297. Thus, by definition, one practicing a form of treatment which requires both an exterior barrier element and an interior loophole element is not practicing Mr. Kimura’s invention. This court finds that Mr. Kimura’s description of his invention as “a termite treatment without barrier,” (U.S. Pat. No. 6,414,040, col. 1, ll. 43-44), excludes barrier treatments from the invention and therefore the combination of a barrier treatment and Mr. Kimura’s loopholes does not infringe the patents at issue.
The entirety of Kimura’s disclaimer read: “Another object of the instant invention is to provide a termite treatment without barrier,” with the key word being without. The court found this to be a clear disclaimer of claim scope, and contrasted this disclaimer to cases where the patentee was either silent on the issue, or stated that certain features were merely undesirable, in which cases courts do not find disclaimers of claim scope.
The Supreme Court released its decision in Bilski v. Kappos today, a long-awaited case dealing with the scope of patentable subject matter under 35 USC Sec. 101. In short, the Supremes affirmed the Federal Circuit’s judgment that Bilski’s business method was not patent-eligible, but stated that the Federal Circuit’s “machine-or-transformation” test was not the sole test of patentable subject matter. More will come shortly, but for now, here is a link to the opinion:
Bilski v. Kappos opinion
There is bound to be much erudite commentary on the Bilski decision. Here is a running list of the posts I have found that might be of interest to the casual (or professional) reader. If you have something you want linked, let me know. Note that Gene Quinn at IPWatchdog.com also has what appears to be a memo to Examiners at the U.S. Patent and Trademark Office giving a preliminary assessment of Bilski‘s impact on their operations. [As an aside, so much of the following commentary is really excellent that it gives me pause regarding whether I should even try to contribute my two cents’ worth. Nice work, everyone.]
Eric Guttag at IPWatchdog
IP Now: Australia and New Zealand
Joe Mullin at The Prior Art [same]
Ted Sichelman at Patently-O
In business, we often forget, the effect of an adverse (or favorable) court ruling can be drastic, and immediate. Today’s shining example of this effect is the ruling of the Court of Appeals for the Federal Circuit that it will reconsider, en banc, its March 4, 2010 ruling (in favor of TiVo) in Tivo Inc. v. Echostar Corp, et al. In that earlier decision, the Federal Circuit held (roughly) that Echostar’s attempts to design around TiVo’s DVR patents (after an earlier loss at trial) were properly found invalid by the district court, and upheld a more-than-$90 million award against Echostar. The decision and award have now been vacated, and the case will be decided anew.
TiVo’s stock dropped approximately 35% in the minutes after the Federal Circuit’s decision was announced today, wiping out grand amounts of book-money for TiVo’s shareholders. Before, however, anyone cries great tears for TiVo and its owners, please recall that this effect essentially restores the status quo. After the Federal Circuit’s March 4 ruling, TiVo’s stock price leapt more than 60%; today’s loss brings TiVo’s shares back to within a dollar of their pre-March 4th selling price.
For you legal nerds, the Federal Circuit’s order establishes that rehearing en banc will address the following issues:
- Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?
- How does “fair ground of doubt as to the wrongfulness of the defendant’s conduct” compare with the “more than colorable differences” or “substantial open issues of infringement” tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985).
- Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should be given to the infringer’s efforts to design around the patent and its reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?
- Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope?
Between this and the rehearing en banc order in Therasense, Inc. v. Becton, Dickinson and Co. there is a lot of amicus briefing fun to be had.
In Forest Group, Inc. v. Bon Tool Co. [DOC], 590 F.3d 1295 (Fed. Cir. 2009), the Federal Circuit, on appeal from the U.S. District Court for the Southern District of Texas, held that a false marking fine of not more than $500 should be assessed for each article marked falsely.
On remand, the Southern District ordered [PDF] on Tuesday that Forest Group shall be fined $180 for each falsely-marked article, for a total fine (based on evidence at trial of 38 sales of falsely-marked articles) of $6,840.00. This is not much in absolute dollars. Notably, however, this represents the upper limit of the sale price for each of the articles, meaning that Forest made no money at all on any of the sales of a falsely-marked product (and, indeed, could have lost money on some sales, since the evidence showed there were sales at prices as low as $103).
