Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Ninth Circuit Ignores the Law Again

    One of the treats of writing a blog is that you can take issue with decisions – and so I take issue with a recent decision out of the Ninth Circuit in FreecycleSunnyvale v. Freecycle Network. The Ninth Circuit has now extended its questionable version of the naked licensing doctrine as last stated in Barcamerica Int’l USA Trust v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002) to a point well beyond the words and intent of the Lanham Act, as well as any meaningful commercial rationale.  The Ninth Circuit applies a ruthless standard that strips trademark owners of significant value and furthers consumer confusion by punishing companies that, out of naivete, don’t adhere to an exacting legal standard that has little or no relationship to the policy basis for the doctrine or the goals of the Lanham Act.

    How did the Ninth Circuit get here?  The Ninth Circuit’s naked licensing doctrine has been based on a false foundation from the beginning. In Siegel v. Chicken Delight, Inc., 448 F.2d 43 (9th Cir. 1971), the Ninth Circuit relied on Section 5 of the Lanham Act, 15 U.S.C. § 1055, to find that there is a duty to control the quality of goods and services:

    The licensor owes an affirmative duty to the public to assure that in the hands of his licensee the trade-mark continues to represent that which it purports to represent. For a licensor, through relaxation of quality control, to permit inferior products to be presented to the public under his licensed mark might well constitute a misuse of the mark. 15 U.S.C. §§ 1055, 1127.

    Siegel at 51. No. Section 5 of the Lanham Act implies no duty to control the use of a trademark. Section 5 states:

    Use by related companies affecting validity and registration

    Where a registered mark or a mark sought to be registered is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration, and such use shall not affect the validity of such mark or of its registration, provided such mark is not used in such manner as to deceive the public.

    This was not meant to impose any kind of duty of control; rather it was simply a vehicle for facilitating the registration of marks in the new, modern world:

    Of course, what is aimed at in this section is the modern way of doing business in this country through subsidiaries.  Take the Ford Motor Co., for instance, they have factories all over the country, in every State of the Union. They are all controlled, either by contract or stock ownership, but they are all using the word “Ford” on the cars which they sell. Under existing law nobody can get registration, because nobody can make an affidavit that no one else has the right to use the mark.  Sometimes there is no stock ownership. Sometimes one of the products made is controlled by contract. In order to make the statute conform to modern business practice something of this kind is needed, because the statute which was passed in 1905, before the question of local companies became so important, did not contemplate any such thing and did not provide for it.

    Hearings before the Committee on Patents, Subcommittee on Trade-Marks, House of Representatives, 76th Cong. 1st Sess. on H.R. 4744, March 28, 29, 30, 1939, p. 58.

    Simplifying the sentence shows that the phrase “provided such mark is not used in such manner as to deceive the public” modifies the circumstances under which a trademark owner may rely on a related company’s use for purposes of registration and validity, and nothing more: “Where a registered mark . . . is . . . used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration . . . provided such mark is not used in such manner as to deceive the public.”  One must take the phrase entirely out of context to find that this statutory section might impose an affirmative duty on a trademark owner to control the quality of goods and services.  Nevertheless, the Ninth Circuit’s erroneous basis for its naked licensing doctrine has been perpetuated through Edwin K. Williams & Co., Inc. v. Edwin K. Williams & Co.-East, 542 F.2d 1053, 1059 (9th Cir. 1976), Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001 (9th Cir. 1985), Barcamerica Intern. USA Trust v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002), and now Freecycle.

