What does “cover” mean in a patent assignment clause?
Plaintiff Openwave Systems, Inc. developed software for network computing but decided to sell off the client-side part of the business, keeping the server-side. It sold the business to Purple Labs S.A., predecessor to defendant Myriad France S.A.S. Some patents were assigned in the transaction, but the transactional documents (an Intellectual Property License Agreement (IPLA) in particular) also provided for transfer of patents afterwards if they were “Missing Assigned Patents.” “Missing Assigned Patents” were defined as:
| Patents owned by Openwave immediately prior to the execution of the APA (or patents issuing on patent applications owned by Openwave immediately prior to the execution of the APA) that (a) contain claims that, immediately prior to the execution of the APA, cover products or services in the “Business” (as defined in the APA) but do not cover products or services in the Openwave Field of Use; and (b) were not assigned to Purple Labs as “Seller IP” pursuant to the APA. |
Two years later Myriad sold its patents to Google and informed Openwave that it thought there were 35 Missing Assigned Patents. This called into question the meaning of the word “cover.” Here are the parties proposed definitions:
Openwave (wishing to avoid transfer):
Option 1: One of the client software products Purple Labs acquired from Openwave infringed the patent
Option 2: That the invention described in the patent was implemented in one of the client software products Purple Labs acquired from Openwave
Myriad (wanting the transfer):
Generally describing client-side products and services, or serving to protect client-side products and services from competition
What’s your vote?
I thought that “cover” would be readily construed to mean that the product would infringe the patent – and I was wrong. The court held that:
| First, “cover” cannot mean infringement. The sophisticated parties to the IPLA were familiar with the term infringement and the concept of an infringement analysis. They invoked infringement elsewhere in their contracts but chose not to do so when defining Missing Assigned Patents.[*] Moreover, the bone-crushing burden of claim construction and a double infringement analysis for each patent claim is too impractical, grossly so, to have been a mutual business intent. The term “cover” as used in the definition of Missing Assigned Patents is not reasonably susceptible to any meaning that requires a conventional infringement analysis. No extrinsic evidence will be admitted to prove such an interpretation. |
I don’t buy it. What else could “cover” mean when it comes to a patent? The only thing that’s relevant is whether a patent is infringed. If the patent isn’t potentially infringed, then the patent doesn’t interfere with the business and no assignment or license is necessary. Infringement is surely what the Supreme Court means when it talks about patents “covering” products. TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 30, 121 S. Ct. 1255, 1260 (2001) (“Although the precise claims of the Sarkisian patents cover sign stands with springs ‘spaced apart’ “); Markman v. Westview Inst., Inc., 517 U.S. 370, 374, 116 S. Ct. 1384, 1388 (1996) (“Victory in an infringement suit requires a finding that the patent claim ‘covers the alleged infringer’s product or process’ “); General Motors Corp. v. Devex Corp., 461 U.S. 648, 650, 103 S. Ct. 2058, 2060 (1983) (“Claim 4 of the Patent covers . . . .”); Parker v. Flook, 437 U.S. 584, 586, 98 S. Ct. 2522, 2524 (1978) (“The patent claims cover . . . .”); U.S. v. Glaxo Group Ltd., 410 U.S. 52, 54, 93 S.Ct. 861, 863 (973) (“This patent covers . . . .”), Merrill v. Yeomans, 94 U.S. 568, 572 (1877) (“If the patentee is … entitled to a patent for the product …, and has failed, as we think he has, to obtain it, the law affords him a remedy, by a surrender and reissue. When this is done, the world will have fair notice of what he claims, of what his patent covers, and must govern themselves accordingly.”).
I also don’t buy that they couldn’t mean “infringe” because it would be a “bone-crushing burden” to figure out – that’s just some backfill on the weak theory that “cover” doesn’t mean “infringe.”
But tsk, tsk on Openwave for using such an inartful term in the document. Although I have some sympathy, it’s not a clearly defined term of art and begs for argument about the meaning.
Openwave’s option 2 was also knocked out because the agreement contemplated patents that were relevant to future products Purple Labs might develop. Myriad didn’t win either, though; instead, the proper construction will be decided at trial.
Openwave Sys. Inc. v. Myriad France S.A.S., No. C 10-02805 WHA (N.D. Cal. June 29, 2011).
*This is a bit of a stretch in my book. The court cites to two other mentions of “infringement” in the transactional documents. One was in the seller’s reps and warranties in the Asset Purchase Agreement that “no Person has infringed, misappropriated, or otherwise violated, and no Person is currently infringing, misappropriating or otherwise violating, any Seller IP.” (Sec. 2(f)). The other was in the disclaimer of warranties in the IPLA, “Except for the express representations and warranties set forth in the APA, each party expressly disclaims any and all representations and warranties, express or implied, including any warranty of noninfringement, merchantability or fitness for a particular purpose.” (Sec. 5. ALL CAPS omitted. You’re welcome.) I don’t think that the parties “chose” not to use the word “infringement” in the more individualized portions of the documents simply because it also appeared in the more formulaic boilerplate.
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