Positively Perfect in Every Way
by Pamela Chestek • September 30, 2008 • patent
Positive Technologies whiffed the first patent infringement complaint by filing in the name of the wrong entity, Positive-California, when it should have been filed in the name of Positive-Nevada. Positive calls a mulligan and refiles in the correct entity’s name, then the two companies merge into Positive Technologies, Inc.
The standing problems aren’t over yet though. It turns out that the inventor had assigned a 25% ownership interest to a former attorney as part of a fee agreement long before the present suit. After the present suit was filed and this wild ownership interest uncovered during discovery, the lawyer assigned his ownership interest to Positive, effective on the date of the original assignment to him (N.B., the court refers to the lawyer’s assignment to Positive as the “reassignment,” although it also says the first assignment was from the inventor, not Positive, to the lawyer. I’ll stick with using the court’s denomination of it as a “reassignment.”). The reassignment did not provide for an assignment of the right to sue for past infringement and the attorney also retained the right to enforce his original fee agreement.
A patent infringement suit must be brought by all the owners of a patent, so the defendants raised four arguments for lack of prudential standing:
First, the defendants argued that the lack of standing at the time suit was filed cannot be cured by a nunc pro tunc assignment. Wrong; other cases where standing was denied were where plaintiffs had no ownership interest at all at the time of suit, i.e., they lacked constitutional standing. Here, Positive had 75% ownership at the time of suit and lacked only prudential standing, so the standing problem could be cured post-filing.
Second, the defendants argued that the reassignment didn’t grant the right to sue for past damages, which just happened to be when the infringement occurred. Nunc pro tunc to the rescue again; there was no need to grant the right to sue for past damages since there was no gap in time between the assignment and reassignment.
Third, the reassignment was only to “Positive,” not specifying whether it was Positive-Nevada or Positive-California, so it was ambiguous. No matter; while the grant was effective on a date when both entities existed, it was executed on a date when there was only one “Positive,” so no ambiguity as to the assignee.
Finally, the assignment was illusory because the lawyer did not give up his right to attorney’s fees pursuant to the fee agreement, and the fee agreement included the original assignment. Wrong for the last time; the lawyer did not retain any legal rights to the patents after the reassignment, but only at most an equitable interest. The equitable interest does not divest Positive of the legal title needed for standing.
I have a hard time swallowing all of this; it seems to be a have-your-cake-and-eat-it-too situation. The plaintiff succeeded in cutting out links in a chain of title that should be relevant. The “reassignment” wasn’t an assignment-back, it was an assignment to an entirely different party. Doesn’t that affect the past damages question – why does the court talk about a “gap” when it’s just two separate transactions between three parties that happened to be effective on the same day? Why should we assume that the lawyer assigned all that he possessed when he didn’t say so, particularly when he clearly was trying to retain some kind of interest in the whole matter? But if the nunc pro tunc reassignment was to be construed as effectively a nullity (the “no gap” theory), then shouldn’t it matter that there were two potential assignees on the effective date?
This “reassignment” was created during the litigation, and, given the plaintiff’s success, it was masterfully done. I like to think about why certain decisions were made and whether there’s a reason they made sense, even though in a decision they may just come out looking like sloppy work. Plus here you have the wild card lawyer who has something good that he knows you need.
You can just imagine that it would be tricky negotiating against a non-patent lawyer who still wants his fees and plans on using his claim to past patent infringement damages somehow to collect them, so you just don’t mention them in the agreement and hope for the best (how often have you negotiated an agreement where you just leave it unstated in the belief, or hope, that your position is the better interpretation?). Is there a side agreement with the lawyer? And stating that the assignee was just “Positive,” rather than exactly who, so you could play it any way you needed to, turned out to be a great call.
Nunc pro tunc was the key, suit proceeds. Eastern District of Texas, you know.
Positive Technologies v. LG Display Co., No. 2:07 CV 67, 2008 U.S. Dist. LEXIS 73087 (E.D. Tex. Sep. 24, 2008).
© 2008 Pamela Chestek