Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • The Reason for a Declaratory Judgment Counterclaim

    Exclusive Rights blogged on a recent decision from the 11th Circuit. It involves the “Rooker-Feldman” doctrine on the availability of review of state court decisions by a federal court. I promptly mentally filed the decision in the category of “I’ll look it up if I ever need it,” but the brief summary of facts by the 11th Circuit, describing a disagreement between the state and federal courts about whether a copyrighted work was a joint work, provoked a little digging. It’s quite a battle.

    Defendant Shafe hired plaintiff Nicholson to create an “Interest Inventory” as part of a larger work used to help high school students with career choices, which I’ll call “Work 1.” The Interest Inventory contained a table called “What Your Scores Mean.” Nicholson’s work was covered by a written agreement and the parties did not dispute that Nicholson’s contribution was as a work made for hire.

    Nicholson then created another “Interest Inventory” with a modified, 11 column “What Your Score Means” table for Work 2. There was no signed agreement relating to this work. Shafe then took the new table and incorporated it into Work 1. Nicholson filed a copyright registration for columns 4, 5, 6, 7, 9 and 11 of the “What Your Scores Means” table. [ed. note – I think it probably doesn’t bode well for your ownership claim when you register only some columns of a table.] Nicholson sued Shafe in federal court for copyright infringement.

    The court held that the table in Work 2 was a joint work – specifically the court said “In sum, the court finds that [Work 2] is comprised of inseparable and interdependent works, and that Nicholson intended for the new copyrighted columns to be incorporated into the original version of “What Your Scores Mean,” for which Defendants already owned a copyright interest. Accordingly, the court holds that [Work 2] is a joint work.” Therefore, since Shafe was the owner of some of the copyright, he couldn’t be an infringer. The court granted summary judgment in favor of Shafe on the copyright infringement claim.

    Nicholson did the logical next thing, suing in state court for an accounting since she was joint owner of the work. But, as reported in the Georgia state court appeals opinion, the state trial court held that collateral estoppel did not apply because the federal court’s statement that Nicholson was an owner was dicta. The case went to trial and the jury held that Nicholson didn’t have ownership rights and was owed no money.

    “Dicta” that Nicholson was a joint owner, when the case was fundamentally about copyright ownership? The Court of Appeals opinion is short but tantalizes for paragraph after paragraph before getting to the reason – just because Shafe was an owner of the copyright doesn’t necessarily mean that Nicholson was also. All that was necessary to decide the infringement claim was to find that Shafe was an owner, not whether Nicholson was. A parsimonious reading of the federal decision if ever there was one, but technically accurate.

    Back to federal court for Nicholson, this time for a declaration that she also was a joint owner of the work. But she was smacked down again in federal court, sanctions and all, by the same judge who heard the original case. The court sua sponte raised the Rooker-Feldman doctrine to bar the suit and refused to reach the parties’ arguments on res judicata. The smackdown seems particularly cruel given that the court, in the first opinion, commented that there were counterclaims (perhaps for a declaration of ownership?) but strongly suggested settling: “As a practical matter, if Defendants dismiss their counterclaims, this court would no longer have federal question jurisdiction and would not exercise supplemental jurisdiction over the state law clams, so this action in this court would be over. While this court will not mandate mediation of the remaining claims, the court suggests that now may be a good time to discuss settlement of what remains of the dispute.” The case settled less than two months later.

    But most recently the 11th Circuit to Nicholson’s rescue, as explained by Exclusive Rights. The district court was wrong on Rooker-Feldman and Nicholson has another chance in the district court. Still the res judicata to contend with, but not dead in the water yet.

    2003 Northern District of Georgia decision here.
    Georgia state appeals court citation is Nicholson v. Shafe, 294 Ga.App. 478, 669 S.E.2d 474 (2008).
    2008 Northern District of Georgia decision here.
    11th Circuit decision here.

    © 2009 Pamela Chestek

  • Jumping to Conclusions

    One thing lawyers are good at is exploiting weaknesses. A recently-filed case in Delaware used an incorrect admission in an unrelated case as grounds for a motion to dismiss, claiming that the admission demonstrated that the plaintiff was not the actual owner of the patent. The defendant’s motion was ultimately unsuccessful, but a lot time and money were wasted and there were nervous attorneys somewhere.

