• There Is Just No Way Around the Absent Patent Owner

    by  • January 3, 2017 • patent • 1 Comment

    I’m writing about an inventorship case mostly because I have to bone up before I speak at the AIPLA Mid-Winter Institute in a talk rivetingly titled “The Backlash from Mismanagement of Inventorship in Multi-Party Deals.” If you’re attending, consider Speedfit LLC v. Woodway USA, Inc. your homework assignment.

    The plaintiffs are an inventor, Aurel Astilean, and his company, Speedfit. Astilean was the inventor on two patents, the ‘619 and ‘016 patents for manually-powered treadmills.


     
    The patents were amended to add another inventor, Daniel Bostan, during the lawsuit, but Bostan is not a party to the suit.

    Defendant Woodway manufactures manually-powered treadmills, the suit mentioning the “Curve” treadmill. The backstory, not in this opinion (but you can read it here) is that Astilean hired Woodway to make a prototype of the treadmill. The complaint alleges that there was a non-disclosure agreement stating that Speedfit was to own “every right of every kind in and to its designs and any other information supplied to Woodway, and to any prototypes that Woodway builds as a result thereof,” as well as later documents confirming Speedfit’s ownership. Nevertheless, Woodway also filed patent applications for the treadmill, the ‘627 patent, the ‘169 patent, and the ‘276 patent. The legal theories have morphed throughout the case,1 starting with a complaint for declaratory judgment of non-infringement of the Woodway patents but now currently a claim for infringement of the Speedfit patents combined with a claim for correction of inventorship of the Woodway patents.

    So first up is whether the plaintiffs have standing to claim infringement of the Speedfit patents in the absence of Bostan as a plaintiff. You will note that the lawsuit was filed before Bostan was identified as an inventor, so there was no reason that he would have been a party in the original suit. During the suit both Astilien and Bostan assigned their patent rights to Speedplay, but, as attendees will learn in the AIPLA session in which I’m speaking, the answer is a quick “no.”2 Of course, all patent owners must be joined in a patent infringement lawsuit and Bostan’s assignment after the suit was filed didn’t cure the problem for several reasons: one cannot cure a standing problem at the inception of a suit with a nunc pro tunc assignment, nor did they even manage to have Bostan assign the accrued patent infringement claim. Nor, as a general rule, can one join a reluctant inventor using Fed. R. Civ. P. 19, also black-letter law:

    The Federal Circuit has addressed the question of whether there is a rule of patent law that precludes application of Rule 19, in light of the rule that “an action for infringement must join as plaintiffs all co-owners.” Ethicon, 135 F.3d at 1467 (citing Waterman, 138 U.S. at 255). In considering this question, the Federal Circuit has held that “[r]ules of procedure, such as Rule 19(a), must give way to substantive patent rights.” STC.UNM, 754 F.3d at 946 (citing 28 U.S.C. § 2072 (2012)). The Federal Circuit has defined such “substantive patent rights” to include “the right of a patent co-owner to impede an infringement suit brought by another co-owner,” noting that this substantive right “trumps the procedural rule for involuntary joinder under Rule 19(a).” STC.UNM, 754 F.3d at 946 (finding that one co-owner’s consistent expression of a desire not to join a lawsuit left the other co-owner without standing to bring the suit); see also DDB Technologies, L.L.C. v. MLB Advanced Media L.P., 517 F.3d 1284, 1289 n.2 (Fed. Cir. 2008) (“[W]e have explicitly held that Rule 19 does not permit the involuntary joinder of a patent co-owner in an infringement suit brought by another co-owner.”). Thus, controlling precedent is clear that a co-owner must voluntarily join an infringement suit, and absent the specific exceptions discussed above — which do not apply here — a court cannot rely on Rule 19 to join an unwilling co-inventor involuntarily as a plaintiff.

    There was a valiant effort to claim that an exception to the general rule applied here, which is where a co-owner has waived its right to refuse to join suit.3 A stretch, it was based on a 2009 agreement between Astilien and Bostan. The language Speedfit thought helpful to its cause was this:

    If you can’t read it, it says:

    [Astilean and Bostan] will promote and market the New Design in such a way to obtain the most beneficial rewards, both financial and honorary, for their role as innovators and catalysts for the implementation of the new generation of green treadmills.