The court noted that such a fine (amounting to the total sales price of the false-marked articles) “fulfill[s] the deterrent goal of [35 U.S.C. Sec. 292’s] fine provision.”
Indeed it does.
Patent prosecutors, have you ever felt that the PTO’s constructions of your pending claims were just hideously overbroad? (Can I get an “Amen”?). Today, the Federal Circuit helped you out by deciding an appeal from reexamination proceedings in the U.S. Patent and Trademark Office (PTO). The Federal Circuit’s decision in In re Suitco Surface can be summarized in one quote from the opinion (which you will rejoice in pasting into your Office action responses and Appeal briefs):
The broadest-construction rubric coupled with the term “comprising” does not give the PTO an unfettered license to interpret claims to embrace anything remotely related to the claimed invention.
Suitco Surface, Inc. owns U.S. Patent No. 4,944,514 (’514 patent), claiming a “floor finishing material” for use on athletic courts, bowling lanes, and other “floor surfaces [made] of wood, linoleum, terrazzo, [or] concrete.” Claim 4 is representative:
4. On a floor having a flat top surface and an improved material for finishing the top surface of the floor, the improvement comprising:
at least one elongated sheet including a uniform flexible film of clear plastic material having a thickness between about one mil and about twenty-five mils and
a continuous layer of adhesive material disposed between the top surface of the floor and the flexible film, the adhesive layer releasably adhering the flexible film onto the top surface of the floor.
This is the third trip to the Federal Circuit for the ’514 patent. In 1996, Middleton, Inc., the exclusive licensee of the ’514 patent, brought suit against 3M Company in the U.S. District Court for the Northern District of Illinois alleging infringement of claims 1-4 of the ’514 patent. In that case, the district court construed the terms “material for finishing” and “uniform flexible film.” “Material for finishing” was construed to mean “a material that makes more durable the underlying surface of the floor, and is applied for that purpose.” “Uniform flexible film” was construed to mean “the material must be of a uniform thickness, and excludes material in which there are any variations in thickness.”
3M moved for summary judgment of noninfringement based on both limitations, but the district court granted the motion based solely on “material for finishing.” Middleton, Inc. v. Minn. Mining & Mfg. Co., No. 96 C 6781, 1998 WL 852841 (N.D. Ill. Nov. 24, 1998). Middleton appealed and the Federal Circuit vacated and remanded, finding no support for “durability” in the ‘514 patent’s specification or prosecution history. Middleton, Inc. v. Minn. Mining & Mfg. Co., No. 96 C 6781, 1999 WL 1072246 at *4 (Fed. Cir. Nov. 16, 1999).
On remand, the Northern District of Illinois granted 3M’s second motion for summary judgment, this time based on the “uniform flexible film” limitation. Middleton, Inc. v. Minn. Mining & Mfg. Co., No. 96 C 6781, 2001 WL 1155151 at *2 (N.D. Ill. Sept. 28, 2001). The Federal Circuit again remanded, finding that the district court’s construction was too narrow. Middleton, Inc. v. Minn. Mining & Mfg. Co., 311 F.3d 1384, 1389 (Fed. Cir. 2002).
The Northern District being by now sick of the proceedings (blatant conjecture), it transferred the case to the Southern District of Iowa. 3M then filed an ex parte reexamination request with the PTO. The district court stayed the case after the request was granted. In reexam, the examiner rejected the claims on various grounds (not discussed here) after construing their terms. Suitco appealed to the PTO’s Board of Patent Appeals and Interferences (BPAI).
In affirming the examiner’s rejections, the BPAI construed the term “material for finishing the top surface of the floor” to mean “requiring a material that is structurally suitable for placement on the top surface of a floor.” Under that construction, according to the Board, the “material for finishing the top surface of the floor” could be any layer above the floor regardless of whether it was the top or final layer (emphasis in Federal Circuit opinion). Suitco appealed.
The Federal Circuit cited the appropriate standards for claim construction and review:
“During reexamination, as with original examination, the PTO must give claims their broadest reasonable construction consistent with the specification.” In re ICON Health & Fitness, Inc., 496 F.3d 1374, 1379 (Fed. Cir. 2007) (citing In re Am. Acad. of Sci. Tech Ctr., 367 F.3d 1359, 1364 (Fed. Cir. 2004)). This Court thus reviews the PTO’s interpretation of disputed claim language to determine whether it is “reasonable.” In re Morris, 127 F.3d 1048, 1055 (Fed. Cir. 1997).