    The relevant, much-disputed patent is U.S. Patent No. 4,868,112. The inventor, John J. Toole Jr., assigned the patent to Genetics Institute, Inc. (“GI”). The patent issued September 19, 1989. In 1996, American Home Products (“AHP”) completed the purchase of all shares of GI and it was held as a wholly-owned subsidiary of AHP. In 2002 AHP changed its name to Wyeth. In 2002, GI Inc. changed its entity type and name to GI, LLC and recorded the change with the PTO.

    In about 2002 there had been an interference proceeding involving the ‘112 patent. During the interference, the following statement was made:

    After the interference was decided in GI’s favor, it was appealed to the district court. Both Wyeth and GI were named as parties, because, as explained in the complaint, “the most recent written assignment recorded with the PTO shows GI, LLC as the assignee” but it was the plaintiffs’ belief that “at all times including and since the Board’s October 31, 2003 decision complained of herein, all right title and interest had resided in Wyeth alone.” The answer confirmed “Wyeth is the real party in interest and owner of all right, title and interest in the ‘112 patent.” The proceeding was later settled.

    But then GI, not Wyeth, sues for a declaration that the ‘112 patent has priority over two Novartis patents, in reaction to a patent infringement suit Novartis brought against Wyeth. Novartis makes hay with the admission in the earlier case, moving to dismiss on the basis that GI is not the owner of the patent.

    After what was undoubtedly many hours of sweating later, GI filed a declaration from an in house lawyer, stated that he searched the Wyeth legal records and that:

    Those files generally include corporate agreements relating to Wyeth and any existing or former subsidiaries of Wyeth (such as Genetics Institute, LLC and Genetics Institute, Inc.) and include agreements involving transfers of assets. Upon a search of those files, I found no transfer of any intellectual property assets from Genetics Institute, Inc. or Genetics Institute, LLC to Wyeth. Based on my search of those files, I conclude that at no time did Genetics Institute, Inc. or Genetics Institute, LLC transfer any of its intellectual property assets, which includes [the ‘112 patent] to Wyeth.

    I have also searched the minutes of the Board of Directors of Genetics Institute, Inc. and Genetics Institute, LLC and I found no authorization for a transfer of U.S. Patent No. 4,868,112 or any patent to Wyeth. The only authorization by the Board of Directors of Genetics Institute, Inc. or Genetics Institute, LLC for a transfer of assets to Wyeth that I found expressly excluded patents.

    The declaration included a copy of the board consent that ratified the transfer of assets but excluded the patents.

    The court held this was uncontroverted documentary evidence that GI was the owner of the ‘112 patent and denied the motion to dismiss. Hand slapping was not foregone, though:

    The court notes at this juncture that it is well aware of the fact that counsel for GI, LLC has taken one position before the PTO and the court in this case, and another before Judge Sleet in prior litigation. Although different local counsel appear to have been involved, plaintiff had the same lead counsel in both cases. Plaintiff characterizes its prior representations as simple misstatements, emphasizing that an August 2005 settlement agreement between GI, LLC, Wyeth, Genentech and Bayer, post-dating the statements at issue, acknowledges that GI, LLC owns the ‘112 patent. (D.I.11, ex. 9) Should discovery demonstrate that GI, LLC and Wyeth are engaged in a “shell game,” as defendant suggests, the court will revisit the issue in the context of a subsequent motion following jurisdictional discovery. For purposes of the record, the court does not find plaintiffs prior statement a “judicial admission,” as defendant argues, in view of the fact that it occurred in separate litigation. Plaintiff’s motion to file a sur-reply to defendant’s motion to address this issue (D.I.18) is denied.

    Genetics Institute, LLC v. Novartis Vaccines and Diagnostics, Inc., Civ. No. 08-290-SLR, 2009 WL 396073 (D. Del. Feb. 18. 2009).