    Not surprisingly, there was no waiver there:

    The court finds that the 2009 Agreement did not constitute a waiver by Bostan of his right to refuse to join an infringement suit. First, there is no mention in the 2009 Agreement of participation in future lawsuits and Bostan’s willingness to do so. Second, years after the 2009 Agreement was executed, Bostan expressed his desire not to participate in this suit in the emails and deposition testimony cited by the parties — thereby asserting his right to refuse to join the lawsuit – without any mention of the 2009 Agreement. Plaintiffs point to Bostan’s deposition testimony, in which he stated that he “was giving all the rights to Speedfit over the applications, patents and so on” and that his “understanding was that Speedfit now will continue their lawsuit against Woodway […] and I will not have to be party of that.” The court finds this statement to be ambiguous at best with respect to Bostan’s intention to waive his right to refuse to join the lawsuit.

    Based on the foregoing, and because a waiver must be clear and unambiguous, the testimony cited by plaintiffs cannot be viewed as a waiver of Bostan’s right, particularly to the extent that it can be construed as an expression of Bostan’s desire not to be a party to the lawsuit against Woodway.

    (Citations omitted; ellipses in original.) The court therefore dismissed the patent infringement claim.

    But there was still the matter of inventorship of the Woodway patents. Woodway argued that Speedfit didn’t have standing to correct inventorship to add Bostan. Not so:

    Although this court finds that Bostan must be joined as a plaintiff in order for plaintiffs to have standing to bring a patent infringement claim, the court finds that Bostan need not be joined for plaintiffs’ correction of inventorship claims to stand.

    The Federal Circuit has advised that 35 U.S.C. § 256 should be “interpreted broadly as a ‘savings provision’ to prevent patent rights from being extinguished simply because the inventors are not correctly listed.” Here, as discussed above, Bostan assigned his interests in the ‘016 and ‘619 Patents to Speedfit as of June 1, 2015, through the Assignment Agreement. The Assignment Agreement assigned Bostan’s “entire and exclusive right, title, and interest” in the ‘619 and ‘016 Patents to Speedfit, including the right to protect its own interests in these patents as of June 1, 2015. The court disagrees with defendant’s reliance on the fact that the Assignment Agreement “say[s] nothing about Mr. Bostan assigning any alleged inventorship rights in the Woodway Patents” to Speedfit, and finds that Speedfit’s ability to assert such claims derives from its assigned interest in the ‘619 and ‘016 Patents, which concern the same underlying subject matter as the Woodway Patents.4

    The court finds that as an assignee of Bostan, Speedfit may assert a clear ownership interest in the subject matter at issue in the Woodway Patents and therefore has standing to bring claims for correction of inventorship seeking to add Bostan as an inventor. Moreover, the court notes that in light of the Assignment Agreement, Bostan no longer has an ownership interest in the ‘016 and ‘619 Patents, and would likely be found to lack standing if he sought to bring a correction of inventorship claim on his own behalf at this time.

    (Footnote added; citations omitted.)

    The plaintiffs also had a conversion claim, “based on the allegation that ‘Woodway has wrongfully exercised dominion over the property of Plaintiffs by refusing to name Astilean and Bostan as either inventors or joint inventors […] of the [Woodway Patents].'” Uh, no.

    In addressing matters of preemption, the Federal Circuit has explained that “although federal patent law plainly does not provide for explicit preemption […] a state may not offer patent-like protection to intellectual creations that would otherwise remain unprotected as a matter of federal law.” Further, the Federal Circuit has held that “the field of federal patent law preempts any state law that purports to define rights based on inventorship.” Thus, according to controlling precedent, a state law claim that either seeks “patent-like” protections not provided by federal patent law, or turns on a determination of inventorship, is preempted by federal patent law.

    Here, plaintiffs’ conversion claim is both “patent-like” in nature, and also turns on a determination of inventorship regarding the manually-powered treadmill design at issue. First, plaintiffs’ assertion of ownership over the subject matter of the Woodway Patents, which underlies their claim of conversion, clearly turns on a determination of inventorship. Second, the damages that plaintiffs assert, in particular the “loss of value of the Patents-in-Suit and the revenues derived from licenses to that property,” essentially restate the infringement claim for which patent law would provide a remedy if warranted. The court therefore finds that plaintiffs’ conversion claim is preempted by federal patent law and must be dismissed.

    So inventorship, and I believe a breach of contract claim, are still alive. The case has been pending for 3 1/2 years and is heavily litigated. I wonder how much money there is in non-motorized treadmills.

    Speedfit LLC v. Woodway USA, LLC, No. 130CV-1276 (KAM) (E.D.N.Y. Dec. 28, 2016).
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    1. Talk about convoluted, from an earlier decision:

      On March 11, 2013, plaintiffs filed an action for, inter alia, breach of contract and declaratory judgment invalidating defendants Woodway and Douglas G. Bayerlein’s patent for a manually-powered treadmill. (See generally ECF No. 1, Complaint.) Plaintiffs amended their complaint against defendants on June 17, 2013 to abandon their declaratory judgment claim and instead allege infringement of plaintiffs’ own patents for components of a manually-powered treadmill, U.S. Patent Nos. 8,308,619 (the “‘619 Patent”) and 8,342,016 (the “‘016 Patent”) (collectively, the “Speedfit Patents”.) (See generally ECF No. 18, Amended Complaint.)

