Federal Circuit Finds Assigned “Inventions and Discoveries” Extends to Continuation Applications

In MHL Tek, LLC v. Nissan Motor Co., 99 USPQ2d 1681 (Fed. Cir. 2011), MHL Tek, LLC (“MHL”), the controversy surrounds the ownership of U.S. Patent Nos. 5,663,496 (“the ′496 patent”), 5,741,966 (“the ′966 patent”), and U.S. Patent No. 5,731,516 (“the ′516 patent”), all of which relate to a tire pressure monitoring system (“TPMS”) and have the same inventors.  Two of the patents, the ‘496 and ‘966 patents, are divisionals of the same parent application (the “Parent Application), while the third patent, the ‘516 patent, has a separate specification from the ‘496 or ‘966 patents or to the Parent Application.

The Parent Application was filed on August 3, 1993, while the ‘496 and ‘966 patents were both filed on June 6, 1995, and the ‘516 patent was filed on May 2, 1996.  On August 5, 1993, two days after the Parent Application was filed, the inventors executed an assignment to Animatronics, Inc. (“Animatronics”), assigning all rights to “the inventions and discoveries” in the Parent Application.

Two months later, Animatronics executed an assignment (the “1993 Assignment”) to McLaughlin Electronics (“ME”), stating that Animatronics assigned all rights to “the inventions and discoveries set forth” in the Parent Application.  However, this 1993 Assignment contained a carve-out provision, stating that the Assignment did not cover any rights to the Parent Application concerning Animatronics’ “Proprietary Inventions.”  The Proprietary Inventions were define in a separate Development Agreement as “(1) the Communications Link; (2) a radio frequency transceiver and algorithm used in the Service Unit and Sensor Unit; and (3) a piezo resistive rubber pressure sensor for use in the Sensor Unit.”  However, Animatronics and ME began to have disputes as to ME’s progress under the Development Agreement, and Animatronics began to dispute the ownership over the ′496 & ′966 patents, which were divisionals of the Parent Application in the 1993 Assignment.  The dispute was not resolved.

On June 7 and July 6, 2007, the inventors signed documents assigning the ′496, ′966, and ′516 patents to MHL, who then sued the Defendants on July 13, 2007, claiming that Defendants’ TPMS infringed on all three patents.  Animatronics then assigned any of its rights to the patents-in-issue to MHL on November 6, 2007.

The Defendants moved to dismiss for lack of standing.  The district court granted this motion with respect to the ‘496 and ‘966 patents, agreeing that these patents had already been assigned to Animatronics due to the 1993 Assignment and thus were not assigned to MHL until November 6, 2007, after MHL had filed suit.  However, the district court denied the motion with respect to the ‘516 patent, holding that the inventors never assigned this patent to Animatronics, and therefore the June and July 2007 assignments conferred standing upon MHL in regard to this patent.

MHL filed an amended complaint to cure the timing defect with respect to the ‘496 and ‘966 patents.  The Defendants again moved to dismiss these claims for lack of standing, asserting that Animatronics had assigned its rights in these patents to ME and therefore could not assign them to MHL.  The district court agreed, holding that these two patents did not concern Animatronics’ Proprietary Inventions and were not subject to the carve-out provision of the Assignment.

The Defendants moved again to dismiss the ‘516 infringement claim for lack of standing, asserting that the ‘516 patent was assigned to Animatronics and then to ME because it was within the scope of the “inventions and discoveries” in the Parent Application.  Here, the district court disagreed, holding that the ‘516 patent was not related to the Parent Application and therefore was not included within the scope of either assignment.  Litigation commenced regarding infringement of the ‘516 patent, and the district court eventually granted the Defendants’ motion for summary judgment of non-infringement of the ‘516 patent.

On appeal, MHL did not dispute that the ‘496 and ‘966 patents were “inventions and discoveries” within the Parent Application as defined in the 1993 Assignment, but instead argued that the ‘496 and ‘966 patents included additional features which were part of the carve-out.  Specifically, the ‘496 patent claims include limitations to a communications link, and the ′966 patent covers a Service Unit and its RF Link, both of which were Proprietary Inventions in the carve-out.  The Federal Circuit, however, noted that there was no evidence that these technologies included in the specification of the Parent Application were the same ones included in the 1993 Assignment carve-out.  Therefore, the Federal Circuit held that the ‘496 and ‘966 patents were not subject to the carve-out provision of the 1993 Assignment because the patent claims did not cover any of the Proprietary Inventions – thus, they were assigned to ME and could not be then assigned to MHL by Animatronics.  As such, the Federal Circuit affirmed the district court’s decision that MHL lacked standing to assert those two patents.

In regards to the ‘516 patent, the Federal Circuit noted that the 1993 Assignment was not limited solely to patents claiming priority to the Parent Application since it was limited only to “inventions and discoveries” of the Parent Application.  As such, it was possible for the 1993 Assignment to also cover the ‘516 patent.  To determine the scope of the 1993 Assignment, the Federal Circuit noted that the invention is both determined by the existing claims of the ‘516 patent as defined in Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en banc), as compared to whether the written description in the Parent Application would describe the invention for purposes of 35 U.S.C. § 112 “reasonably conveys to those skilled in the art,” Ariad Pharms., Inc. v. Eli Lilly & Co., 589 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc).

Under this test, the Federal Circuit first noted that the specification of the Parent Application did support the claims of the ‘516 patent, and therefore did include the invention of the ‘516 patent.  As such, the ‘516 patent was also subject to the 1993 Assignment.  Therefore, the Federal Circuit held that MHL also lacked standing to assert the ‘516 patent, reversing the district court’s decision, and vacated the district court’s grant of summary judgment of non-infringement of the ‘516 patent.

Significance to Patent Owners

MHL Tek is a continuation of the Federal Circuit’s recent jurisprudence in which Federal Common Law is being applied to interpret assignment documents.  This is an issue which has recently come to the forefront and is not without some controversy since the difference can change an outcome of a case.  Indeed, the Supreme Court in Stanford Junior Univ. v. Roche Molecular Sys., 179 L. Ed. 2d 91;79 U.S.L.W. 3475 (2011) seemed to critical of the application of Federal Common Law to assignments, and at least one petition for certiorari has been filed on this very issue.  See Supreme Court Confirms Ownership Under Bayh-Dole; See generally Ian B. Feinberg, Eric B. Evans, and Andrew M. Holmes, Consequences of the Federal Circuit’s New Reliance on Federal Common Law to Interpret Patent Assignment Agreements, Landslide 24–29 (ABA Jan./Feb. 2011) (arguing that the application of Federal Common Law by the Federal Circuit in Stanford resulted in a different outcome than would have occurred under California law).   in MHL, it is also unclear as to whether a state court would have reached the same conclusion since the 1993 Assignment did not specify whether it covered other distinct applications, such as continuations, divisionals, continuations in part etc as is the normal practice with regards to assignments, and therefore the Federal Circuit was relying on very vague language as interpreted under Federal Circuit claim construction laws to cover entire classes of technology.  Until this issue is resolved, patent owners are advised of the need to carefully review their standard assignment and licensing language to ensure that they are updated to reflect this growing body of Federal Common Law.

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