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Patentee Had Standing to Sue Because Obligation in Employment Agreement to Assign Invention Was Not a Present Assignment

September 28, 2007
Bianco, Krista E.

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Last Month at the Federal Circuit - October 2007

Judges: Newman (author), Lourie, Bryson

[Appealed from: C.D. Cal., Judge Fischer]

In IpVenture, Inc. v. ProStar Computer, Inc., Nos. 06-1012, -1081 (Fed. Cir. Sept. 28, 2007), the Federal Circuit vacated the district court’s dismissal of IpVenture, Inc.’s (“IpVenture”) patent infringement suit against ProStar Computer, Inc. and Midern Computer, Inc. (collectively “Defendants”) and remanded. At the same time, the Court dismissed as moot Defendants’ cross-appeal for attorneys’ fees.

IpVenture owns and licenses patents on inventions related to the management of personal computer systems, including U.S. Patent No. 6,216,235 (“the ’235 patent”). The ’235 patent, entitled “Thermal and Power Management for Computer Systems,” was the joint invention of C. Douglass Thomas, one of the two owners of IpVenture, and his father. The application leading to the ’235 patent was filed in 1994, while Mr. Thomas was employed by Hewlett-Packard Company (“HP”) as a patent attorney. Mr. Thomas was employed by HP from 1992 to 1995. His employment agreement with HP included a provision whereby he agreed to disclose and assign to HP any inventions made by him that relate to HP’s business. On April 20, 2005, IpVenture and HP entered into an agreement, which stated that IpVenture was “the sole assignee of [the ’235 patent . . .],” that HP had “never asserted any ownership rights to the IpVenture Patents,” and that HP “never has had any legal or equitable rights . . . to any of the IpVenture Patents.” Slip op. at 4 (alterations in original).

On August 14, 2003, IpVenture filed suit against Defendants, alleging infringement of the ’235 patent. Defendants moved for dismissal, arguing that IpVenture lacked standing to sue because it did not own the entire interest in the ’235 patent, based on Mr. Thomas’s obligations under his employment agreement with HP. The district court agreed and dismissed the suit. It concluded that the assignment provision in Mr. Thomas’s employment agreement with HP “constituted an assignment of all Proprietary Developments to HP.” Id. The district court declined to consider the content and effect of IpVenture and HP’s April 20, 2005, agreement, since it was executed after the suit was filed. It ruled that even if the April 2005 agreement was a retroactive assignment, it could not cure a standing defect. IpVenture appealed the dismissal, and Defendants cross-appealed for attorneys’ fees.

On appeal, the Federal Circuit noted that “[o]nly the entity or entities that own or control all substantial rights in a patent can enforce rights controlled by that patent, lest an accused infringer be subjected to multiple suits and duplicate liability.” Id. at 2. It explained that, thus, all entities with an independent right to enforce the patent are indispensable or necessary parties to an infringement suit. It observed that when such an entity declines to join in the suit, it may be joined involuntarily, either as a party plaintiff or party defendant. The Court explained that on the facts of this case, HP was not a necessary party. It noted that the question before it was whether HP had an ownership interest in the ’235 patent when the suit was filed, and if so, the effect of HP’s later statement that it “never has had any legal or equitable rights” in the patent.

The Court noted that Mr. Thomas’s employment agreement with HP stated “agree to assign” and that this language was reinforced by HP’s 2005 statement that it “never has had any legal or equitable rights” to the ’235 patent. Id. at 5. The Court explained that “[t]he district court should have considered this statement, although it was written after this suit was filed, for it serve[d] to remove any uncertainty arising from the language of the employment agreement.” Id. It concluded that while Mr. Thomas’s employment agreement was “an agreement to assign, such interest in the ’235 patent must be implemented by written assignment.” Id. The Court noted that HP, by stating that it never had an interest in the ’235 patent, confirmed the situation as to that patent and removed the need to construe the employment agreement. It noted that HP had also confirmed that there was no possibility of a separate infringement suit by HP.

Relying on Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574 (Fed. Cir. 1991), where the Court held that the use of the phrase “will be assigned” was an agreement to assign, not a present assignment, the Court concluded that HP was not an assignee in 2003 and that the 2005 agreement with HP supported that position. It thus vacated the district court’s dismissal and remanded. Given its decision on IpVenture’s appeal, the Court dismissed the Defendants’ cross-appeal for attorneys’ fees as moot.