• Check the Chain of Title, Please

    by  • September 24, 2011 • patent

    Folks, really.  Check the assignment documents before you file the lawsuit, don’t assume the face of the patent is correct:
     At some point soon after PBS Inc. filed its motion to amend, it was discovered that PBS Ltd., not PBS Inc., is the assignee and owner of the ‘651 and ‘039 patents. PBS Inc. is listed as the assignee on the face of the ‘651 and ‘039 patents, but all of the underlying assignment documents on file with the USPTO designate PBS Ltd. as the assignee. PBS Inc. asserts that the designation of PBS Inc., instead of PBS Ltd., as assignee on the face of the ‘651 and ‘039 patents was the result of a clerical error.
    There’s really no excuse for failing to check the chain of title on any asset before bringing a lawsuit. Is the chain of title documented at every step for ALL former owners, particularly inventors? Have all necessary fees been paid?  Do the assignment documents have the proper language, e.g., did the trademark assignment include the goodwill, did the patent assignment properly assign future inventions?  You may be able to fix all this before the suit is filed, but if you don’t it will surely be challenged.

    Luckily for the plaintiff here, substitution is allowed under Fed. R. Civ. P. 17(a)(3).  “Courts should grant leave to substitute if ‘(1) the defect in the named plaintiffs plausibly resulted from mistake (“mistake” prong), and (2) correcting this defect would not unfairly prejudice defendants by changing the particulars of the claims against them (“prejudice” prong).'”

    The “mistake” prong was met:

    Here, PBS Inc. asserts that when filing this suit, its attorney was under the mistaken belief that PBS Inc. was the owner of the ‘651 and ‘039 patents based on the face of each patent, which listed PBS Inc., not PBS Ltd., as the assignee. Park B. Smith, chairman of PBS Inc. and PBS Ltd., likewise avows that he mistakenly believed that PBS Inc. was the owner from the time that the complaint was filed until May 2010, when he was advised otherwise by his attorney. While PBS Inc.’s failure to look beyond the face of the patents and investigate the underlying assignment documents before filing suit evinces a lack of diligence, there is no indication that they acted in bad faith and absent such evidence, PBS Inc. meets the mistake prong.

    “Prejudice” prong was too, so the suit continued.  But imagine if it didn’t – five years of litigation down the drain.

    Park B. Smith, Inc. v. CHF Indus. Inc., No. 06 Civ. 869 (LMM) (S.D.N.Y. July 12, 2011).

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