Patent Assignees Must Receive a Present Transfer of Legal Rights to Have Standing to Sue

Authored by Mindy L. Ehrenfried, D. Brian Kacedon, and John C. Paul

When a party filing a patent infringement litigation is not the sole legal owner of the asserted patent, a court may dismiss for lack of standing. Often, the particular language used in the grant clause of an assignment determines whether a co-inventor or other presumptive owner transferred their rights to the asserted patent or merely created an obligation to assign those rights at some unknown time in the future. Agreements that do not explicitly create a present assignment in future rights can only create an equitable claim to ownership, which fails to satisfy the standing requirement.

In an opinion in Gellman v. Telular Corp., No. 2011-1196 (Fed. Cir. Nov. 30, 2011),¹ the United States Court of Appeals for the Federal Circuit affirmed a district court ruling dismissing the suit for lack of standing because the plaintiff only had an equitable claim to ownership.

Background

Tobi Gellman filed a patent infringement suit against Telular Corp., Napco Security Systems, Inc., and Visonic Inc. alleging infringement of U.S. Patent No. 6,075,451 ("the '451 patent"). Gellman is both the widow of Mayer Leibowitz—one of the two named inventors—and a Trustee of the Leibowitz Trust. James Seivert, also deceased, was the other named inventor. As co-inventors, Leibowitz and Seivert (and any heirs or assignees) are presumptive joint legal owners of the '451 patent.

In the United States District Court for the Eastern District of Texas, Gellman argued she had standing because Seivert had legally transferred his ownership interest in the '451 patent to Leibowitz, rendering Leibowitz (and now Gellman) the sole legal owner. Gellman presented circumstantial evidence of a contract between Seivert and Leibowitz's company, Cellular Alarm Systems, Inc. Gellman argued that the contract, though unsigned, transferred Seivert's legal interest in all inventions to Leibowitz. Specifically, Gellman relied on the following language: "[Mr. Seivert] agrees to execute any and all assignments or other transfer documents which are necessary . . . to vest in Cellular Alarm all right, title, and interest in such Work Products." In the alternative, Gellman argued that Seivert was "hired to invent" and therefore Seivert's inventions necessarily belong to his employer, Leibowitz.

The district court found Gellman's arguments unpersuasive. Having filed the infringement suit without the participation of all legal owners of the asserted patent (i.e., Seivert's heirs), the district court dismissed without prejudice for lack of standing.

The Gellman Decision

The Federal Circuit affirmed the district court's dismissal for lack of standing. The court first noted that a plaintiff in a patent infringement suit bears the burden of proving sole, legal ownership of the asserted patent in order to establish standing—i.e., the ability to assert the patent rights. The court explained that the absence of a signed instrument was not fatal to Gellman's argument that Seivert transferred his legal rights to Leibowitz. Although section 261 of the Patent Act requires parties to memorialize in writing all assignments in writing, the court acknowledged that transfers of patent rights—which do not require written proof—may occur outside of an assignment. Based on the facts at hand, however, the court found that Gellman had, at best, showed Leibowitz had an equitable ownership interest rather than the required sole, legal ownership. Thus, Gellman failed to establish standing.

The court reasoned that the unsigned contract, even if enforceable, lacked conclusive language to demonstrate that Seivert had actually transferred his legal rights and interests. The phrase "agrees to execute," at most, created an obligation for Seivert to assign his rights at some unknown time in the future. The court reiterated that present assignments of future rights must expressly set forth the assignment when the agreement is signed. As an example, the court highlighted its decision in Board of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Systems, Inc., 583 F.3d 832, 841–42 (Fed. Cir. 2009), which held that the phrase "I will assign and do hereby assign" created a present assignment of a future right. Because "agrees to execute" imposed a future rather than a present obligation on Seivert, Gellman established only an equitable claim to ownership.

Addressing Gellman's alternative argument, the court noted that the "hired-to-invent" doctrine is purely equitable, and could thus create only an obligation to assign as opposed to a present assignment. Because a plaintiff asserting patent infringement must demonstrate legal ownership rather than just an equitable claim of ownership, the court affirmed the district court's dismissal for lack of standing.

Strategy and Conclusion

Licensors who are the sole, legal owners of a patent always have standing to assert their patent rights. In addition, exclusive licensees have standing to assert rights in a licensed patent while non-exclusive licensees, or bare licensees, generally do not have standing to assert such rights. Therefore, care in drafting and analyzing assignments is required to determine whether an assignee has a present transfer of patent rights that allows standing to bring a patent infringement suit or a promise to transfer the patent rights in future that does not allow standing to bring a patent infringement suit.

Endnotes

¹  The Gellman decision: available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1196.pdf.

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