You may have read the recitals or introductory clauses in a
license or an assignment agreement. In most cases, these clauses
are just skimmed, if they are reviewed at all. In a recent decision
of the US Federal Circuit Court of Appeals, the court reviewed the
impact of the so-called "consideration" clause in an
assignment. In patent law, an assignment is a contract transferring
ownership of an invention by the inventors. This permits the
assignee (the party getting the invention, such as an
employer or a purchaser) to file a patent application as
the applicant and owner of the invention. This assignment document
is a contract, and so it must meet all the requirements of contract
law. One of those requirements is that there must be adequate
"consideration" - in other words, something of value that
flows to each party. It can be money, or something else of
In MemoryLink Corp. v. Motorola Solutions.
Inc., (Fed. Cir. Dec. 5, 2014)(No. 2014-1186, N.D. Ill.),
the court looked at the consideration clause in the context of a
patent infringement lawsuit. Memorylink sued Motorola for
infringement of a certain patent. However, both Memorylink and
Motorola were joint owners of the underlying inventions by
virtue of an assignment which was signed by all the inventors.
Memorylink attacked the validity of that assignment, arguing there
was a lack of consideration.
In June 1998, all four designated inventors signed the
assignment, transferring their rights to both Motorola and
Memorylink. The assignment begins with this statement:
"For and in consideration of the sum of One Dollar to us
in hand paid, and other good and valuable consideration, the
receipt of which is hereby acknowledged.."
There are variations of that clause - sometimes the sum of one
dollar, sometimes five or ten dollars - but they are all designed
for the same purpose: to remove the argument that the contract
should fail for lack of consideration. In the context of the
assignment and transfer of valuable patent rights, is one
dollar truly sufficient to create a legally binding
Citing decisions that reach back to the 19th century, the US
court said, yes, nominal consideration will suffice to
support a contract, including an invention assignment. Courts will
not inquire into whether or not the consideration listed in the
agreement is adequate, unless the amount is "so grossly
inadequate as to shock the conscience." In this case, the
amount of $1.00 did not shock the court's conscience.
The original 1998 assignment was valid, and Motorola was a joint
owner of the patent. As a joint owner, Motorola could not be liable
for infringement of the patent.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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