Property, intangible

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The Missing Schedule

The Patent Prospector summarizes a decision from the Federal Circuit where the ownership of patents hinged on whether they were “related to” pending litigation at the time of an earlier intra-company assignment agreement. If the patents were related, they weren’t assigned and U.S. Surgical Corporation, not plaintiff Tyco Healthcare, remained the owner of the patents. Tyco Healthcare’s major problem was that the transactional documents were silent on what that litigation was:

On its face, the Contribution Agreement purports to answer the question of whether any USSC litigation was pending at the time. Section 4.21 describes pending litigation:

Except as set forth on Schedule 4.21 hereto, there are no actions pending or threatened by or against, or involving USSC (with respect to the Business only) or any directors, officers, or employees thereof in their capacity as such or which question or challenge the validity of this Agreement, or any action taken or to be taken by USSC pursuant to this Agreement in connection with the transactions contemplated hereby or thereby, and to the knowledge of USSC, there is no valid basis for any such Action.

Thus, Schedule 4.21 was to list any USSC litigations then pending or threatened, but Schedule 4.21 is missing. Or it simply never existed, as Tyco Healthcare contends on appeal.

Since there had been several suits pending at the time, the court assumed all the patents were excluded from the assignment. Therefore, Tyco Healthcare was not the owner and did not have standing.

Judge Newman’s dissent compellingly points out several flaws in the majority’s reasoning even absent the schedule, concluding with this: “The court’s contrary reading produces the absurd result whereby no USSC patent, indeed none of the assets transferred by the Contribution Agreement, can be deemed to have been transferred, merely because Schedule 4.21, listing public information, was missing. That is not a tolerable reading of the contract, for it renders the contract ineffective for its purpose and defeats the plain intent of the contracting parties.” But at least the suit was dismissed without prejudice, giving Tyco Healthcare another chance.

Tyco Healthcare v. Ethicon Endo-Surgery, Nos. 2008-1269, 2008-1270, 2009 WL 4546935 (Fed. Cir. Dec. 7, 2009)
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