Docket Nos. 2016-2309-11
NEWMAN (D), O’MALLEY (C), REYNA
January 11, 2018
Brief summary: DC dismissal for lack of standing because a co-owner’s ownership interests in the patent were not transferred to” AVT “under the terms of an employment agreement” and that person cannot be involuntarily joined.
Summary: AVT appealed SDNY dismissal of its complaints regarding US 5,781,788 for lack of standing “on the ground that a co-owner of the patent was not a party to the actions, and that co-owner’s ownership interests in the patent were not transferred to” AVT “under the terms of an employment agreement.” At the time of the invention, the inventors were employees of Infochips; two of the three inventors assigned their rights to AVT. The question here is whether the third (Ms. Hsiun) did so. AVT argued that it obtained ownership of the patent through four transfers: 1) Ms. Hsiun’s Infochips Employment Agreement (“IEA”) executed before the ‘788 application was filed; 2) Infochips pledged the invention (“receivables”) to Lease Management Services as security, and LMS seized it when Infochips went out of business; 3) LMS sold the invention to Mr. Woo, one of the three inventors; and, 4) Mr. Woo assigned his ownership interest to AVC Technology Inc. AVC filed the ‘788 application (actually a parent to the ‘788 application) and obtained assignments from two of the three inventors (Mr. Woo and Ms. Li, but not Ms. Hsiun). AVC successfully petitioned the USPTO to prosecute the application by submitting the Infochip Employment Agreement and documents “purporting to show that Mr. Woo and AVC had acquired Ms. Hsiun’s ownership rights.” AVC “later dissolved, but not before purporting to transfer its assets” to AVT. AVT’s first suits (2011) were dismissed because, the DC found, the patent rights had not been transferred. In 2015, the court “appointed a Receiver to transfer to [AVT] any patent rights helds by AVC”, which was completed in 2016, after which AVT filed three infringement suits against HTC. AVT argued “the transfer was effected pursuant to…a ‘will assign’ provision, a trust provision, and a quitclaim provision” of the IEA. The FC panel explained that it reviews a DC’s dismissal for lack of standing de novo and the relevant factual findings for clear error (Isr. Bio-Eng’g, FC 2007; Prima Tek, FC 2000; Enovsys, FC 2010). The FC panel found that neither “[t]he ‘will assign’ language alone” nor the “will hold in trust” provision created the immediate transfer and, e.g., AVT did bring an action against Ms. Hsiun alleging “a breach of Ms. Hsiun’s duties as a trustee by her failure to transfer those rights” (Jim Arnold, FC 1997; Abraxis, FC 2010; STC.UNM, FC 2014 (rights of co-owner “to impede infringement suit…is a substantive right that trumps” involuntary joinder rule)). The FC panel also found the “quitclaim provision” did not “cover patent rights that could have been assigned under contract, but were never actually assigned” and did not therefore “effect an assignment…to Infochips, AVC, or” AVT. The FC panel opinion addressed Judge Newman’s dissent regarding the parties intentions by explaining that “[g]enerally, courts should not deviate from unambiguous provisions unless they lead to ‘absurd results’” (Shaw, Cal. Ct. App. 1997; IpVenture, FC 2007). The FC panel therefore affirmed the DC dismissal. Judge O’Malley concurred but disagrees with “the conclusion that a non-consenting co-owner or co-inventor can never be involuntarily joined” under FRCP Rule 19.