Property, intangible

It was big news when Lucent Technologies won a $1.5 billion patent infringement suit against Gateway, Dell and Microsoft.  Less memorable was when the jury award was tossed on a motion for judgment as a matter of law (Lucent Technologies Inc. v. Gateway, Inc., 509 F.Supp.2d 912 (S.D.Cal. 2007)).  Now, the Court of Appeals for the Federal Circuit has affirmed the JMOL.  Of interest for this blog, the case discusses the intersection of patent and contract law in exploring whether technology is the fruit of the joint development work and, if so, who will own how much of the patent rights.

In 1988, AT&T Bell Labs, now Lucent Technologies, entered into a joint development agreement (JDA) with a German company, Fraunhofer Gesellschaft, to work on digital compression technologies.  The JDA defined the parties’ “Existing Technology” as that which was “the result[] of” each parties’ independent prior work in the field, described in exhibits to the agreement in papers with technical information, patents, and patent applications.  Each party was to continue to solely own their respective existing technologies.  The “New Work,” technology developed under the JDA after April, 1989, was to be jointly owned:

A Fraunhofer scientist, Brandenburg, worked with James Johnston of AT&T under the JDA.  Johnston and Brandenburg worked on setting the industry standard for MP3 coding and implementing it.  By 1997 Frauenhofer was licensing companies to software for the standard and Microsoft became a licensee, using it in the Windows Media Player.

James Johnston had been an inventor on a patent application filed in 1988 before the joint work under the JDA, the 598 application.  Johnston was also listed as the sole inventor of the 938 patent, filed in 1994 (claiming priority to a 1992 application), which later reissued in 2006 during the litigation as the 080 patent.  Claim 2 of the 938 patent was cancelled during the reissue and at the same time the patent was amended to claim priority as a continuation-in-part to the 598 application, giving it a priority date of 1988 for some of the claims.

Lucent Technologies sued Gateway, Inc. and Dell, Inc. in separate suits for infringement of the 938 patent and another.  Microsoft intervened as the manufacturer of the accused software and the cases were consolidated.

Microsoft argued that Lucent had no standing to sue on the 938 patent in the absence of Frauenhofer – it claimed the asserted claims 2 and 4 of the 938 patent were New Work, so Frauenhofer should be a joint owner of the reissue 080 patent and thus a necessary party to the suit.  If the 938 patent consisted only of Existing Technology, however, Frauenhofer would have no ownership interest and Microsoft would be an infringer.  

Lucent disagreed; even though the matter claimed in claims 2 and 4 wasn’t described in the 598 application, Lucent argued it was in the public domain before April, 1989 and therefore, because it was “the results of” the Existing Technology, it was not New Work.  The court sided with Microsoft; nothing in the attachments suggested that the agreement should be interpreted so broadly. Second, the specification showed that the material was New Work; since the 598 application was only a continuation-in-part, whether the claims could benefit from the priority of the 1988 application had to be ascertained.  Since the original 598 application did not show possession of the subject matter claimed in the 938 patent, even though it might have been obvious, the court concluded claims 2 and 4 could not claim priority to the 598 application.

Claims 1 and 3 of the 938 patent were Existing Technology and 2 and 4 were New Work, so the court continued by examining exactly what Frauenhofer owned.  Lucent argued Fraunhofer was a mere licensee of the patent – some of the claims were to Existing Technology, which were to be exclusively owned by Lucent, but one can only own an entire patent, so Fraunhofer must only have a license to the claims covering the New Work. Not correct; the court held that Frauenhofer was an owner because the claims were invented during the period covered by the JDA and were New Work.   Since Lucent was in control of filing applications it could have segregated the Existing Technology out in a separate patent to avoid giving Fraunhofer any ownership of claims covering Existing Technology.  Further, it could have cancelled claim 4 during the reissue, as it had done with claim 2, to eliminate Fraunhofer’s ownership interest, but did not.

Frauenhofer therefore was an owner of the 938 patent and its reissue 080 patent; Lucent did not have standing to bring suit for infringement of the 938 patent.  The Court of Appeals didn’t discuss Microsoft’s license defense.

A discussion of the noninfringement of a second patent-in-suit can be found here.  Analysis of the implications of this decision on patent drafting here.