    Unequivocally, the actual statutory basis for the naked licensing defense is the definition for abandonment in the Lanham Act, which defines a trademark as abandoned “[w]hen any course of conduct of the owner, including acts of omission as well as commission, causes the mark to . . . lose its significance as a mark.”  Lanham Act § 45, 15 U.S.C. § 1127.  The Fifth Circuit explains it thusly:

    The language of subsection 1127(2) reflects that to prove “abandonment” the alleged infringer must show that, due to acts or omissions of the trademark owner, the incontestable mark has lost “its significance as a mark.” This statutory directive reflects the policy considerations which underlie the naked licensing defense: “[i]f a trademark owner allows licensees to depart from his quality standards, the public will be misled, and the trademark will cease to have utility as an informational device … [a] trademark owner who allows this to occur loses his right to use the mark.” Conversely, if a trademark has not ceased to function as an indicator of origin there is no reason to believe that the public will be misled; under these circumstances, neither the express declaration of Congress’s intent in subsection 1127(2) nor the corollary policy considerations which underlie the doctrine of naked licensing warrant a finding that the trademark owner has forfeited his rights in the mark.

    [The defendant], pointing to recent precedent in this Circuit indicating that naked licensing results in an “involuntary trademark abandonment,” posits that when a defendant proves that the trademark owner has licensed its mark without any quality control provisions the courts should presume a loss of significance. We disagree. Abandonment due to naked licensing is “involuntary” because, unlike abandonment through non-use, referred to in subsection 1127(1), an intent to abandon the mark is expressly not required to prove abandonment under subsection 1127(2). In addition, a trademark owner’s failure to pursue potential infringers does not in and of itself establish that the mark has lost its significance as an indicator of origin. Instead, such a dereliction on the part of the trademark owner is largely relevant only in regard to the “strength” of the mark; absent an ultimate showing of loss of trade significance, subsection 1127(2) (and the incorporated doctrine of naked licensing) is not available as a defense against an infringement suit brought by that trademark owner.

    Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1079 -1080 (5th Cir. 1997) (citations omitted).  

    The Ninth Circuit gives lip service to the abandonment concept, acknowledging that “[u]ncontrolled or ‘naked‘ licensing may result in the trademark ceasing to function as a symbol of quality and controlled source” (emphasis added), but it entirely skips the part about proof. Instead, the court increasingly relies on compliance with technical standards of its own invention, the absence of which at best only circumstantially indicate loss of significance in some instances. Here, the Ninth Circuit decided that since “TFN (1) did not retain express contractual control over FS’s quality control measures, (2) did not have actual control over FS’s quality control measures, and (3) was unreasonable in relying on FS’s quality control measures,” the Freecycle Network has lost all right to enforce ALL its marks – FREECYCLE,* THE FREECYCLE NETWORK, and the logo.  Yes, that is correct, based only on evidence about the licensor’s behavior with ONE licensee (the accused infringer no less), The Freecycle Network has been stripped of its trademark rights against all the world.

    A naked licensing doctrine completely unmoored from the concept of loss of significance has no legal or business justification. Tell me – are the two logos confusing similar?

    Of course they are.  And what serves the consuming public better, a decision that fosters the very confusion the Lanham Act was designed to prevent when there has been no proof whatsoever that consumers no longer attribute trademark significance to the marks, or allowing the trademark owner to do its best to ensure that the marketplace operates efficiently and consumers can rely on what, to them, is an indicator of source and quality?

    There are other doctrines, like implied license, laches and equitable estoppel, that are available to a defendant in situations where it may be inequitable to force the defendant to cease using the mark, such as may have been the case here.  But the naked licensing doctrine has no place except in the rare case where a trademark has lost all source-identifying significance.

    Read the insanity here (Scribd).  If you want a simple synopsis of the case without the outrage, the Seattle Trademark Lawyer covers it here.

    FreecycleSunnyvale v. The Freecycle Network, No. 08-16382 (9th Cir. Nov. 24, 2010). 

    *Yes, I’m aware that there is some dispute over whether the term “freecycle” is generic.  There is no disclaimer in the application record and, as far as I know, no legal determination that it is.

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  • At Least They’re Thinking About It

    Neil Wilkof writing for the IPKat recently posted about joint ownership of a trademark, in particular what termination options might be available when the relationship falls apart.  He’s done a great job wrestling down the pros and cons of the various ways one can deal with the disposal of the trademark once a joint venture terminates.

