Patent Assignment Properly Transferred Ownership to Successor Corporations
September 09, 2010
Last Month at the Federal Circuit - October 2010
Judges: Newman (author), Bryson, Dyk
[Appealed from: C.D. Cal., Judge Feess]
In Tri-Star Electronics International, Inc. v. Preci-Dip Durtal SA, No. 09-1337 (Fed. Cir. Sept. 9, 2010), the Federal Circuit affirmed the district court’s denial of defendant’s motion to dismiss a patent infringement suit for lack of standing. The Court held that the inventor properly assigned the patent to his former employer and its successors, and so the plaintiff, one of the succeeding companies, may bring an infringement suit.
On June 16, 1998, Leslie Kerek, an inventor employed by Tri-Star Electronics International, Inc. (“Tri-Star Ohio”), executed an assignment of his invention set forth in a patent application entitled “Socket Contact.” In accordance with Kerek’s employment contract, he assigned the invention to “Tri-Star Electronics International, Inc., its successors, legal representatives, and assigns.” Tri-Star was identified in the assignment document as an Ohio corporation. The patent application was filed in the PTO and the assignment recorded on June 25, 1998. Kerek executed an assignment for a CIP application on September 7, 1999, which also assigned the invention to “Tri-Star Electronics International, Inc., its successors, legal representatives, and assigns,” and identified Tri-Star as an Ohio corporation. This application issued as U.S. Patent No. 6,250,974 (“the ’974 patent”).
Tri-Star Ohio merged with a California corporation of the same name (“Tri-Star California”) on June 24, 1998. In August 2005, the Tri-Star California corporation merged into a newly created Delaware corporation (“Tri-Star Delaware”). Tri-Star Delaware sued Preci-Dip Durtal SA (“Preci-Dip”) for infringement of the ’974 patent in June 2008. Preci-Dip moved to dismiss the suit, arguing that Kerek had assigned his invention to a nonexistent entity, the Tri-Star Ohio corporation, and, therefore, the chain of ownership never came into effect. Kerek executed a “Confirmatory Assignment” in response, reciting the status of each succeeding Tri-Star corporate entity and stating that he confirmed his assignment to the appropriate Tri-Star corporations.
The district court denied Preci-Dip’s motion to dismiss, holding that Kerek’s September 7, 1999, assignment conveyed ownership of the invention to the Tri-Star California corporation, because it transferred Kerek’s ownership rights to Tri-Star Ohio and its “successors, legal representatives, and assigns.” The district court held that Tri-Star California existed as the successor of Tri-Star Ohio at the time of the assignment, and, therefore, Tri-Star California validly acquired Kerek’s patent rights. Ohio law provides that whenever an assignment is necessary to vest property or rights in a new entity, the merged corporation continues to exist for these purposes. Id. at 3-4 (citing Ohio Rev. Code § 1701.82(A)(1) (2010)). Accordingly, the district court held that Tri-Star Ohio continued to exist for the purpose of vesting property rights in its successor Tri-Star California, including the patent application at issue. Preci-Dip appealed.
On appeal, the Federal Circuit addressed Preci-Dip’s argument that Tri-Star California did not come into the patent application’s chain of ownership through Kerek’s assignment, and, thus, Tri-Star Delaware did not have standing to sue. Preci-Dip also argued that the “successor, legal representatives, and assigns” language in the assignment document was “merely boilerplate” and could not be viewed as conveying ownership to an unnamed successor. The Court examined the patent assignment under Ohio law, which strives to give effect to every contract provision and favors interpreting a doubtful condition in a construction that would give it “meaning and purpose.” The district court held that Tri-Star California, as the existing successor to Tri-State Ohio, received the assignment of the patent at the time of assignment. The Court agreed with this interpretation, stating: “The district court held that Tri-Star of California, as the existing successor to Tri-Star of Ohio, received the assignment of the patent at the time of the assignment. This interpretation maintains the validity of every contract provision, and gives effect to the contract’s purpose of assigning the invention to Mr. Kerek’s employer.” Id. at 5 (citations omitted). The district court also looked to the contracting parties’ mutual intent, since all contracts must be construed in this direction. It was not disputed that Kerek intended to assign his patent rights to Tri-Star Ohio as required by his employment contract, and Preci-Dip did not offer any reason to disregard this contractual intent as evidenced in the assignment. The parties to the assignment agreed that Tri-Star California, as Tri-Star Ohio’s successor, was the intended recipient of the ownership rights at the time of the assignment’s execution. The term “successor” in the assignment language gave further effect to this intention, and, therefore, the Court affirmed the district court’s ruling that the assignment transferred ownership to Tri-Star California. Since Preci-Dip did not challenge the ensuing transfer to
Tri-Star Delaware, Tri-Star Delaware had standing to bring its patent infringement suit.
Summary authored by Michael R. Justus, Esq.