Contributors: Akin Gump Strauss Hauer & Feld LLP
Future Tense in Contractual Language Found Insufficient to Convey Title, Depriving Party of Right to License Patent
by Caitlin E. Olwell & Rubén H. Muñoz
Federal Circuit, District Court, Patent Infringement
Mar. 29, 2022
Applying recent Federal Circuit precedent requiring language evincing a present conveyance of patent rights, a district court in the Western District of Pennsylvania found that the contractual language “shall become the property of” did not constitute a patent assignment and did not confer a third party the right to license the patent.
Plaintiff Lambeth Magnetic Structures, LLC (LMS) filed a patent infringement lawsuit against Defendants Seagate Technology (US) Holdings, Inc. and Seagate Technology LLC (collectively, “Seagate”). Seagate filed affirmative defenses, including lack of standing and express license. LMS subsequently moved for summary judgment with respect to those defenses on the basis that U.S. Patent No. 7,128,988 (the “ʼ988 Patent”) was assigned to LMS and not Carnegie Mellon University (CMU). LMS argued that it had standing to sue as the owner of the ‘988 Patent and that CMU could not have granted a license to Seagate because it never owned the ‘988 Patent. The court disagreed and denied LMS’s motion for summary judgment. The court found that the terms in an intellectual property policy and sponsorship agreement—which provided that intellectual property “shall be owned” or “shall become the property of” the university—constituted a present assignment of the ‘988 Patent to CMU.
Subsequently, the Federal Circuit in Omni MedSci v. Apple Inc. issued a decision regarding whether an assignee of patents had standing to sue in view of an intellectual property policy containing similar terms. 7 F.4th 1148 (Fed. Cir. 2021). The Federal Circuit in Omni MedSci concluded that the language “shall be the property of” did not amount to a present assignment because the “absence of an active verbal expression of present execution is a substantive indication that a present automatic assignment [is] not intended.” Id. at 1156. And, therefore, the Federal Circuit affirmed the district court’s denial of Apple’s motion to dismiss for lack of standing.
Because such contractual language in Omni MedSci did not create an automatic present assignment, LMS filed a motion for reconsideration of the district court’s initial summary judgment ruling. In light of this controlling Federal Circuit precedent, the district court granted that motion and held that LMS was entitled to summary judgment on Seagate’s affirmative defenses. According to the court, like in Omni MedSci, the contractual language with CMU lacked an active verbal expression of present execution, and hence did not result in an automatic assignment; therefore, the court concluded that CMU could not have licensed the ‘988 Patent to Seagate.
Practice Tip: Some parties routinely rely on intellectual property agreements and policies when developing new products and technologies. If those parties are seeking to automatically assign ownership of inventions, they should avoid agreements using passive verbs in indefinite or future tenses, such as “shall be the property of.” Rather, they should use present tense words of execution to indicate a present assignment and a clear grant of intellectual property rights.
Lambeth Magnetic Structures, LLC v. Seagate Technology (US) Holdings, Inc. et al, Case No. 2-16-cv-00538 (WDPA Mar. 14, 2022)
District Court Granted Dismissal Because the Patent Recited a Patent-Ineligible Abstract Idea of Processing and Transmitting Data
by C. Brandon Rash & Brooks J. Kenyon
District Court, Patent Infringement, 35 U.S.C. § 101, 12(b)(6) Motion to Dismiss
Apr. 07, 2022
Chief Judge Lynn in the Northern District of Texas recently granted a Rule 12(b)(6) motion to dismiss a complaint alleging patent infringement because the claim-at-issue recites patent-ineligible subject matter under 35 U.S.C. § 101. The patent is directed to transmitting data wirelessly from data sensors. The court found that the claim recites the abstract idea of processing and transmitting data.
Plaintiff Magnacross LLC sued OKI Data Americas, Inc. for infringing U.S. Patent No. 6,917,304. The claim-at-issue recites a method of wirelessly transmitting data through a communications channel from at least two data sensors to a data processing means. The method includes the step of division of the channel into sub-channels having unequal data carrying capacities, and
transmitting the data through the sub-channels from the data sensors, which require substantially different data rates for data transmission.
The court analyzed eligibility using the U.S. Supreme Court’s two-step Alice framework. In step one, the court determines whether the claims are “directed to” a patent-ineligible concept, such as an abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 217 (2014). If they are, the court proceeds to step two and considers “the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id.
Addressing step one, the court found that the claim “describes nothing beyond the division of the channel and allocating sensor data to sub-channels.” The court noted that the Federal Circuit has recognized that claims directed to gathering, processing and transmitting data are directed to an abstract idea; and the court determined that the claim is similar to claims held ineligible in Two-Way Media Ltd. v. Comcast Cable Communications, LLC, 874 F.3d 1329 (Fed. Cir. 2017). In Two-Way Media, the claims recited a method of transmitting packets of information over a network with a series of abstract steps (“converting,” “routing,” “controlling,” “monitoring” and “accumulating records”) using “result-based functional language.”
The court found that, like in Two-Way, the claim recites functional language (“division,” “transmitting” and “allocating”) without any means for achieving the purported technological improvement and without any guidance on the kind of structure or how the division is to be achieved. The court reasoned that the claim is not directed to an improvement to computer functionality, but rather a generic process in which computers are used as a tool to improve efficiency. The court further noted that the specification fails to identify a specific improvement and, instead, generally offers improvements in relation to prior proposals in the field.
Addressing step two, the court found that the claim does not recite an “inventive concept” because it recites generic terms and routine functions. According to the court, the specification acknowledges that the claimed “data sensors” were known, and that the invention is not directed to a certain type of data or limited to any particular application. The court also found nothing in the specification describing the “communications channel” as anything other than conventional, or describing the division of the channel into sub-channels as inventive.
Magnacross argued that the claim solves a problem particular to wireless data transmission from multiple sensors with different data rate requirements by asymmetrically dividing and allocating data to a communications channel. The court, however, found that improving the efficiency of a process, rather than the functionality, does not confer patent eligibility. The court also noted that Magnacross conceded that the claim relates to “how to more efficiently use bandwidth to transmit data [from data sensors].”
Practice Tip: Patent Owners should avoid describing and claiming the advance over the prior art in purely functional terms, in a result-oriented way that amounts to encompassing an abstract idea. Instead, Patent Owners should describe and claim technical details for tangible components in the claimed system and how the functionality of those components has been improved, showing that such components are technologically innovative and not generic. In the data transmission field, Patent Owners should describe and claim technological improvements to components in particular applications, and avoid relying only on generic efficiency improvements.
Magnacross LLC v. OKI Data Americas, Inc., No. 3:20-cv-1959-M (N.D. Tex.)