    Neil justifiably professes discomfort at the prospect of writing an agreement allowing for joint ownership of a trademark altogether, but at least Neil’s clients are one step ahead of the game.  From my legal digesting experience, most of the disputes arise because, like a dewy-eyed marital couple, no one thinks the love of a lifetime could ever end.  Or, they deal with all the other facets of a shared business but don’t realize that every business has at least a trade identity, if not a trademark per se, in order to plan for its disposition at the end of the relationship.  Just knowing that some arrangements should be made has to be 99% of the battle, no matter what outcome you draft.

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  • A Routine Trademark Ownership Dispute

    The case about the ownership of the LIGHT STAR TRAVEL trademark is almost blissfully routine. It simply boiled down to whether one entity acquired ownership of another – if so, the alleged acquiror owned the trademark, if not, the original owner retained ownership.

    It looks like the parties are acting without the advice of counsel, or they could have saved themselves a lot of money. There was no dispute that the defendant, Light Star Travel Agency, Inc. (LSTAI) was the first to use the below trademark, starting in 1993:

    LSTAI and plaintiff US Gates International, LLC (UGI) were both in the travel agency business – in particular brokering hotel accommodations, car rentals and airline tickets for Hajj and Umrah travel, that is, pilgrimage travel by Muslims to Mecca and Medina.  Travel visas from Saudi Arabia are required.

    A quick interlude with the cast of characters here:

    Taha Alashi is the sole owner and managing member of UGI.
    Fawaz Mushtaha incorporated LSTAI in 1993 and operated it until 2004. He went to Saudi Arabia in 2004.
    Musab Mushtaha is his son. He started working with LSTAI in 2007.
    Abdellah is Musab Mushtaha’s mother and Vice President of LSTAI.
    Abdelilah is a friend of Fawaz Mushtaha and Treasurer of LSTAI.

    LSTAI was inactive between 2004 and 2006.  In 2006 and 2007, Alashi and Musab Mushtaha had negotiations regarding transferring LSTAI to UGI. Alashi had LSTAI reinstated with the Virginia State Corporation Commission and became President of LSTAI. UGI started using the disputed mark on its website and other materials. 

    Also in 2007, Musab Mushtaha and Alashi filled out a form with the International Airline Travel Agent Network (IATA) saying that Alashi was now the 100% owner of LSTAI, 50% of the stock received from Fawaz Mushtaha and 25% received from each of Abdelellah and Musab Mushtaha.  Musab Mushtaha didn’t own 25% of the company and also didn’t have the authority to transfer the stock to Alashi. 

    Eventually a dispute arose, Alashi was removed as President in April, 2008, and Musab Mushtaha became President. Around the same time, unbeknownst to the Mushtahas, Alashi filed a trademark application in the name of UGI for the mark with the USPTO (which issued on June 23, 2009).  In July, 2008, Asashi, Fawaz Mushtaha and Abdelilah entered into an agreement with the following language (typos in original):

    Musab (light Star Travel Agency Inc.), will provide U.S. GATES INT’L (Taha [Alashi]) and Mohammed Abdelilah with 200 Hajj packages at the agreed cost between the parties selling cost. No VISA charges shall be added to the 200 packages. . . . Any Hajj packages or Visa provided by Light Star Travel Agency Inc., to his throughout the rest of the country, Taha and Mohammed would not acquire any benefits from it unless they have been involved in it. . . .  Light Star Travel Agency Inc. has the right to choose the organizer for the hajj business or add extra company to its organizer permit without permition from Taha Alashi or any representative of us gates and will cover all the expenses.

    US GATES INT’L LLC–d/b/a Light Star Travel and Taha will not be held responsible for any penalty, charge, damage, taxes, liabilities or lawsuit held against Light Star Travel Agency Inc, U.S. Gates Taha, Mohammed will be responsible for their own packages only. . . .  We U.S. GATES INT’L LLC– D/B/A Light Star Travel has separate entity than Light Star Travel Agency Inc,

    In 2009 there was a dispute about the travel visas.  Musab Mushtaha, Alashi and Abdelilah met with the Saudi Arabian Embassy to settle the matter.  Abdelilah testified that before the meeting, Alashi said that he never owned LSTAI.  At the meeting with the Embassy staff, Alashi said that LSTAI was not his company.  As a result of the meeting, the right to the visas was given to LSTAI.