    © 2009 Pamela Chestek

  • The Risk of the Silent License

    A previous post looked at a contract that was silent on trademark ownership and licensing, leaving the court to sort out who owned the trademark in dispute. A similar problem, a contract silent on the trademark, was decided in the Northern District of Indiana on the same day. This time, it was decided in the defendant’s favor and to the detriment of the mark.

    The plaintiff Boss Products was formerly known as Port-A-Pit Bar-B-Que, Inc. (“Inc.”) and had a registered trademark for Port-A-Pit. In 1974, the principal of defendant, Peverly, entered into a one-year contract with Inc. to lease Inc.’s patented barbecue grill, so long as he did it as an individual proprietor, adopted an assumed business name, paid half of his net profits to Inc., and used barbecue sauces developed by Inc. In 1975 they entered into a second agreement that was the same in all relevant respects and then continued to operate under the terms of the agreement until 1983. During that time, Peverly operated under the name “Port-A-Pit Bar-B-Que of Edgerton,” incorporating in 1981.

    In 1983 they entered into another agreement with a five year term that did not require, but urged, the use of Inc.’s barbecue sauces, then entered into another similar agreement in 1987. They continued their relationship until 2003, when Peverly terminated because, in Peverly’s opinion, Boss Products proposed unreasonable terms. Peverly instead returned the grills and had new ones built in order to continue his business. Shortly thereafter, Boss Products sent Edgerton a cease and desist letter telling Edgerton that it could no longer use the Port-A-Pit name. Boss Products ultimately sued in 2005, alleging trademark infringement, dilution and unfair competition.

    Edgerton had three theories in its defense: there was no breach of contract because the contract did not prevent its use of the Port-A-Pit mark; Boss Products abandoned its mark through naked licensing; and the claim was barred by laches or equitable estoppel.

    The contract was silent on the use of the “Port-A-Pit” trademark, but Boss Products claimed there was an oral agreement that Edgerton could use the mark only so long as Edgerton used the grill and the sauces. Edgerton said there was no oral agreement, only the contract provision that Peverly adopt an assumed business but not what the name should or should not be. The court dodged, finding that the written agreements were fully integrated and thus parol evidence not admissible. Since the agreements did not reference the Port-A-Pit trademark, there was no breach of contract by Edgerton by its use of the “Port-A-Pit” name, even post-termination.

    On the naked licensing defense, Edgerton alleged that the agreements did not control Edgerton’s use of the mark; in fact, the 1983/85 lease agreements demonstrated absence of control. The lease terms said that Edgerton was “an independent business in all respects and is not required to use any particular marketing plan or system,” was to have “sole control over the manner in which [it] will use the leased barbeque machine and over [its] method of operation,” and had no obligation to use the Boss Products’ barbecue sauces. Edgerton claimed it marketed the business in any way it chose, used the sauces of its choice, and served any side dishes it chose.

    But the court sided with Boss Products – a licensor may rely on the reputation and expertise of its licensees to some degree, and there was no substantial deviation in quality. There was also no reduced significance of the Port-A-Pit mark, so no abandonment.

    But the laches defense was successful for Edgerton. Boss Products was aware of Edgerton’s use of the Port-A-Pit mark since the 1970’s because the contracts were signed as “Port-A-Pit Bar-B-Que of Edgerton.” Thirty years of use, including at least five years of non-use of the Boss Products sauces, was inexcusable delay. Prejudice was also an easy call for the court – Edgerton’s “inability to continue operating their business under the ‘Port-A-Pit’ name would strip them of the goodwill they spent thirty years establishing.”

    Although laches does not necessarily bar injunctive relief, “in some cases, however, the delay may be so prolonged and inexcusable that it would be inequitable to permit the plaintiff to seek injunctive relief as to future activities.” That was the case here; summary judgment entered in Edgerton’s favor.

    So the “Port-A-Pit” mark is in use by a company other than the trademark owner or its licensee. Remember the trademark license.