Suitco argued both that the Board should have been bound by the Federal Circuit’s earlier construction of “material for finishing the top surface of the floor,” and that the Board’s adopted construction was unreasonable. The Federal Circuit considered only the latter point, and vacated the BPAI’s holding.
The Federal Circuit noted that the language of the claims requires a “material for finishing the top surface of the floor” (emphases in opinion). In light of this, the court noted that
“[a] material cannot be finishing any surface unless it is the final layer on that surface. Otherwise, the material would not be ‘finishing’ the surface in any meaningful sense of the word. The PTO’s proffered construction ignores this reality by allowing the finishing material to fall anywhere above the surface being finished regardless of whether it actually ‘finishes’ the surface….If the PTO’s construction were accepted, a prior art reference with carpet on top of wood, on top of tile, on top of concrete, on top of a thin adhesive plastic sheet anticipates the claims in question because an adhesive plastic sheet falls at some point in the chain of layers. This construction does not reasonably reflect the plain language and disclosure of the ’514 patent.” (emphasis added).
The Federal Circuit thus vacated the BPAI’s rejection and remanded for new proceedings on this issue:
Although the PTO emphasizes that it was required to give all “claims their broadest reasonable construction” particularly with respect to claim 4’s use of the open-ended term “comprising,” see Genentech, Inc. v. Chiron Corp., 112 F.3d 495, 501 (Fed. Cir. 1997) (“the open-ended term comprising . . . means that the named elements are essential, but other elements may be added”), this court has instructed that any such construction be “consistent with the specification, . . . and that claim language should be read in light of the specification as it would be interpreted by one of ordinary skill in the art.” In re Bond, 910 F.2d 831, 833 (Fed. Cir. 1990) (quoting In re Sneed, 710 F.2d 1544, 1548 (Fed. Cir. 1983)) (emphasis added).
The PTO’s construction here, though certainly broad, is unreasonably broad. The broadest-construction rubric coupled with the term “comprising” does not give the PTO an unfettered license to interpret claims to embrace anything remotely related to the claimed invention. Rather, claims should always be read in light of the specification and teachings in the underlying patent. See Schriber-Schroth Co. v. Cleveland Trust Co., 311 U.S. 211, 217 (1940) (“The claims of a patent are always to be read or interpreted in light of its specifications.”). In that vein, the express language of the claim and the specification require the finishing material to be the top and final layer on the surface being finished. See, e.g., ’514 patent, col.1 ll.15-20 (“The present invention is directed generally to a material and method for quickly and easily producing a transparent wear resistant finish on a smooth flat surface subject to wear and more particularly to a material and method for finishing a floor . . . .”). The PTO’s proffered construction therefore fails. (emphasis added).
As noted above, patent prosecutors may want to copy and paste the above holding into their word processors relatively liberally. In light of KSR Int’l Co. v. Teleflex Inc., the PTO has broad discretion to make obviousness rejections over the prior art. One way to fight those rejections (assuming the patent applicant and his or her prosecutor are interested) is to argue that the PTO’s construction of the claims is overbroad (as they certainly can be), thus narrowing the field of applicable prior art. Incorporating the Federal Circuit’s holding into an AutoText entry might be a nice shortcut in beginning your next “overbroad reasonable construction” argument.
Anascape sued Nintendo* in the Eastern District of Texas in 2006, alleging that Nintendo’s Wii Remote, Wii Classic, Wii Nunchuk and Game Cube controllers infringe certain claims of U.S. Patent No. 6,906,700 (‘700 patent). The Eastern District contrued the relevant claims, and a jury found the asserted claims valid and infringed. Nintendo appealed to the Federal Circuit, which today reversed.
The ‘700 patent, entitled “3D Controller with Vibration,” was filed November 16, 2000 as a continuation-in-part (CIP) of the application that became U.S. Patent 6,222,525 (the ’525 patent). The two patents are directed generally to video game controllers offering control of on-screen objects with 6-degrees-of-freedom movement (forward/backward, left, right, yaw, pitch, roll), with the ‘525 patent focusing on controllers with single input members and the ‘700 patent focusing on controllers with multiple input members.