    Since UGI and LSTAI were both using the mark for the same services, UGI ultimately sued LSTAI on various claims under the Lanham Act.  LSTAI counterclaimed on a similar assortment of claims and for cancellation of the registration.

    Those are the facts relied on by the district court in a bench trial. No one contested that the mark was valid and there was likelihood of confusion since both entities were using the same mark.  Rather

    though this case is one for trademark infringement, the dispute, at bottom, is one over the transfer of a business, specifically a Virginia corporation. Both parties concede that they each use the identical mark in commerce–what they contest is ownership.

    Defined that way, it really wasn’t hard.  Despite the inaccurate statements made to IATA, Alashi never actually owned any stock.  Under Virginia law, there must be a plan for a share exchange and the plan has to be adopted by the board of directors and approved by the shareholders. That clearly didn’t happen.  The July, 2008 agreement also didn’t operate to transfer stock; the agreement was merely a business arrangement for the allocation of travel packages and visas.  The agreement also acknowledged that UGI and LSTAI were two distinct entities, a situation that Alashi confirmed was the case both to Abdelilah before the meeting at the embassy and to an embassy official.  Once the court decided that UGI wasn’t the true owner of the mark, it was clear that the trademark infringement was by UGI, not LSTAI. The evidentiary value of the trademark registration was quickly and correctly disposed of and LSTAI’s common law properly invoked and evaluated.  UGI wound up as the one enjoined and the court ordered the cancellation of the registration.

    US Gates Int’l, LLC v Light Star Travel Agency, Inc., No. 1:10cv32 (E.D. Va. Nov. 8, 2010).

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  • Assigned or Not?

    The ‘086 patent was owned by Astra L and the ‘524 and ‘489 patents were owned AZAB. On, and effective on, June 28, 2006 and pursuant to an earlier-executed Asset Purchase Agreement, a third company, AstraZeneca-UK (“AZ-UK”), purported to assign the three patents to plaintiff Abraxis. Does Abraxis have standing? It’s not as clear-cut as you might think.

    Here’s the language of the APA:

    [AZ-UK] shall, or shall cause one or more of its Affiliates to, Transfer to the Purchaser, and the Purchaser shall purchase and accept from the Seller or its Affiliates, as applicable, all of the right, title and interests of the Seller and its Affiliates in and to … all Transferred Patent Rights.

    The separate Intellectual Property Assignment Agreement, executed as part of the transactional documents, stated:

    [The] provisions of this instrument are subject to the terms and conditions of the [Asset] Purchase Agreement. . . . [Seller] hereby sells, assigns, conveys and transfers to Buyer … all of Seller’s right, title and interest [in the three patents in suit, and others].

    . . . .

    Further Assurances. [AZ-UK will] do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, any and all further acts, conveyances, transfers, assignments, and assurances as necessary to grant, sell, convey, assign, transfer, set over to or vest in Buyer any of the Transferred Intellectual Property.

    Most likely in contemplation of filing the patent infringement lawsuit, AZ-UK realized that Astra L and AZAB were the record owners of the patents.  Documents were executed on March 15, 2007 (the same day the lawsuit was filed) to assign the patents to AZ-UK, using the following language:

    [T]his instrument is being executed by the parties to enable the Transferee [AZ-UK] to further convey to Buyer [Abraxis] that portion of the Transferred Assets . . . pursuant to which Transferee agreed to sell to Buyer and Buyer agreed to purchase from Transferee the Transferred Assets, all as more particularly set out in the [Asset] Purchase Agreement [with] consummation of the transactions . . . deemed to occur at the Effective Time.