    Boss Prods., Inc. v. Port-a-Pit Bar-B-Que of Edgerton, Inc., Cause No. 3:05-CV-293 RM, 2009 WL 260793 (N.D. Ind. Feb. 4, 2009)

    © 2009 Pamela Chestek

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  • Wild Things

    The IPKat gives us an interesting story of a failed joint authorship theory for a children’s book. The German court held that the illustrations were not a joint work of authorship with the literary work and characters because there was a lack of sufficient interaction between the illustrations and the plot of the story. It’s hard to understand how that could be true without seeing the books, which are not to be confused with this similarly titled story more familiar to Americans. Perhaps it has something to do with the fact that the character drawing preceded the story, designed as a logo for the youth football (soccer) team that the author coached.

    Which leaves the interesting question of where it goes from here – surely the story author can’t create new stories with new drawings too similar to the original character or it would be a copyright infringement. And who gets the royalties for the promotional goods that feature only the character?

    IPKat story here.

    © 2009 Pamela Chestek

  • Think of the Trademark License, Too

    Two opinions issuing on the same day, one in Connecticut and one in Indiana, are parallel situations. In both cases, there was a contractual relationship that fell apart. The relationships had a trademark aspect to them, but the contracts never addressed the use or ownership of the trademarks directly, leaving the courts to sort it out in hindsight. This post will be on the Connecticut case and the next on the Indiana decision.

    In Laboratory Corporation of America v. Schumann, Dr. G. Berry Schumann and his wife developed a certain kind of urinalysis test, the “Schumann urinalysis test,” in 1979. On January 1, 1993 Schumann was hired by Laboratory Corp. subsidiary Dianon Systems, Inc. In August or September of that year, Dianon began marketing the test under the trademark “Microcyte.” Dianon stated on its medical literature “Microcyte is a trademark of Dianon Systems, Inc.”

    Shortly thereafter, on October 12, 1993, Dianon signed a “technical services agreement” with Dr. Schumann’s company, Schumann Cytology Laboratories, Inc. (“SCL”). SCL gave Dianon an exclusive license to the Schumann urinalysis test through December 31, 1998, after which Dianon would have a non-exclusive perpetual license.

    Dr. Schumann worked for Dianon from 1993 to 2005. Dianaon terminated Dr. Schumann’s employment in 2005, shortly after Dr. Schumann filed an application to register Microcyte in SCL’s name. Lab. Corp. and Dianon opposed the application and filed the lawsuit, seeking a declatory judgment that it was the owner of the Microcyte mark and that Dr. Schumann was infringing the mark. Dr. Schumann counterclaimed on trademark ownership, and also brought a claim for copyright infringement of training materials. The PTO suspended the prosecution of the SCL application.

    The fairly well-reasoned decision awarded ownership of the trademark to Dianon. It found that Dianon was the first to use the mark Microcyte and therefore awarded priority to Dianon. I don’t believe that “priority” is the right way to characterize the point, since the dispute is about only one trademark and, a priori, there can only be one priority date. Nevertheless the point is well-taken; Dr. Schumann commercialized the test before his relationship with Dianon without using the name “Microcyte.” He claims that he was the first to think of the name “Microcyte,” but it was Dianon who commercialized the test under the name. Dr. Schumann also for years reviewed patient test results that stated “Microcyte is a trademark of Dianon Sytems, Inc.” and never objected.

    Schumann argued that the agreement between the parties was a trademark license to Dianon. The court found, however, that the agreement, when considered as a whole, was not a trademark license but merely a license for the test itself. It was labeled “technical services agreement” and described the scope of the license as the testing services. Although the agreement referred to “Microcyte,” the agreement did not use the word “trademark” in it or assign trademark-related duties. It did not consistently refer to the test as “Microcyte,” but also referred to simply “testing service” or “testing service application.”

    In light of the silence of the agreement and the absence of Schumann’s own earlier use of Microcyte, the court granted summary judgment in Dianon’s favor on the trademark ownership count. It grant Schumann summary judgment on the infringement count, though, since Schumann was not actually using the Microcyte mark but had only tried to register it. The copyright claims were decided in Dianon’s favor and the court declined to exercise supplemental jurisdiction over the state law claims, dismissing them without prejudice for refiling in state court.

