Abstract
The U.S. International Trade Commission terminated its investigation of patent infringement because the complainant never acquired title to the patents it was asserting. The patent assignment agreement that purported to convey the patent rights to the complainant was defective because it was signed on behalf of a corporate entity that had ceased to exist due to a corporate merger rather than on behalf of the corporate entity that survived the merger and owned the patents. The ITC could not reform the agreement to reflect what the parties intended, so it dismissed the case.
The U.S. International Trade Commission (ITC) recently found that the complainant in a patent infringement action failed to acquire the asserted patents through an attempted assignment from a corporate entity that ceased to exist through a previous merger.
Background
In 2008, Encap Technologies merged into its corporate
parent and ceased to exist, with all of its property going to Encap
Holding. In 2012, Intellectual Ventures signed an agreement
with Encap Technologies to purchase patents previously held by
Encap Technologies. However, by then, Encap Technologies no
longer existed.
Intellectual Ventures later sued several respondents for patent
infringement at the ITC. The Respondents challenged Intellectual
Ventures' standing to assert the patents because Intellectual
Ventures acquired the patents from Encap Technologies at a time
when it did not exist.
The ITC Decision
The parties agreed that the 2012 assignment agreement
purported to transfer ownership of the asserted patents from Encap
Technologies to Intellectual Ventures. However, they
disagreed on whether Encap Technologies could convey any rights in
the patents since Encap Technologies had been merged with Encap
Holding four years before the purported
assignment.
The ITC administrative law judge applied Illinois law to both the
2012 assignment agreement and earlier merger agreement. When
interpreting an agreement under Illinois law, a court can rely only
on the plain language of an agreement if the agreement is
unambiguous. Only if there is ambiguity in the contract, can
the court look to evidence outside the language of the contract. In
this case, the ITC found that both agreements clearly and
unambiguously provided that Encap Technologies no longer existed,
owned nothing, and could convey nothing through the 2012 assignment
agreement.
Intellectual Ventures argued that courts can reform obvious
mistakes in a contract. While other courts have this power to
reform a contract, the judge ruled that Congress never granted this
power to the ITC, just as the ITC does not have the power to change
the inventorship of a patent, while courts do.
The judge also rejected Intellectual Ventures' argument that
Encap Technologies was merely a trade name for Encap Holding,
finding no precedent for a patent conveyance under a trade name
instead of the name of the true owner. Because Encap Technologies
did not exist and had no property rights to convey, Intellectual
Ventures did not acquire the patents and did not have standing to
sue for patent infringement at the ITC. A confirmatory
assignment executed in response to standing challenge was also
insufficient to save standing, which is evaluated at the time of
filing.
Strategy and Conclusion
This case illustrates two points. A defect that can
arise in chains of title that involve companies that reorganize by
merger and acquisition. And the ITC may not reform a contract
to remedy an obvious mistake.
The In re Certain Thermoplastic-Encapsulated Electric
Motors opinion can be found here.
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