    On November 12, 2007, eight months later, AZ-UK executed an additional document between it and Abraxis, stating that it was:

    confirming the sale, assignment and transfer to Abraxis, for Abraxis’ sole and exclusive use and enjoyment, of all of AZ-UK’s right, title and interest in and to [the ’086, ’524, and ’489 Patents] and the patent applications therefor pursuant to the Asset Purchase Agreement and further sells, assigns, conveys and transfers to Abraxis . . . all of AZ-UK’s right, title and interest, if any, in and to [the ’086, ’524, and ’489 Patents] and the patent applications therefor pursuant to the Asset Purchase Agreement.

    So does Abraxis have standing?  The answer apparently depends on whether you apply the law of the State of New York (as the district court did) or the law of the Federal Circuit (as of course the Federal Circuit did).  In the former case, the assignment is valid as of the 2006 effective date.  As explained in Judge Newman’s dissent:

    The district court, applying New York law of contracts and property transfers, held that the March 15, 2007 assignment documents were “delivered in accordance with” the terms of the Asset Purchase Agreement and were effective as of June 28, 2006, as stated therein. The district court determined that the June 28, 2006 Closing Date applied to all of the listed patents. The court stated: “Given this retroactive effect, the [Intellectual Property Assignment Agreement] would then operate to transfer title from [AstraZeneca UK] to Abraxis as of that date as well,” and held that the transfer was effective as of June 28, 2006.

    In Judge Newman’s opinion, the March, 2007 transaction was undertaken pursuant to the “Further Assurances” clause of the APA and therefore effective on February June 28, 2006.  But the Court of Appeals for the Federal Circuit took a more literal approach to the chain of title.  It held that the documents did not effect a present assignment of the patents, but instead there was only a promise to assign in the future.  Thus, Abraxis did not acquire the patents in suit until the final document was executed on November 12, 2007, well after suit was filed.  Therefore Abraxis did not have standing.

    I have to agree with Judge Newman on this one.  (Well, I usually do agree with Judge Newman.)  As she notes, “It is not unusual to transfer a complex set of related assets through a master agreement and additional contracts and assurances. . . .”  It’s clear that the parties to this transaction fully intended to, and by their language thought they had, transferred the ownership of the patents. The patents were listed by number in the original transactional documents and the documents contemplated the possibility that there might be a series of transactions to effect the transfer, which, no matter when executed, were to be effective on June 28, 2006. Indeed, as stated by Judge Newman, the Federal Circuit “engraft[ed] a meaning that no party could reasonably or possibly have intended.”  It’s a lousy decision.

    Abraxis Bioscience, Inc. v. Navinta LLC, No. 2009-1539 (Fed. Cir. Nov. 9, 2010).
    Abraxis Bioscience, Inc. v. Navinta LLC, No. 07-CV-1251 (D.N.J. March 3, 2009).

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  • The Hard Rock Hotel Fires Back

    Photo by David Herrera

    Things are getting more interesting in Hard Rock Cafe International (USA), Inc. v. Hard Rock Hotel Holdings, LLC. As previously blogged, this is a spat between a trademark licensor and licensee where the licensor claims a breach of the license agreement.  Hard Rock Hotel has fired back in its answer:

    The Café has brought the present lawsuit – a meritless grab bag of claims for breach of license, trademark infringement, trademark dilution and unfair competition – in an attempt to terminate or rewrite the 1996 license agreement. The Café complains about a range of alleged trademark abuses that in many cases it has long known about, tolerated or even approved.

    It also counterclaims for  breach of contract, breach of the covenant of good faith and fair dealing, and tortious interference with business relations.  This could get interesting.

    More from Ryan Gile at the Law Vegas Trademark Attorney here.

    Hard Rock Cafe International (USA), Inc. v. Hard Rock Hotel Holdings, LLC et al. Answer.

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  • Things I Don’t Write About

    John Steinbeck and Bob Marley copyright ownership disputes.  They are complicated and make my head hurt.  Luckily, others take on the task.  Eddy Ventose, of the law faculty of the University of the West Indies, has taken on the Bob Marley story.