    For discussion: Dianon did not allege fraud by SCL in its Notice of Opposition, only likelihood of confusion. Should it have?

    Laboratory Corporation of America v. Schumann, No. 3:06-cv-01566 (VLB), 2009 WL 275859 (D. Conn. Feb. 4, 2009).

    P.S. Hat tip to my former colleagues at Cantor Colburn on the case.

    © 2009 Pamela Chestek

  • University versus Professor

    There have been a few news reports of a suit between the University of Missouri and Galen J. Suppes, a professor of chemical engineering, and William R. Sutterlin, a former graduate teaching assistant and post-doctoral fellow. The university has a broad contractual claim to ownership of patents for inventions created by its employees, including those created while working for the University but not within the scope of the employee’s duties. The University claims that Suppes and Sutterlin did not disclose patents they filed and improperly licensed them.

    Counts are for declaration of ownership of patents, including undisclosed ones, that there was an automatic assignment of patents to the University, breach of contract, tortious interference with business relationships, breach of duty of loyalty, for an accounting, and for specific performance of contractual obligations to account for the patents and revenue generated.

    Complaint below, Suppes version of events in the articles linked above.

    Univ. of Missour vl. Suppes Complaint

    © 2009 Pamela Chestek

  • JOYCE Still Up for Grabs

    Awhile back I blogged on a TTAB opposition and cancellation between the Joyce Theater Foundation, Inc. and Ballet Tech Foundation, Inc. The proceeding involved a dispute over who owns the mark JOYCE, the foundation that purchased and renovated a theater named JOYCE or the foundation that ran the facility. The TTAB held that the foundation that purchased the theater, Ballet Tech, owned the JOYCE mark.

    The parties have now moved the dispute to federal court. The Joyce Theater Foundation filed a suit in the United States District Court for the Southern District of New York, No. 09 Civ 1225, asking for judicial review of the TTAB decision as provided for by Lanham Act § 21(b), 15 U.S.C. § 1071(b).

    Complaint below.

    Joyce Theater Foundation v. Ballet Tech Found Dist Ct

    © 2009 Pamela Chestek

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  • Unfairly Filing Patent Applications

    Patent inventorship is defined by law, but there’s more than one way to get rewarded for it. Unjust enrichment, for example.

    Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc. is a tale of business misrepresentations and underhanded dealing, described by the court as “manifest unfairness” and “unscrupulous.” Of particular interest here is the maneuvering for ownership of patent applications.

    Dr. Joan Miller, while working for Massachusetts Eye and Ear Infirmary (MEEI), used biological materials provided by defendant QLT Phototherapeutics to develop a treatment for age-related macular degeneration. After her initial success in developing the treatment, she and QLT executed a preclinical agreement for QLT to fund her further research. The parties also signed confidential disclosure agreements and additional material transfer agreements.

    QLT then shopped the new treatment to CIBA Vision. Contrary to the terms of the confidential disclosure and material transfer agreements, QLT disclosed confidential information to CIBA Vision and also eventually convinced Dr. Miller to present her findings to CIBA Vision directly. The parties had not yet negotiated a license agreement, but QLT persuaded Dr. Miller to go ahead by promising that QLT would enter into a license with MEEI on fair terms. Dr. Miller met with CIBA Vision and was persuasive; as a result of her presentation CIBA Vision ultimately executed an agreement with QLT.

    When it was time to file a patent application, QLT offered its patent attorney but said that it was not an inventor. QLT promised to compensate MEEI based on the assumption that MEEI would be the sole owner of the patent.

    QLT’s patent attorney drafted an application with three listed inventors, all from MEEI. QLT later told MEEI that in its opinion the part of the patent specifically addressing age-related macular degeneration had to be refocused in light of prior art. At the same time it told CIBA Vision that it wanted to maintain control of the application process, but could only use persuasion to do so since it had no inventors on the patent.

    QLT then suggested to MEEI amending the application in a way that would add QLT as an inventor. MEEI balked over a concern that adding inventors from other entities would also reduce its royalties. QLT assured MEEI that MEEI would be compensated as if it was the sole inventor. MEEI acquiesced, so the original application was cancelled and continuations-in-part filed, this time listing inventors from MEEI, Massachusetts General Hospital and QLT.