A complicating factor for Anascape was that there existed invalidating prior art that was disclosed between the filing dates of the ‘525 and ‘700 patents. Thus, because it was filed as a CIP of an earlier patent, the validity of the claims of the ’700 patent (and, consequently, the claim for infringement) depended upon whether those claims, as construed by the Eastern District, were entitled to the filing date of the ’525 patent (July 5, 1996). If not entitled to the earlier date, Anascape had conceded that the asserted claims were invalid under 35 U.S.C. Sec. 102 as being anticipated by prior art consisting of a Sony “DualShock” controller sold in the United States in 1998 (described in a patent application of Goto published in 1998) and a Sony “DualShock 2” controller sold in the United States in October 2000.
The Federal Circuit laid out the controlling law and issue:
To obtain the benefit of the filing date of a parent application, the claims of the later-filed application must be supported by the written description in the parent “in sufficient detail that one skilled in the art can clearly conclude that the inventor invented the claimed invention as of the filing date sought.” Lockwood v. American Airlines, Inc., 107 F.3d 1565, 1572 (Fed. Cir. 1997). See generally Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., No. 2008-1248, 2010 WL 1007369 (Fed. Cir. Mar. 22, 2010).
The issue turns on whether the specification of the ’525 patent supports not only controllers having a single input member that operates in six degrees of freedom, as described and claimed in the ’525 patent, but also controllers having multiple input members that together operate in six degrees of freedom, as described and claimed in the ’700 patent.
The parties’ contentions on this point boiled down to the following assertions:
- Anascape argued, for the purpose of establishing the ’525 filing date for the ’700 claims, that the ’525 specification also supports the ’700 claims that are not limited to a single input member operable in six degrees of freedom.
- Nintendo disputed that position, arguing that the ’525 specification is directed to only a single input member.
Anascape tried to argue that a number of the ‘525 patent’s figures described multiple input members operating in fewer than six degrees of freedom, thus supporting the ‘700 patents later claims. The Federal Circuit noted, however, that “[t]his statement does not match the description in the patent.” In fact, Nintendo had compiled over 20 statements in the ‘525 patent’s specification to the effect that “the invention is directed to a single input member that is operable in six degrees of freedom.”**
Anascape tried to avoid these problems by noting that some of the claims of the earlier ‘525 patent recited input members “moveable on at least two axes,” arguing that this adequately described, for priority purposes, use of more than a single input member for 6-degree-of-freedom control. The Federal Circuit rightly ignored this argument, noting that the claim language at issue was added to the ‘525 patent in 2000 (i.e. too late to help the ‘700 patent overcome the prior art).
Anascape also tried to argue that extensive changes it made to the ‘700 patent’s specification, all supposedly supporting claims to multiple-input-member controllers, were not new matter relative to the ‘525 patent (which, if it was true, would defeat the claim that such material was present in the earlier application). The Court was rightly skeptical, stating:
This is classical new matter. See, e.g., Baldwin Graphic Systems, Inc. v. Siebert, Inc., 512 F.3d 1338, 1344 (Fed. Cir. 2008) (“the examiner rightly refused to allow the applicants to amend the specification to remove references to ‘heat’ as the way of sealing the sleeve,” for the change “would have broadened the patent and introduced impermissible new matter” and rendered the reissue claims “invalid for lack of support in the initial disclosure”).
Anascape tried also to assert that the ‘525 patent was only describing a preferred (single input) embodiment of a 6-degree-of-freedom controller, and was not intended to disclaim other (multiple input) embodiments. The Federal Circuit did not chase this red herring:
However, the question is not whether the patentee in the ’525 specification “disclaimed” the scope of the ’700 patent; the question is whether the ’525 specification sufficiently describes the later-claimed subject matter, as to entitle the ’700 claims to the filing date of the ’525 application. See Lucent Technologies, Inc. v. Gateway, Inc., 543 F.3d 710, 718-19 (Fed. Cir. 2008) (to claim priority based on the filing date of an earlier application, the earlier application must support the claims of the later-filed application).