    Citation: Journal of Intellectual Property Law & Practice (2010) doi: 10.1093/jiplp/jpq166, first published online 10 November 2010.

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  • The Heebie Jeebies

    As former counsel for Reebok, my eye caught on “reabok.com”; it was a clear typosquat. I looked more carefully at the list of domain names in dispute and it wasn’t the only typosquat or cybersquat:  belis.com, daffy.com, epsun.com, fivebars.com, gunit.com, helmsley.com, livs.com, mascaron.com, oncologics.com, pirreli.com, profesia.com, reabok.com, remolacha.com, satz.com, sunlet.com, vespas.com, vitallium.com, zire.com, and redroof.org.  I got a bit of the heebie jeebies because in the case being reported, the owner of these domain names wasn’t the defendant but was instead the plaintiff.

    Plaintiff Warren Weitzman owned the domain names for purposes of “domain monitization and as such collects domain names for the purpose of turning Internet traffic into monetary gain through the use of click through traffic,” according to his complaint.

    Weitzman alleged that the defendant, Lead Networks Domains Pvt., Ltd., an Indian corporation with a primary place of business in Mumbai, India, “has taken control of each of the subject domain names by effectively re-titling the subject domains as if they were owned by Lead Networks.”  Weitzman brought claims under the Anticybersquatting Consumer Protection Act, for tortious interference with contractual relationship, and for conversion.

    Lead Networks defaulted, which meant that the court had to determine only whether Weitzman properly stated a claim for relief under the ACPA. The uncomfortable part is that to state a claim under the ACPA, one has to own a trademark.  15 U.S.C. §1125(d) (“A person shall be liable in a civil action by the owner of a mark . . . .”).  Does a bald-faced squatter own “a mark”?

    Apparently so, according to this court, after a lot of hand-wavey stuff about domain names and “marks.”  First, the complaint:

    The court buys into it, thus:

    Although Plaintiff has sufficiently shown that he owns the rights to these Domain Names, the real question now turns on whether domain monetizing and common law ownership of a domain name fall under the purview and protection of the ACPA. As Plaintiff notes in his brief, the Domain Names that he previously used are highly suggestive of the actual advertising placed on the site, but are not indicative of the actual goods and services provided. For example, the word “belis” in “belis.com” helps differentiate Plaintiff’s advertising from others, but does not in fact identify a particular good or service with the name “belis”.  So, the real question is, does a domain name that is not registered as a trademark, but is used to provide internet users certain services, constitute a “mark” under the ACPA?

    . . . .

    Plaintiff argues that because his advertising services are distinctive and pertain specifically to users clicking on the disputed Domain Names, the Domain Names should fall under the protection of a trademark under the ACPA. The undersigned Magistrate Judge concurs. Similar to the situation in People for the Ethical Treatment of Animals, the Defendant here has taken unlawful possession of domain names that prevent users from obtaining or using Plaintiff’s services. Defendant redirected the proceeds from Plaintiff’s prior work to itself by illegally preventing Plaintiff from accessing his Domain Names. Further, Defendant is not efficiently managing the advertising services of the Domain Names and thus is prohibiting users from fully benefiting and receiving the services that they seek. Thus, legal precedent dictates that Plaintiff’s Domain Names should be afforded the protection of the ACPA.

    According to the magistrate judge, domain name=trademark, a proposition that any trademark lawyer will tell you is complete bunk.  I know it’s a default judgment, but it makes me very uncomfortable to think that there’s a decision out there that states that a cybersquatter owns trademark rights in, say, “redroof.org” by virtue of the squatting itself.

    Weitzman v Lead Networks Domains Pvt., Ltd., No. 1:10-cv-01141 (CMH/IDD) (E.D. Va. Sept. 24, 2010); Order adopting magistrate’s Report and Recommendation here.

    P.S. Quote of the day in Weitzman letter to ICANN, “I have been working with domains since 1994 or so, and as you may know, when one has 12,000+ domains, it’s difficult not to have a few that overlap on other trademarks.”  He also claims to turn them over on request – “if any business were to request or complain about an infringement, I would surely surrender and transfer the domain to them, should it be a legitimate claim.”  Trademark owners, get busy.