    Then the licensing negotiations began. As the court put it, “it became clear that they entertained diametrically opposed notions of what constituted a ‘fair business arrangement.’” QLT’s position was now it was free “as a co-assignee to practice the invention independently,” although it offered to still come to an agreement on reasonable terms. Not surprisingly, terms were never reached and the lawsuit filed.

    Note that the decision is out of the First Circuit, not the Federal Circuit. Despite the overarching patent background of the case, it did not involve a question of patent law.

    We previously noted that although the proper inventorship of the patent applications at issue is a non-negotiable question of federal patent law, the question of which application to prosecute was a choice available to the parties. Consequently, . . . if QLT induced MEEI to abandon a more limited claim (embodied in the ‘473 application or a similar MEEI-only application that did not raise prior art issues) in favor of the broader ‘591 claim by promising compensation, and then did not pay such compensation, QLT would be unjustly enriched.

    QLT argued that for unjust enrichment the benefit conferred had to be a patent benefit; the court disagreed. QLT also argued that the court shouldn’t assume that the original patent would have been valid, but the court noted that enrichment occurred regardless of the validity of any patent that would have issued from the original application: to wit, without the broadened application, QLT would have had significant challenges to its ownership of essential rights at a time when it was in critical negotiations with CIBA Vision. “[T]here was sufficient evidence that MEEI’s cooperation in the patent application process constituted a detriment to MEEI and conferred a benefit on QLT in a non-gratuitous context. In light of QLT’s vast profits and repeated promises, it would be manifestly unjust to permit QLT to retain such benefit.”

    The award of 3.01% of gross sales was affirmed.

    Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc. , 552 F.3d 47 (1st Cir. 2009). The Patent Prospector reports on the lower court decision here.

    © 2009 Pamela Chestek

  • Make a List, Check it Twice

    Of the four types of intangible property typically characterized as “intellectual property,” that is, patent, trademark, copyright and trade secret, only one, the patent, is a true grant of rights from the government. If the government says you don’t have it, you don’t have it. Which brings me to a sorry tale of oversights and errors that caused the expiration of nine patents for failure to pay maintenance fees.

    Twelve patents were acquired by the plaintiff Hi/fn. The docketing clerk at the law firm Irell & Manella, LLP docketed the change of ownership for only one of the patents. Then, the Irell lawyer, Bruce Kuyper, left to go to Latham & Watkins and took all of the original owner’s files with him, which incorrectly included the Hi/fn patents. At the same time, Hi/fn told Irell that Hi/fn was transferring some, but not all, of its files to Latham and asked for a list of its matters that Irell was handling. The patents were not on the list, because they were in the docketing system as having been sent to Latham.

    The maintenance fees on two of the patents not at issue here came due. Latham asked if Hi/fn wanted the fees paid, and to “disregard the notice” if Irell was handling it. Hi/fn asked that Latham pay the fees, then later sent a list of its patents, including the patents-in-suit, to Latham to confirm that Latham’s and Hi/fn’s records were in agreement on the due date of the maintenance fees. Latham didn’t respond. A few months later Hi/fn told Irell that Latham would be handling the files in Latham’s possession, but didn’t advise Latham of the same.

    The date the maintenance fee was due for the exemplar patent in suit, the 308 patent, was September 26, 2002, so the patent expired at the end of the grace period on March 26, 2003. Hi/fn was told by one of its licensees 3 1/2 years later, in November, 2006, that the 308 patent had expired. In December, 2006, “Latham was ‘notified’ of the decision Hi/fn had made in December 2002 that Hi/fn, at that time, had directed Irell not to handle the files in Latham’s possession.”

    Hi/fn filed its Petititon to Accept Delayed Payment of Maintenance Fees with the PTO on March 23, 2007. The PTO denied both the initial petition and a petition for reconsideration. Hi/fn then filed suit in federal district court under the Administrative Procedures Act, on the basis that the PTO’s denial of the petition was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.

