It May Be Impossible to Recover Patent Rights Assigned to Another Entity on the Mistaken Assumption the Other Entity Also Had Rights in the Invention

Authored by D. Brian Kacedon, John C. Paul, and Kara A. Specht

Abstract

The founders of Memorylink planned to collaborate with Motorola on wireless multimedia technology, discussed features to be patented, and along with two Motorola employees, entered into an agreement assigning their patent rights to both Memorylink and Motorola. When Memorylink subsequently learned that the Motorola employees would not be regarded as inventors for purposes of patenting they tried to invalidate the assignment for lack of consideration and sued Motorola for infringing the resulting issued patent. The court found the assignment of rights to Motorola was valid, making Motorola a joint owner of the patent and able to practice the patent without further authorization from Memorylink.

When parties enter into a collaboration agreement, one of the more important issues to be addressed is the ownership of inventions arising from that collaboration. Frequently, the collaborators will agree to co-own inventions they jointly develop and to individually own inventions they develop alone. While seemingly straightforward, this approach can prove problematic if issues arise regarding inventorship.

In a recent decision from the Federal Circuit in Memorylink Corp. v. Motorola Solutions, Inc., No. 14-1186 (Fed. Cir. Dec. 5, 2014), the collaborators agreed to co-own certain inventions on the assumption that employees of both companies would be considered inventors. When it was later determined that only employees of one entity might be inventors, those inventors attempted to invalidate the assignment providing for joint ownership. The Federal Circuit, however, found the assignment of rights valid and the patents jointly owned.

Background

Peter Strandwitz and Bob Kniskern formed Memorylink and approached Motorola to jointly develop a handheld camera that could wirelessly receive and transmit video signals. After a successful demonstration to Motorola, Strandwitz sent a letter to Motorola stating that he "agree[d] that any patents would be jointly owned by Motorola and Memorylink," and that Motorola should "head up the patent investigation." Strandwitz also sent Motorola a technical document drafted by Kniskern. After reviewing the document, Motorola's attorney responded with a letter describing features to be focused on for patent applications, stating the attorney's understanding is that the inventors were Strandwitz, Kniskern, and two Motorola employees. All four designated inventors signed an assignment transferring all rights to both Motorola and Memorylink. The assignment also included a statement that it was granted "[f]or and in consideration of the sum of one dollar to us in hand paid, and other good and valuable consideration, the receipt of which is hereby acknowledged . . . ."

U.S. Patent No. 6,522,352 ("the '352 patent") subsequently issued and listed the four designated inventors. When Memorylink later hired outside counsel to review the inventorship and relationship between the entities, it was advised that Motorola's employees were not proper co-inventors.

Memorylink then filed suit against Motorola, alleging infringement of the '352 patent, seeking a declaration that the assignment was void for lack of consideration. Motorola moved for summary judgment that there was consideration for the assignment and that Motorola could not be liable for infringement as a co-owner of the '352 patent. The district court granted summary judgment in favor of Motorola. Memorylink appealed.

The Decision of the Federal Circuit on Appeal

The Federal Circuit rejected Memorylink's arguments that the assignment was void because it merely recited boilerplate consideration language and Strandwitz and Kniskern allegedly received no consideration given that Motorola's employees were not proper co-inventors, thus, had no rights to assign. The court explained that the assignment explicitly acknowledged consideration for the sale, assignment, and transfer of rights relating to the wireless video technology, and that the use of boilerplate language did not make the stated consideration invalid or nonexistent.

Additionally, the court found that consideration was actually exchanged because Motorola's employees transferred whatever ownership rights they possessed to Memorylink and Motorola by executing the assignment. Whether those rights, the court reasoned, are eventually decided to be nonexistent did not undermine the consideration supporting the agreement. The court pointed to the fact that a party assigning patent rights before the patent application is filed or during prosecution cannot guarantee that a patent will issue or that an issued patent will not be invalidated.

In summary, the Federal Circuit found that the assignment was valid and the Memorylink inventors had received consideration for assigning their rights to Motorola. Thus, Motorola co-owned the asserted patent with Memorylink and could not infringe the patents.

Strategy and Conclusion

This decision illustrates how decisions made at an early stage as to ownership of inventions resulting from collaboration will often be binding, even if the assumptions underlying those decisions later prove incorrect. While the inventors can try to include contract terms that would allow them to recover their rights and solely own the invention, if an assumption on inventorship turned out to be wrong it would likely be difficult to reach agreement on such terms because inventorship can be a difficult issue to determine and the parties would likely want some certainty as to rights going forward.

Endnotes

¹ The Memorylink decision can be found at http://www.finnegan.com/files/Publication/23d6378c-3b34-40a7-a8bc-67b81456deea/Presentation/PublicationAttachment/79bfc4b7-f6c8-4d5b-8941-682487f382ef/14-1186 12-5-14.pdf.