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  • The Difference Between a First Name and a Trademark

    “Zoe” may indeed be used as a trademark by Renault, which means, according to the lawyer for two plaintiffs named Zoe Renault, that they will “now be subject to a lifetime of ribbing and that, as they grew older, would be prey to such quips as ‘Can I see your airbags?’ or ‘Can I shine your bumper?’”  His novel trademark theory that “There’s a line between living things and inanimate objects and that line is defined by the first name” didn’t convince the judge.

    Story here.

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  • When an Assignor is Not Estopped

    Assignor estoppel is an equitable doctrine that precludes the assignor of a patent from later challenging the validity of the patent. The reach of the doctrine is limited, though, as explained in Borgwarner, Inc. v. Honeywell International, Inc. 

    The patents-in-suit are for a titanium compressor wheel made by investment casting. In mid-2000, Plaintiff BorgWarner engaged an outside company, B & R Molding, to create dies to be used to make the wax patterns that are used to make the investments for casting the wheels.  Robinson, of B & R Molding, identified some problems with the wheel design that meant that the die wouldn’t release properly and recommended a redesign to make the tool “pullable.” Robinson told BorgWarner that he had created a toolset similar to the one BorgWarner wanted for a previous client.

    BorgWarner incorporated the changes into its design.  In June, 2001, BorgWarner filed patent applications related to the wheel, naming two BorgWarner employees as the inventors.

    Enter Honeywell, the defendant.  In 2003, before any patent issued, Honeywell approached Robinson and obtained an assignment of “whatever rights, titles, and/or interests [he] may have” in the various applications related to the patents-in-suit. Robinson had no problem signing the assignment; he thought any patent would be invalid because of his prior work and told Honeywell so. 

    Honeywell ultimately get sued on the patents.  BorgWarner claimed that Honeywell was estopped from challenging the validity of the patents on the assignor estoppel theory.  Assignor estoppel applies not only to the assignor, but all those in privity with him or her, as Honeywell was with Robinson. 

    The court didn’t buy the theory, though.  Why didn’t it work for BorgWarner?  The court explained why normally an assignor is not allowed to challenge the validity of what he or she has assigned away:

    (1) to prevent unfairness and injustice; (2) to prevent one from benefiting from his own wrong; (3) to adopt the analogy of estoppel by deed in real estate; and (4) to adopt the analogy to a landlord-tenant relationship. “Courts that have expressed the estoppel doctrine in terms of unfairness and injustice have reasoned that an assignor should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.”

    The court pointed out that the doctrine is to protect the interests of the assignee against subsequent challenges from the assignor.  If there was an assignor estoppel here, it would protect Honeywell from a claim by Robinson that what he assigned was worthless.  But that’s not the challenge here; in fact, Honeywell agrees with Robinson that the assignment is worthless because the patent is invalid. 

    No easy out for BorgWarner here on a validity challenge, but nice try on a long shot.  BorgWarner’s claim that Robinson was estopped from challenging inventorship was also denied.

    Borgwarner, Inc. v. Honeywell International, Inc.    , Civ. No. 1:07cv184 (W.D.N.C. Sept. 27, 2010).

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  • The Supreme Court and Ownership of Patents

    The Supreme Court recently granted certiorari to decide a question of patent ownership.  The case is Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. and involves interpretation of the Bayh-Dole Act of 1990.  The Bayh-Dole Act discusses, in the case of federally-funded research, the relative rights of patent ownership between the federal government and the university, small business or non-profit receiving the funds.  What isn’t clear is how the inventor’s ownership rights fit into the scheme. The question presented is:

    Whether a federal contractor university’s statutory right under the Bayh-Dole Act, 35 U.S.C. §§ 200-212, in inventions arising from federally funded research can be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor’s rights to a third party.

    Dennis Crouch at Patently-O has a great summary on the case.

    Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 09-1159.
    Federal Circuit opinion here.
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