Property, intangible

a blog about ownership of intellectual property rights and its licensing

The Danger of Terms of Art

Sherman & Associates, Inc. v. Oxford Instruments, PLC discusses the fairly commonplace question of whether plaintiff Sherman & Associates, who was only a patent licensee, has standing to sue. The answer hinged on interpretation of the contract between it and the patent owner, ASM America, Inc. Sherman & Associates was originally the owner of the patent-in-suit, but it had transferred title to ASM several years earlier. In exchange, Sherman & Associates received a “non-assignable, nontransferable worldwide exclusive right to grant sublicenses under the Sherman Patents in fields of use other than the field of Microelectronic Applications” from ASM. The question was whether this right to sublicense also included the right to sue for infringement.
The first notable part of the case was the position of patent owner ASM – it was named by Sherman & Associates as a defendant in the Amended Complaint, with this statement: “ASM has an interest in the outcome of this litigation, and is a proper party to this action as a plaintiff, defendant, defendant patent owner, or involuntary plaintiff, whichever designation is deemed appropriate by this Court.”  Sherman & Associates had named ASM in its Certificate of Interested Entities when it filed suit and two months later filed the Amended Complaint adding ASM, so there was presumably some communication about the issue.  And presumably any communication with ASM didn’t turn out well because, not only did Sherman & Associates name ASM as a defendant, ASM was the one who filed the Motion to Dismiss under FRCP 12(b)(1), not the accused infringer Oxford Instruments.
But the eyebrow-raising part of the decision is the court’s interpretation of this language, fairly standard in any licensing agreement:
Sherman agrees to cooperate and assist ASM in any litigation involving the Sherman Patents on reasonable terms and conditions to be agreed upon. Sherman also agrees to assist ASM in patent prosecution relating to the Sherman Patents at no cost to ASM. ASM will pay all prosecution costs and will reimburse Sherman for any out of pocket costs.
What did the court do with this?

[T]he contract says nothing about Sherman’s right to litigate. The only language in the contract about litigation anticipates that ASM will be litigating, and does not limit such litigation to the field of microelectronics. See Bunsow Decl. Ex. A ¶ 1(g) (“Sherman also agrees to assist ASM in patent prosecution relating to the Sherman Patents at no cost to ASM.”). Sherman argues that the paragraph about litigation contains no reciprocal language because he is the inventor of the patent and would not need any assistance from ASM in prosecuting a patent. That is plausible, but it is no more plausible than ASM’s suggestion that the parties did not intend for Sherman to do any litigating.

What!? The court thinks that the language about “prosecuting” patents is further elaboration on the preceding sentence about litigating patents?

It’s easy to understand how this happens. When I talk about “prosecuting” patents to anyone but a patent lawyer, I follow up with an explanation of what that means. Apparently no one helped the judge out with that part of it here. Nevertheless, the court otherwise had adequate reason to find that Sherman & Associate’s didn’t have the right to sue and dismissed the case.

Sherman & Associates, Inc. v. Oxford Instruments, PLC, No. C 11-8827 CRB (N.D. Cal. Jan. 10, 2012).

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