      On November 9, 2013, Woodway filed a motion to (1) dismiss or transfer plaintiffs’ claims based on a later-filed action in the United States District Court for the Eastern District of Wisconsin, and (2) dismiss plaintiffs’ state law claims for failure to state a claim for which relief could be granted. (ECF No. 34, Motion to Dismiss.) The court denied Woodway’s motion except as to plaintiffs’ breach of fiduciary duty claim, which was dismissed for failure to state a claim. (ECF No. 59, Mem. and Order, dated October 10, 2014.)

      On February 17, 2015, with the consent of remaining defendant Woodway, plaintiffs filed a Second Amended Complaint that, inter alia, amended their cause of action for breach of contract to compel Woodway to assign all right, title, and interest in two Woodway patent applications connected to the manually-powered treadmill: U.S. Patent Application No. 13/235,065 (the “‘065 Patent Application”) and U.S. Provisional Patent Application No. 61/161,027 (the “‘027 Provisional Patent Application”). (Second Am. Compl. ¶ 54.) Plaintiffs asserted that the information Woodway used to develop the patent applications “was taken directly from Plaintiff’s design” and “improperly failed to identify Astilean as the inventor of the [manually-powered treadmill].” (Id. ¶ 35.) Woodway answered the Second Amended Complaint on March 6, 2015 and included counterclaims against plaintiffs for a declaratory judgment that the Speedfit Patents are invalid and a claim to correct inventorship of the Speedfit Patents to include “relevant Woodway personnel” as sole or joint inventors. (See generally ECF No. 93, Defendant’s Answer and Counterclaims to Second Amended Complaint.)

    2. The court seemed to know that going in, too. An unnumbered docket entry on November 25, 2015 says “The court again advised plaintiffs that pursuant to Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359 (Fed. Cir. 2010) it appears the court lacks subject matter jurisdiction over plaintiffs’ patent infringement claims. Plaintiffs acknowledged the Abraxis case but asked the court for leave to submit supplemental briefing in opposition to defendant’s letter motion to dismiss. Accordingly, the court set the following schedule for supplemental briefing to address whether the court has subject matter jurisdiction over plaintiffs’ patent infringement claims: …” 
    3. I’m a bit confused by how this issue is treated in the opinion. The section is captioned “Bostan’s Right Not to be Involuntarily Joined in a Lawsuit.” The court states “Plaintiffs argue in the alternative, that even if Bostan would ordinarily be required to join as a plaintiff under the general rule for standing, an exception applies in the present case because Bostan waived his right not to be involuntarily joined in this lawsuit. (See Pl. Supp. Op. at 1.) The Federal Circuit has recognized this exception to the general requirement that all co-owners must be joined as plaintiffs in an infringement suit. See, e.g., Ethicon, 135 F.3d at 1468 n.9 (“If, by agreement, a co-owner waives his right to refuse to join suit, his co-owners may subsequently force him to join in a suit against infringers.”); see also STC.UNM v. Intel Corp., 754 F.3d 940, 946 (Fed. Cir. 2014) (same).” As I understand the quote, it means a co-owner can be involuntarily joined (which will be as an involuntary defendant), not that the reluctant co-owner doesn’t have to be a party at all. However, the court seemed to treat it as a theory that Bostan didn’t have to be a party. Nevertheless, the result is the same here either way. 
    4. I wouldn’t have minded a bit of elaboration on that point. The assignment agreement is specifically for two pending applications, the two issued patents, all applications “associated therewith, based on, or claiming priority therefrom” and the right to claim priority to the assiged patents and applications. There was no assignment of inventions related to manual treadmills generally. The Speedfit patents are cited as prior art in the Woodway patents, but does that mean the Woodway patents are “associated therewith or based on” the patents Bostan assigned to Speedfit? 

    One Response to There Is Just No Way Around the Absent Patent Owner

    1. Jonathan
      January 4, 2017 at 8:50 am

      Interesting. Here are my thoughts: the real and most important question to ask in the beginning is whether true/correct inventorship a question of law or fact. The Supreme Court has never directly addressed this question and opinions from the Riding Circuit are (at best) conflicting. If one looks at the Seventh Amendment test and at the practice in England at the time of 1787 related to the correction of inventorship, it should be a question of law. If this is a correct the SCA Hygiene Products case will have a huge impact on the timing related to filing of a correction of inventorship claim.

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