In MHL Tek, LLC v. Nissan Motor Co., the Federal Circuit took a careful look at patent assignment language and determined that an earlier assignment encompassed all asserted patents, and so the later assignment to the plaintiff was ineffective, leaving the plaintiff with no standing.

The Patents At Issue

The three patents at issue name the same inventors and are directed to a tire pressure monitoring systems (TPMS) that “monitors a tire’s pressure and then transmits this information to the vehicle’s operator.”

U.S. 5,731,516 was filed May 2, 1996 as a divisional application of U.S. Patent Application Ser. No. 476,613, which was a divisional of U.S. Patent Application Ser. No. 332,200. The granted claims are directed to an “apparatus” for monitoring tire pressure.

U.S. 5,663,496 and U.S. 5,741,966 were filed June 6, 1995 (the pre-GATT deadline) as divisional applications of U.S. Patent Application 08/101,379, filed August 3, 1993 (the “Parent Application”). The claims granted in these patents relate to “systems” for monitoring tire pressure.

The Assignments

1.  Inventors to Animatronics

Shortly after the Parent Application was filed, the inventors executed an assignment to Animatronics, Inc. which stated:

For the sum of One Dollar . . . and other good and valuable consideration, . . . [the inventors] do hereby assign, sell and set over to ANIMATRONICS, INC. . . . the entire right, title and interest, domestic and foreign, in and to the inventions and discoveries in [the Parent Application].

2.  Animatronics to McLaughlin Electronics

A few months later, Animatronics executed an “Assignment of Patent Rights” to McLaughlin Electronics (ME), which stated:

Animatronics does hereby assign to [ME] the entire right, title and interest, domestic and foreign, in and to the inventions and discoveries set forth in the [Parent] Application.

with a carve out providing that the assignment

shall not cover any rights to the [Parent] Application that concern the Animatronics Proprietary Inventions . . . .

Instead, pursuant to a “Development Agreement,” ME had

an exclusive, irrevocable, royalty free license to use the Animatronics Proprietary Inventions to make, use and sell the TPMS, which license shall not preclude Animatronics . . . from using the Animatronics Proprietary Inventions to make, use and sell products other than [TPMS].

The Patent Assignment defined “Animatronics Proprietary Inventions” as

  1. the Communications Link
  2. a radio frequency transceiver and algorithm used in the Service Unit and Sensor Unit
  3. a peizo resistive rubber pressure sensor for use in the Sensor Unit

The Patent Assignment defined each of these terms, and defined the TPMS as including the Communications Link, the Service Unit, the Sensor Unit, and the Display Module.

3.  Inventors & Animatronics to MHL Tek

Many years later, in 2007, after the relationship with ME went sour, the inventors and Animatronics signed documents purporting to assign all three patents to MHL Tek.

The District Court Decision

MHL brought suit to enforce the patents against a number of defendants.

The district court determined that MHL lacked standing to enforce the ’496 and ’966 patents because the rights to those patents had been assigned to ME before they purportedly were assigned to MHL.

The district court determined that the ME assignment did not encompass the ’516 patent because it was not related to the Parent Application, and so allowed MHL’s claims on that patent to proceed on the merits, but granted the defendants’ motion for summary judgment of non-infringement.

The Federal Circuit Decision

The Federal Circuit noted that MHL’s standing turns on the scope of the Patent Assignment to ME.

MHL argued that the ’496 and ’966 patents fell under the carve out provision of the Patent Assignment, and so were not assigned to ME.

On the other hand, the defendants argue that the ’516 patent was encompassed by the Patent Assignment because it relates to “inventions and discoveries set forth in the [Parent] Application,” even though the ’516 patent and the Parent Application are not related.

The Federal Circuit agreed with the defendants, and found that MHL did not have standing to enforce any of the patents.

With regard to the ’496 and ’966 patents, the Federal Circuit looked beyond the common words used in the Patent Assignment carve out and the patent claims, and considered the subject matter at issue. Because the claims did not cover the carve out subject matter as it was defined in the Patent Assignment, the patents were not encompassed by the carve out, and so were assigned to ME.

The treatment of the ’516 patent is more interesting. The Federal Circuit noted that the Patent Assignment did not limit its reach to patents related to the Parent Application, but instead referred to “the inventions and discoveries” set forth in the Parent Application. The court therefore framed the issue as “whether the inventions claimed [in the '516 patent] are the ‘inventions and discoveries’ set forth in the Parent Application.”

[S]o long as the written description of the Parent Application “reasonably conveys to those skilled in the art” . . . the invention claimed in the ’516 patent, the ’516 patent was assigned to Animatronics and then to ME.

The court compared the subject matter of independent claim 1 of the ’516 patent to the specification of the Parent Application, and determined that it indeed was adequately disclosed, and so was encompassed by the Patent Assignment. (The ’516 patent includes two other independent claims and other dependent claims that the court did not discuss.)

The Federal Circuit rejected MHL’s arguments that this subject matter was carved out of the Patent Assignment, under an analysis similar to that applied for the ’496 and ’966 patents.

Thus, the Federal Circuit found that the Patent Assignment effectively assigned all three patents to ME. As a result, the subsequent assignments to MHL had no effect, and MHL had no standing to enforce the patents.

When Were The Assignments Recorded?

Because the Federal Circuit did not dicuss the recordation of the assignments, I assumed that they were recorded at the USPTO in order of their execution. However, it appears from a review of the USPTO’s on-line assigment database that while the assignment from the inventors to MHL were recorded in 2007, the 1993 assignments from the inventors to Animatronics and from Animatronics to ME, and the 2007 assignment from Animatronics to MHL, were not recorded until 2009, after the district court litigation.

Dusting off what I remember from my first year law school property class about recording property transfers, I wonder why MHL did not invoke 35 USC § 261:

An assignment, grant, or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.

Perhaps other circumstances prevented MHL from being a “subsequent purchaser . . .  without notice.”