United States: Assignment To Other Party Is Valid If It States Consideration On Its Face, Even If Assignor Subsequently Found Not To Be Inventor

In Memorylink Corp. v. Motorola Solutions, Inc., No. 14-1186 (Fed. Cir. Dec. 5, 2014), the Federal Circuit upheld the district court's grant of SJ in favor of Motorola Solutions, Inc. ("Motorola") that the assignment of the asserted patent to Motorola was valid, that Motorola did not infringe the asserted patent, and that Memorylink Corp.'s ("Memorylink") tort claims were time-barred.

Peter Strandwitz and Bob Kniskern approached Motorola to jointly develop a handheld camera that could wirelessly receive and transmit video signals. Strandwitz and Kniskern had previously formed Memorylink for this joint venture. After a successful demonstration to Motorola, Strandwitz sent a letter to Motorola stating that he "agree[d] that any patents would be jointly owned by Motorola and Memorylink," and that Motorola should "head up the patent investigation." Slip op. at 2 (alteration in original) (citation omitted). Strandwitz also sent Motorola a technical document drafted by Kniskern. After reviewing the document, Motorola's attorney sent a responsive letter describing features to be focused on for patent applications and stating the attorney's understanding that the inventors were Strandwitz, Kniskern, and two Motorola employees. All four designated inventors signed an assignment transferring all rights to both Motorola and Memorylink. The assignment also included a statement that it was granted "[f]or 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 . . . ." Id. at 3 (alteration in original) (citation omitted). U.S. Patent No. 6,522,352 ("the '352 patent") subsequently issued and listed the four designated inventors. When Memorylink later hired outside counsel to review the inventorship and relationship between the entities, it was advised that Motorola's employees were not proper co-inventors.

Memorylink then filed suit against Motorola, alleging infringement of the '352 patent and various tort claims, and seeking a declaration that the assignment was void for lack of consideration. Motorola moved to dismiss, arguing that the tort claims were barred by the statute of limitations and moved for SJ that there was consideration for the assignment and that Motorola could not be liable for infringement as a co-owner of the '352 patent. The district court granted SJ in favor of Motorola. Memorylink appealed.

"Whether they are later determined to have been erroneously included as co-inventors, and thus those rights are eventually decided to be nonexistent, does not create a genuine issue of material fact on the consideration issue." Slip op. at 8.

On appeal, the Federal Circuit first considered whether the assignment lacked consideration. The Court rejected Memorylink's argument that the assignment recited boilerplate consideration language and that the assignment lacked consideration because Motorola's employees were not proper co-inventors, so they had no rights to assign. The Court explained that "the Assignment explicitly acknowledges consideration for the sale, assignment, and transfer of rights relating to the wireless video technology," and that the use of boilerplate language did not make the stated consideration invalid or nonexistent. Id. at 7-8. The Court also determined "consideration was actually exchanged" even if the exchange of ownership was the only intended consideration. Id. at 8. The Court explained that Motorola's employees "did in fact transfer whatever ownership rights they possessed to Memorylink and Motorola by executing the Assignment," and that whether "they are later determined to have been erroneously included as co-inventors, and thus those rights are eventually decided to be nonexistent, does not create a genuine issue of material fact on the consideration issue." Id. The Court also explained that a party assigning patent rights before the patent application is filed or during prosecution cannot guarantee that a patent will issue or that an issued patent will not be invalidated. The Court then considered Memorylink's arguments about unfairness and mistake, and found them unconvincing. Noting that Memorylink had asserted a lack of consideration, not mutual mistake, the Court explained that the "only reasonable inference from the facts alleged . . . would be that Motorola was not mistaken as to inventorship, which precludes any basis for finding a mutual mistake." Id. at 9. Based on this analysis, the Court held that the district court did not err in granting SJ in favor of Motorola on the issue of whether there was consideration supporting the assignment.

The Court next considered the district court's dismissal of Memorylink's tort claims. The Court rejected Memorylink's arguments that "mere knowledge of the facts underlying a claim is insufficient to start the statute of limitations clock," and that "the claim should not accrue until those facts lead to the conclusion that a legal claim exists." Id. The Court noted that "Memorylink knew all the facts necessary to assert its claims, and therefore its causes of action accrued" outside of the permissible limitations period. Id. at 10. The Court supported this conclusion, observing that the letter from Motorola's attorney provided an opportunity for Strandwitz and Kniskern to question the inventorship determination, but neither did so. The Court thus concluded that Memorylink reasonably should have concluded that a legal claim existed at that time and Memorylink did not subsequently learn any new or significant facts to warrant tolling the statute of limitations. Thus, the Court held that the district court did not err in dismissing the tort claims as untimely.

Finally, the Court affirmed the grant of SJ of noninfringement, holding that there was "no genuine issue of material fact because there was a valid assignment, and thus no error of law in granting summary judgment." Id. at 11.

Accordingly, the Court affirmed the district court's grant of SJ that the assignment did not lack consideration, that Motorola did not infringe the '352 patent, and that the tort claims were time-barred by the statute of limitations.

Judges: Lourie (author), Moore, O'Malley

[Appealed from N.D. Ill., Judge Tharp Jr.]

This article previously appeared in Last Month at the Federal Circuit, January, 2015.

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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