Assignment Agreement That Failed to Specifically Address Right to Sue for Past Damages Held Insufficient on Summary Judgment; Summary Judgment Granted to Limit Damages to Period After Patent Was Acquired

May 8, 2013

Plaintiff Nano-Second Technology filed a patent infringement action against Dynaflex International, GForce Corporation, d/b/a/ DFX Sports & Fitness. As part of the patent infringement action, Nano-Second alleged "that Defendants have infringed upon its '311 Patent by selling, importing, making, offering, or using wrists exercisers ("Accused Products") that fall within the scope of the claims of the '311 Patent. First Amended Complaint "FAC" ¶ 12. Further, Plaintiff alleges that these unpatented Accused Products and their packaging are marked with the patent number of the '311 Patent without Plaintiff's consent. Id. ¶¶ 21, 41. Plaintiff claims that in addition to falsely marking their Accused Products and infringing Plaintiff's patent, Defendants have contacted Plaintiff's potential and existing customers misrepresenting that they own the '311 Patent. Id. ¶ 25."

The defendants moved for partial summary judgment, including asserting that the period of damages available for plaintiff did not begin until the plaintiff acquired the patent. "Defendants assert that Plaintiff cannot seek damages for patent infringement that occurred before September 10, 2010, because plaintiff did not have legal title to the '311 Patent before that date."

In ruling on the motion, the district court addressed the general rule of ownership of the patent to seek damages for patent infringement. "The general rule is that one seeking to recover money damages for infringement of the United States patent...must have held the legal title to the patent during the time of the infringement." Arachnid, Inc. v. Merit Indus., Inc. 939 F.2d 1574, 1579 (Fed. Cir. 1991). A party may sue for infringement occurring before it obtained legal title if a written assignment expressly grants the party a right to do so. Id. at 1579 n. 7. (citing, Inter alia, Moore v. Marsh, 74 U.S. (7 Wall.) 515 (1868) ("It is a great mistake to suppose that the assignment of a patent carries with it a transfer of the right to damages for an infringement committed before such assignment.") (emphasis added); See also Abraxis Bioscience, Inc., v. Navinta LLC, 625 F. 3d 1359, 1367 (Fed. Cir. 2010)."

Here, the district court found that "[t]he assignment is unambiguous and clearly transfers all interest in the '311 Patent to Plaintiff. However, the assignment is completely silent as to whether Plaintiff acquired a right to sue for infringement that occurred prior to the date of the assignment, in this case September 10, 2010. Absent any explicit language conveying such right, the court finds that Plaintiff lacks standing to sue for infringement of the '311 Patent occurring before September 10, 2010"

The district court then found that the subject intent to convey rights to sue for past infringement was insufficient. "Although Plaintiff claims that Chuang subjectively intended to convey rights to Plaintiff to sue for past infringement, Plaintiff points to no language in the contract supporting such intent. Under California law, the goal of contract interpretation is "to give effect to the mutual intent of the parties." In re Imperial Credit Indus, Inc., 527 F. 3d 959, 966 (9th Cir. 2008U). This standard, however, is an objective one and does not depend on the parties' subjective intents. Cedars-Sinai Med. Ctr. V. Shewry, 137 Cal. App. 4th 964, 980 (2006) ("California recognizes the objective theory of contracts, under which it is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation.") (internal quotations and citations omitted)."

The district court also concluded that the agreement of the inventor to testify in legal proceedings in the assignment was insufficient to allow Nano-Second to sue for past infringement. "Plaintiff further contends that because Chuang agreed to testify in all legal proceedings in the assignment, he must have intended to allow Plaintiff to sue for past infringement. However, the contractual language makes clear that the basic purpose for his agreeing to testify is to effectuate the rights granted in the assignment, which are not retroactive. The language cannot be reasonably interpreted in the manner that Plaintiff suggests."

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This case highlights the importance of including a right to seek and collect damages for past infringement in any assignment agreement. The failure to do so will strictly limit the patent holder to future damages for infringement only.

Nano-Second Technology Co., Ltd. v. Dynaflex International, et al., Case No. 10-9176 RSWL (MANx) (C.D. Cal. May, 2013)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.