    The PTO may accept a late payment of a maintenance fee within two years after the six-month grace period if the delay was “unintentional.” Here, where the delay was longer, the standard for accepting payment is that the delay must have been “unavoidable.” In both its decisions the PTO found, and the district court agreed, that the delay was not “unavoidable.” Assuming that the docketing clerk’s error was the reason for the non-payment, the error was not “unavoidable.” The docketing clerk erred in recording the assignment of 11 of 12 patents and there was no declaration from the clerk herself explaining her usual practices, her training, or her supervision, so that she could be credited as competent. Even assuming the the clerk’s error was unavoidable, though, Hi/fn itself knew the proper dates and communicated them to Latham only months before the maintenance fees were due, but didn’t take any steps to ensure that they were paid. To the extent that it Hi/fn was relying on Latham, Hi/fn had never expressly communicated to Latham that it should pay the maintenance fees, plus Hi/fn is bound by any errors that its counsel commits. The PTO’s dismissal was not arbitrary and capricious, and the patents are expired.

    And that’s why malpractice insurance for patent prosecution firms is so high.

    Hi/fn, Inc. v. Dudas, No. C-07-6430 MMC, 2009 WL 186180 (E.D. Tex. Jan. 26, 2009).
    © 2009 Pamela Chestek

  • Quickly Decomposing

    Agreements that assign employees’ inventions to the employer are commonplace. O’Keefe v. County of St. Clair demonstrates why.

    Plaintiff John O’Keefe was an at-will Landfill/Resource Recovery Manager for the county landfill. Co-defendant CTI and Associates was a contractor at the landfill, working with O’Keefe on operations and landfill design. O’Keefe and the president of CTI came up with an improved method for treatment of landfill waste, which ultimately resulted in the issuance of Patent No. 7,347,648. There were four inventors on the patent: O’Keefe, his wife, the president of CTI, and another employee of CTI.

    The county became interested in the profit-making potential of the patent, so the fight was on. A county administrator and the county’s lawyer pressured CTI and O’Keefe to turn over ownership of the patent to the county, by threatening to terminate O’Keefe’s at-will employment and dropping the contract with CTI. An agreement to add the county as a one-third owner wasn’t consummated. O’Keefe was later terminated with no explanation.

    CTI and the county later created Accelerated Landfill Technology, LLC to promote the patent for licensing. Meanwhile, the O’Keefe’s had assigned their rights to Virdis Waste Control, LLC. O’Keefe alleged that the county and CTI falsely stated that they had exclusive rights to the patent. The lawyer also gave a quote to a local newspaper that “anyone who wants to use the technology would have to pay us royalties,” and that putting O’Keefe’s name on the patent was “misleading,” saying that “the County should have been put on the patent in the first place.” O’Keefe hasn’t been able to find another job, claiming that he can’t get hired because there’s a cloud on his record.

    O’Keefe brought a false advertising claim under § 43(a)(1)(B) of the Lanham Act, which states:

    Any person who, on or in connection with any goods or services . . . uses in commerce any . . . false or misleading description of fact, or false or misleading representation of fact, which- . . .

    (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

    shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such an act.

    15 U.S.C. § 1125(a)(1).

    Defendants filed a motion to dismiss, claiming that a patent is not “goods” or “services” and thus there was no Lanham Act claim. Unfortunately for the defendants, case law directly on point was contrary to their argument. While a false representation of patent infringement does not state a claim under § 43(a)(1)(B), a false statement that a party is an exclusive source of a product because of its patent is a viable Lanham Act claim.

    Defendant also argued that the statements weren’t made in commercial advertisement and promotion, another loser. The statements to the newspaper were economically motivated and therefore commercial advertisement. O’Keefe thus successfully stated a Lanham Act claim, motion to dismiss denied, and the court retained jurisdiction over the supplemental state law claims.

    All for wont of an employee assignment agreement.

    O’Keefe v. County of St. Clair, No. 08-12162, 2009 WL 185659 (E.D. Mich. Jan. 23, 2009).

    © 2009 Pamela Chestek

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