Flawed Patent Assignment Defeats Standing to Sue for Infringement

May 2017

Intellectual Ventures I LLC v. Erie Indemnity Co., No. 2016-1128, -1132 (Fed. Cir. Mar. 7, 2017)

In Intellectual Ventures, the Federal Circuit affirmed a district court finding that Intellectual Ventures lacked standing to assert infringement because of a flawed assignment of patent rights that failed to properly convey all patents in a patent family.

IV asserted ownership of a patent it allegedly acquired from Alset, Inc., who acquired the patent from AllAdvantage.com, who acquired the patents as the result of a series of earlier assignments.  The assignment from AllAdvantage.com identified the parent to the subject patent, but failed to expressly identify the then pending continuation application that issued into the subject patent.  The assignment purported to convey all rights “in and to said patents” as well as “the goodwill of the business symbolized by said patents.”  It did not contain language assigning the rights to continuing applications or family members to the enumerated patents.  But the assignment was accepted by the Patent and Trademark Office, which recorded the transfer of ownership of the subject patent.

IV sued Erie and a collection of insurance companies for infringement.  Erie moved to dismiss on the basis that IV lacked standing to assert the patent.  The district court concluded that IV did not own rights to the patent and granted the defendants’ motion to dismiss.

The Federal Circuit affirmed the dismissal for lack of standing.  While the court acknowledged that the recordation of the assignment by the Patent Office was evidence that Alset believed it owned the patent, that extrinsic evidence could not alter the plain reading of the agreement.

The Federal Circuit also rejected the argument that the phrase “in and to said patents,” conveyed rights in the continuing application.  The court distinguished prior cases that held the phrase “in and to said invention” conveyed rights to continuing applications directed to the same subject matter, on the basis that the instant assignment expressly limited the assignment to the patents, not the invention as a whole.

Finally, regarding the “goodwill of the business symbolized by said patents” language, the Federal Circuit focused its attention on the term “business” and asserted that the assignment referred to commercial exploitation of products covered by the parent patent, not child patent applications.

Key Takeaway: The assignment of patent rights must be express and in writing.  A flawed assignment may break the chain of ownership of a patent, regardless of the intent of the parties, or the fact that the assignment was accepted by the Patent Office.  Patent owners should diligently examine the written instruments conveying patent rights for any patents acquired through assignment.