- in United States
- with readers working within the Automotive and Law Firm industries
After years of litigation, the Federal Circuit dismissed a patent infringement lawsuit because the plaintiff couldn't prove it owned the patents at the time it filed the suit. The decision in AIT v. Salesforce emphasizes these lessons:
- The precise wording of IP transfer agreements matters: the difference between "hereby assigns" and "will assign" can determine who owns a patent.
- Standing to sue must exist when the lawsuit is filed and cannot be fixed after the fact.
- Remedies like ratification and contract reformation cannot rescue a case where standing was missing from the start.
AIT sued Salesforce for infringing two patents. AIT's claim to those patents depended on a chain of prior agreements, and that chain had a fatal gap. The patents had been owned by a predecessor named Alternative Systems, which attempted to assign the patents to AIT in 2012.
However, an intervening 2006 agreement transferred "all right, title, interest, and liability" in the patents from Alternative Systems to an individual, Beverly Nelson. The court read "is hereby sold" in the agreement as a present transfer, not a promise to transfer later. That 2006 transfer left Alternative Systems with nothing to convey in 2012, making its attempted assignment to AIT fruitless.
AIT tried two workarounds to establish standing. First, it asked the court to allow ratification under Federal Rule of Civil Procedure 17(a)(3), which lets a court give the proper party time to step in. Second, it also sought reformation of the 2006 agreement, asking the court to rewrite the contract to reflect that Alternative Systems had retained the patent rights. The Federal Circuit rejected both attempts. Instead, the Federal Circuit found that while these tools may be available to correct certain procedural defects, they cannot cure a lack of constitutional standing. If the plaintiff had no right to sue on the day it filed, no later correction can change that.
This decision shows how state contract law intersects with federal civil procedure and patent law. Any lawyer advising on IP transactions should take note: ambiguous transfer language in a decades-old agreement can undermine enforcement rights today. Any litigator should recognize the broader principle: standing is not a technicality to sort out later. It is a threshold requirement, and getting it wrong can mean years of wasted effort and expense.
Before asserting a patent, make sure the chain of ownership is complete and unambiguous. If there is any doubt, resolve it before filing.
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.
