Property, intangible

a blog about ownership of intellectual property rights and its licensing

Aerotel Visits the United States

The name “Aerotel” is fairly well known in the UK, at least among software companies. The UK doctrine on patentability of business methods and software is known as Aerotel/Macrossan, after the pair of cases decided in Aerotel Ltd v Telco Holding Ltd and others, and Neal William Macrossan’s application [2006] EWCA 1371 (Civ) (2006-10-27). The Aerotel patent had been revoked by the High Court, but in this decision it was reinstated by the Court of Appeals. This past May, the patent was revoked by the High Court again on the basis of obviousness and excluded subject matter. Perhaps one of our UK friends can tell us how it is that the Court of Appeals can hold that the patent stated patentable subject matter, but the lower court had the freedom to disagree. Blog posts on Aerotel/Macrossan and the ultimate revocation can be found here (reporting original decision and subsequent application of the standard), here and here.

U.S. Patent No. 4,706,275 is a U.S. patent similar to Aerotel’s UK Patent No. 2 171 877. The subject matter of the patents is a telephone system enabling prepayment for telephone calls; all list Zvi Kamil as the inventor. Feel free to ignore the following if you are not a patent maven: the UK patent was filed January 13, 1986 and claims priority to two Israeli patents filed on January 13, 1985 and November 10, 1985. The U.S. patent claims no priority, and was filed on November 13, 1985.

In the U.S. litigation, there was a challenge to Aerotel’s ownership of the patent. The inventor Kamil had assigned his rights in the patent to plaintiff Aerotel, Ltd.; this ownership is shown on the face of the patent. The defendants challenged Aerotel’s ownership, claiming that Kamil had no patent rights to assign to Aerotel because the patent was owned by one of two different Israeli companies with which Mr. Kamil had previously been associated.

A claim that Kamil was obliged under an employment agreement to turn over his invention was quickly brushed off. The defendants could not assert the equitable rights of a third party arising from a potential breach of Kamil’s employment contract in their own defense.

But the defendants might have better luck if they could prove that one of the companies was the legal owner as a result of the operation of Israeli law. The first potential owner was Elscint, a medical imaging company. Kamil was the plant manager of the radiological division and later the chief developer of MRIs; there was also testimony that he was not involved in any way in telecommunications and/or telephony. Although there was some disagreement about the period of Kamil’s employment, it didn’t matter because, applying Israeli law, the patented invention was not made “in consequence of” Kamil’s service to his employer and thus Elscint not the owner of the patent.

The second potential owner was Beta, a company that Kamil co-owned before his employment with Elscint began in 1978. Kamil drafted a document in 1977 describing a “Public Pay Telephone Without Coins or Tokens,” which the defendants claimed was the conception of the ‘877 patent, and therefore the invention was owned by Beta. The court assumed arguendo that the document indeed was conception of the invention, but credited the testimony of the co-owners of Beta that the invention was not “arrived at in consequence of” Kamil’s work for Beta.

Kamil therefore the owner of the patent, assigned it to Aerotel and Aerotel had standing for the suit.

On a separate motion, plaintiffs Aerotel USA Inc. and Aerotel USA Ltd. were dismissed from the case for lack of standing. The companies had the right to license the patent, including in the case of USA Ltd. the right to institute legal proceedings, but neither company had sufficient ownership interest in the patent to provide them with standing to sue.

Aerotel, Ltd. v. Radiant Telecom Inc., 04 Civ. 10292, 2008 U.S. Dist. LEXIS 60770 (S.D.N.Y. Aug. 8, 2008).

© 2008 Pamela Chestek

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