Property, intangible

We’re all generalists for one thing or another. We have specialized knowledge in some field, but the practice of law isn’t so neat that everything you do falls within your core knowledge. Those who trade in contract work may cover many different types of deals and will necessarily rely on forms to take care of specialized requirements. An example is “goodwill” in a trademark assignment – woe be the drafter who omits it, because it may invalidate the entire assignment. In Inventist, Inc. v. Ninebot, Inc., it was a similar detail that was the plaintiff’s downfall.

Non-party Shane Chen was the inventor of utility and design patents for an electric unicycle sold as the Solowheel. There is no dispute he was the inventor of several patents, but there were several assignments that are the monkey wrench in the works.

Chen assigned the patents to plaintiff Investist, Inc., which owned them until August 3, 2017. After the original complaint was filed, Chen entered into an Operating Agreement with a Chinese company to establish a joint venture. The Operating Agreement defines “Intellectual Property” as the “Proposed Patents and the brand of Solowheel trademarks, websites, domain names and proprietary technology.” If the agreement terminated, “the ownership of any Intellectual Property transferred from [Shane Chen] to the Joint Venture shall immediately and automatically revert back to [Shane Chen].” Pursuant to the agreement the patents were assigned to Solowheel, Inc. and Solowheel substituted as plaintiff.

The Operating Agreement terminated and the patents in dispute were transferred back to Chen by two written assignments dated March 2, 2019 and September 19, 2019. Chen then assigned the patents back to plaintiff Investist on October 21, 2019. Investist was substituted back as plaintiff for Solowheel. Defendant Ninebot claimed that Investist’s damages were limited to any infringement occurring after October 21, 2019 and the court agreed.

The written assignments of the patents assigned “any and all rights, title and interest in and to the patents and patent applications” to Chen. However,

Plaintiff does not dispute that [Solowheel] never assigned Chen the right to sue for past infringement but argues that Chen separately acquired that right by virtue of the Operating Agreement’s reversion provision. Specifically, Plaintiff argues that, upon the dissolution of the joint venture in 2019, all of the intellectual property rights Chen had transferred to that entity, including the right to sue for past infringement of the patents, reverted back to Chen pursuant to that provision.

So did the reversion on the Operating Agreement transfer the right to recover for any past infringement?

The Court finds that the Operating Agreement’s reversion provision did not, by its terms, grant Chen the right to sue for past infringement. As noted above, a party may sue for past infringement transpiring before it acquired legal title if a written assignment expressly grants the party a right to do so. For example, in Messagephone, the Federal Circuit held that an agreement to assign the entire right, title, and interest to a patent did not encompass the right to sue for past infringement due to the absence of any explicit language conveying that right. Messagephone, Inc. v. SVI Sys., Inc., 2000 WL 1141046, at *4-5 (Fed. Cir. Aug. 11, 2000).…

The Operating Agreement’s reversion provision simply provides for the reversion of “any Intellectual Property.” In defining the “Intellectual Property” that Chen transferred to the joint venture, the Operating Agreement included, without any reference to past infringement, “all the Proposed Patents and the brand of Solowheel trademarks, websites, domain names and proprietary technologies.” Absent from the Operating Agreement–including its terms governing the initial transfer to the joint venture, and the reversion back to Chen–is any reference to the right to sue for past infringement. As such, Chen did not acquire the right to sue for past infringement of the patents by virtue of the Operating Agreement’s reversion provision.¹

I can see how this could be an easy one to miss. A definition of “Intellectual Property” generally doesn’t include claims too. If you are only thinking that you want to return the parties to the former status quo, it might not dawn on you that there were rights left behind. But here, the lawsuit was already pending when the business deal was made, so the gap is more surprising.

Investist, Inc. v. Ninebot, Inc., No. 3:16-cv-5688-BJR (Jan. 18, 2023)

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