Property, intangible

a blog about ownership of intellectual property rights and its licensing

Mars Gets at Least One Do-Over

The June, 2008 decision in Mars, Inc. v. Coin Acceptors, Inc., blogged here, was a tale of what happens when companies move IP assets around for tax purposes. In Coin Acceptors, Mars sued Coin Acceptors, then assigned the patents to a subsidiary, MEI, Inc. The assignment created a standing problem for Mars, which lost its damages claim post-assignment. This same assignment has now divested Mars of its patent infringement claim against two more defendants.

Mars, Inc. sued JCM American Corp. and Japan Cash Machine Co. Ltd. on June 17, 2005. Mars said it was the owner of Patent No. 5,577,589 for a document handler, i.e., a bill acceptor in a vending machine. On December 22, 2006, Mars filed a motion to substitute MEI as the plaintiff, claiming that it had assigned the entire right, title and interest to MEI on June 9, 2006. The court found the document ambiguous, so added MEI as a plaintiff rather than substituted it. Then, in October, 2008, Mars produced the 1996 assignment discussed in the earlier June Mars, Inc. v. Coin Acceptors, Inc. Federal Circuit opinion. The Coin Acceptors court held that this 1996 assignment meant that Mars had no standing after December 31, 1996. After getting this document in discovery, the defendants filed a motion under Fed. R. Civ. P. 12(b)(1) to dismiss the suit for lack of standing.

Even though MEI was added as a plaintiff, it was added pursuant to Fed. R. Civ. P. 25(c) and therefore only stepped into the shoes of Mars. Since Mars didn’t have standing, MEI had no shoes to step into and the case was dismissed without prejudice. The court also did not allow Mars to amend the complaint to reflect the 1996 assignment, because the amendment would not have cured the fundamental problem. Mars was also sanctioned by an award of the defendant’s attorney’s fees and costs associated with bringing the motion to dismiss and the excess discovery in pursuit of the agreement.

Since the suit was dismissed without prejudice Mars can bring a new suit (or rather, MEI can). Maybe it’s no harm, no foul and MEI will not have lost any of its rights during the four years the dismissed suit was pending. Or maybe the whole ball of wax has been lost. In any case, a lot of money has been spent in litigation because of the 1996 assignment – how much was that tax savings?

Mars, Inc. v. JCM American Corp., No. 05-3165 (RBK), 2008 WL 5401604 (D.N.J. Dec. 23, 2008).

Update: Link to opinion added October 25, 2009.

© 2009 Pamela Chestek

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