A patentee is not deemed to disclaim every variant that it does not mention. However, neither is a patentee presumed to support variants that are not described. See Amgen Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1330 (Fed. Cir. 2003) (“The purpose of the written description requirement is to prevent an applicant from later asserting that he invented that which he did not; the applicant for a patent is therefore required to ‘recount his invention in such detail that his future claims can be determined to be encompassed within his original creation.’” (quoting Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1561 (Fed. Cir. 1991))).
Anascape tried various arguments directed to the testimony of experts, but neither of those was availing, being either unsupported by evidence (that’s bad), or misstatements of testimony (also bad).
Concluding, the Federal Circuit found that the later, asserted, ‘700 patent was not entitled to claim the earlier filing date of the ‘525 patent, was thus invalid. Judgment, and $21 million damages award, reversed.
Thus, the description in the ’525 specification is not reasonably read as describing a larger invention, of which the single input was only a preferred embodiment. See Honeywell Int’l, Inc. v. ITT Industries, Inc., 452 F.3d 1312, 1318 (Fed. Cir. 2006) (“Here, the written description uses language that leads us to the conclusion that a fuel filter is the only ‘fuel injection system component’ that the claims cover, and that a fuel filter was not merely discussed as a preferred embodiment.”). Whether or not the inventor could have described the ’525 invention more broadly, “[i]t is not sufficient for purposes of the written description requirement of §112 that the disclosure, when combined with the knowledge in the art, would lead one to speculate as to modifications that the inventor might have envisioned, but failed to disclose.” Lockwood, 107 F.3d at 1572.
We conclude that the only reasonable reading of the ’525 specification is that it is directed to and describes only a controller having a single input member operable in six degrees of freedom. In contrast, the ’700 specification and claims were enlarged to cover more than single input members operable in six degrees of freedom. The district court erred in ruling that this subject matter is adequately described in the ’525 specification, for the statutory requirements are not met, on any reading of the ’525 specification.
As an aside, Judge Gajarsa concurred in the result and reiterated his point (made in the Eli Lilly v. Ariad en banc opinion) that the written description requirement of Sec. 112 is best used (as here) to determine priority claims and not enablement:
While I agree with the majority’s result, I write separately to highlight the majority’s best use of the written description requirement as a priority-policing mechanism in contradistinction to an independent basis for invalidity. [Ariad Pharm., Inc. v. Eli Lilly & Co., No. 2008-1248, 2010 WL 1007369 (Fed. Cir. March 22, 2010)]
While the statutory language has been interpreted by this court to require a written description for patentability, it is not the ideal vehicle for invalidating claims. Such a vehicle is better provided by the enablement requirement of § 112.
*N.B. Anascape also sued Microsoft, which settled just before trial, and licensed its patents to Sony. Neither Microsoft’s nor Sony’s decisions look good in hindsight (which, of course, is at least 20/20).
**Practice tip: try not to write “the invention is directed to…” in your specifications. Especially 20 times.
On Monday, the Supreme Court denied certiorari in the case of SAP AG v. Sky Technologies LLC. Supreme Court Docket No. 09-819. The Supreme Court thus let stand the holding of the Federal Circuit in Sky Technologies LLC v. SAP AG and SAP America, Inc. [PDF] that ownership of a patent can be transferred without a writing under operation of state law (e.g. a state law transferring title to a patent to a secured creditor).
At issue was whether state law can operate to create classes of patent owners not specifically called out in 35 USC Sec. 154. From the Question Presented to the Supreme Court by petitioner SAP:
The Patent Act identifies only three classes of patent owners with standing to sue for infringement: “patentee[s],” “heirs,” and “assigns.” This Court has repeatedly held that these three classes—unchanged since 1870—comprise the exclusive set of patent owners and that the transfer of legal title in and to a patent requires an assignment in writing. Respondent is not the original patentee, is not an heir, and has no written assignment from the original patent owner. The United States Court of Appeals for the Federal Circuit nevertheless held that Respondent had standing to sue for infringement because a non-judicial state law foreclosure “transferred” legal title to the patents-in-suit by operation of law.
Did the Federal Circuit err when it held that the Patent Act allows the states to create additional, non-statutory classes of patent owners—including “transfer[ee]s” who may take title without any writing at all?
In 1996, Jeffrey Conklin (Conklin) founded TradeAccess, Inc. (TradeAccess). Conklin and his co-inventors obtained a portfolio of patents which were assigned, along with all of their “right[s], title[s], and interest together with the benefits and privileges in and to said inventions and discoveries” to TradeAccess. TradeAccess later changed its name to Ozro.
In 2001, Ozro wanted to obtain a number of commercial loans, so it provided the Conklin patents as collateral. Ozro began by executing an Intellectual Property Security Agreement with Silicon Valley Bank (SVB), granting SVB a “security interest in all of [Ozro’s] right, title, and interest, whether presently existing or hereafter acquired in, to and under all of the Collateral.” Because the Collateral included the patents originally assigned by Conklin, the SVB Agreement was filed with the U.S. Patent and Trademark Office. To get another loan, Ozro executed a similar security agreement with a second company, Cross Atlantic Capital (XACP).
The agreements gave both SVB and XACP “the right to exercise all the remedies of a secured party upon default under the Massachusetts Uniform Commercial Code,” including the right:
(i) to take possession of all or any portion of the Intellectual Property Collateral, (ii) to sell, lease, or otherwise dispose of any or all of the Intellectual Property Collateral . . . and (iii) to exercise all or any of the rights, remedies, powers, privileges and discretions under all or any of the documents relating to the Secured Obligations.
In December 2002, SVB assigned its security interest to XACP through a Non-Recourse Assignment, giving XACP all of the “right, title, and interest” formerly held by SVB. This Assignment, too, was recorded with the PTO; at that point, XACP held the security interest in all of Conklin’s patents.
As you would guess from the set up, Ozro defaulted on its loan obligations and XACP foreclosed on the patents.
In the meantime, Conklin started a new company, Whitelight Technology, later known as Sky Technologies LLC (Sky). After the XACP foreclosure, Conklin entered into negotiations with XACP to transfer ownership of his patents to Sky. The final negotiated agreement said that XACP would use its best efforts to obtain title to the Conklin patents, for purposes of a transfer from XACP to Sky, by selling all of its rights in and to the patents by public auction within 60 days. The nifty trick is that XACP would foreclose on its own security interests, sell those interests at auction, and buy them back. It would thus convert its security interest in the patents to full ownership.
Once it obtained title to the Conklin patents, XACP assigned all of its “right[s], title, and interest in” those patents to Sky by a written assignment. At no point after foreclosure did Ozro execute a written agreement assigning all of its rights, title, or interests in the patents to XACP (meaning that there was a gap in the chain of written assignments).
In 2006, Sky used the Conklin patents to file a patent infringement suit against SAP in the United States District Court for the Eastern District of Texas. Sky Tech. LLC v. SAP AG & SAP America, Inc., Case No. 2:06-CV-440-DF. On January 4, 2008, SAP moved to dismiss Sky’s Complaint for lack of standing.
The district court, relying on the Federal Circuit’s decision in Akazawa v. Link New Tech. Int’l, Inc., 520 F.3d 1354 (Fed. Cir. 2008), found that Sky had standing to bring a patent infringement suit. In Akazawa, the defendant challenged the plaintiff’s standing to sue for infringement based on an alleged defect in the plaintiff’s claim of ownership in the patent. Id. at 1355. Akazawa, the inventor of a patent, died intestate (without a will), after which his wife and daughters agreed that all of Akazawa’s rights would be transferred to his wife, who then transferred her rights to the plaintiff. Id. at 1355. The district court in Akazawa held that the plaintiff lacked standing to enforce the patent because no writing had been issued from the inventor to his wife granting her all of his rights to the patent. Id. The Federal Circuit reversed, holding that passage of title through intestacy is not an assignment, and therefore did not require a writing. Id. at 1358. In addition, the Federal Circuit stated that if the controlling intestacy law passed title of the patent upon the inventor’s death, then all subsequent transfers were valid. Id.
On this basis, the district court in Sky Tech. held that the patents-in-suit were transferred from Ozro to XACP through XACP’s foreclosure proceedings and auction. Because XACP properly complied with the foreclosure requirements of the Massachusetts Uniform Commercial Code, by placing the patent collateral up for sale at a public auction and notifying Ozro of the sale, the district court held title was transferred on July 14, 2003, the date of the foreclosure. For this reason, when XACP assigned the patents-in-suit, in writing, to Sky on July 22, 2003, Sky became vested with all rights, title, and interest in the patents. Thus, the chain-of-title had not been broken from Ozro to Sky, and Sky was declared the proper title holder of the patents-in-suit, giving Sky standing to bring the patent infringement suit.
SAP filed an interlocutory appeal to the Federal Circuit from that judgment. The central question was framed as “whether XACP had legal right, title, and interest in the patents-in-suit to transfer all of those rights to Sky, thereby providing Sky with standing to bring the underlying infringement claim.” SAP contended that because no writing existed transferring the patents-in-suit from Ozro to XACP, Sky did not obtain legal title from XACP, and therefore did not have standing in the matter. Sky (of course) disagreed, arguing that Akazawa permitted transfers of patent ownership by operation of law without a writing, and, since the patents-in-suit were foreclosed upon in accordance with Massachusetts law, XACP became the owner of the patents on July 14, 2003, after the foreclosure proceedings. Thus, Sky contended that XACP’s assignment to Sky vested Sky with full legal title and standing in the underlying case.
The Federal Circuit affirmed, relying primarily on its opinion in Akazawa. The Federal Circuit noted that, usually, federal law is used to determine the validity and terms of an assignment, and the Patent Act requires that all assignments of patent interest be in writing. 35 U.S.C. § 261 (2006). However, the court noted that Akazawa says nothing about permitting assignments without a writing; rather, Akazawa made it clear that if assignment is the method of transfer of patent ownership, then it must be done in writing, pursuant to the federal law established in § 261. See Akazawa, 520 F.3d at 1356. Thus, even though a transfer of patent ownership, if through an assignment, must be in writing, the Federal Circuit held that “[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.” (citing Akazawa, 520 F.3d at 1356). Here, state law provided for transfer of property ownership by operation of law in foreclosure proceedings, without a writing. Thus, since XACP’s foreclosure on its security interest was performed in accordance with Massachusetts law under the Uniform Commercial Code, it did not need a separate writing to receive full title and ownership of the patents, which it then transferred to Sky, providing Sky with standing in the underlying case.
SAP tried to argue at the Federal Circuit that 35 U.S.C. § 154, which controls the content and term of a patent, limits the classes of holders of a patent to only three: “the patentee, his heirs or assigns.” 35 U.S.C. Sec. 154(a)(1) (2006). Alternatively, SAP argued that if Massachusetts law was found to allow transfers of patent ownership without a writing, then federal preemption must occur pursuant to 35 U.S.C. § 261, and the transfer must be in writing. The Federal Circuit disagreed on both counts. First, the court noted that Section 154 does not address ownership classes; it merely defines the rights granted in the patent and fails to specifically address transfers of patent ownership. The court also held that Section 261 “speaks only to assignments of patents; there exists no federal statute requiring a writing for all conveyances of patent ownership. Therefore, no federal law preempts the use of the Massachusetts UCC foreclosure provisions to transfer patent ownership by operation of law.”
After this comprehensive defeat, SAP appealed to the Supreme Court, asking the Court to set aside the holding “that the Patent Act allows the states to create additional, non-statutory classes of patent owners—including ‘transfer[ee]s’ who may take title without any writing at all[.]” SAP relied primarily on historical arguments regarding the statutory text, as well as some Supreme Court precedent, in arguing that Congress and the Supreme Court have always required a “writing” to transfer patent title to a person other than a patentee and his or her heirs. For its part, Sky chose not to respond to the petition for certiorari until ordered to do so by the Court. In the end, the Supreme Court considered SAP’s appeal at its conference of April 2, 2010, and ordered the petition denied on April 5, 2010.
Thus, as it stands today, the rules for transfer of an ownership interest in a patent appear to be as follows:
- If patent ownership is transferred by assignment, the assignment must be in writing, under 35 USC Sec 261.
- If patent ownership is transferred by operation of state law, the requirements of the state law ownership-transfer provisions control. No writing is required for transfer of an ownership interest in a patent unless it is specifically called out.