The Software IP Report

Contingent Patent Assignee Has Standing to Assert Patent

A patent assignee was found to have standing to assert a patent assigned to it, even though the patent assignor retained both a conditional right to mandate a return assignment, and to receive 50% of any enforcement proceeds.  In spite of the rights retained by the assignor, District Judge Nancy C. Atlas held the patent assignee, Hailo Technologies, LLC (“Hailo”), to be the owner by assignment of U.S. Patent No. 6,756,913 (“the Patent”), and to have standing to sue for infringement of the Patent.  Hailo Technologies, LLC v. MtData, LLC, 4-17-cv-00077 (S.D. Texas July 21, 2017).

Factors considered by the court included the rights assigned to Hailo, and the rights retained by the inventor/assignor, Mourad Ben Ayed (“Ayed”), relative to the requirements of the statute, 35 U.S.C. §§261, 281.  Section 281 grants patentees remedy by civil action for infringement of their patent.  Section 261 allows the patentee to convey an exclusive right under his patents, to the whole or any specified part of the United States. 

An assignee is unambiguously granted the right to assert a patent, i.e., the right to sue, when all of the rights under the patent are assigned to the assignee, and none retained by the assignor.  Here, Ayed, the assignor, retained some rights.  The court particularly focused on the “the nature and scope of the assignee’s right to sue for infringement, together with any retention by the assignor of the right to sue.”  The court considered the intention of the parties as well as the rights held by each party. 

The court found evidence of the intent of the parties to transfer ownership, including the right to sue, to Hailo both in a Revenue Sharing Agreement (“the Agreement”) between the parties and in an assignment of the Patent to Hailo by Ayed.

Hailo, the Patent assignee, was determined to have received, subject to Ayed’s rights:

  1. the unfettered right to sue alleged infringers and to receive all damage or other compensation for infringement;
  2. the exclusive right to seek out parties who either are infringing the claims of the Patent or who may have an interest in using, practicing, making or selling products or services covered by the Patent;
  3. the right to commercialized the Patent by using, practicing, making, or selling products or services covered by the claims in the Patent; and
  4. the obligation to maintain the Patent.

Ayed, the Patent assignor, was determined to have retained:

  1. the right to receive payment from Hailo of 50% of the profit generated by the Patent either through enforcement activities or commercialization;
  2. a right to request a report and/or update on the status of pending litigation and/or enforcement activities; and
  3. the right to request that Hailo reassign the Patent if Hailo is not actively enforcing the Patent for more than 90 days.

It was further determined that the assignee, Hailo, had been actively enforcing the Patent less than 90 days before Hailo filed suit against MtData.  Thus, at the time the suit was filed, the assignor, Ayed, did not have a right under the Agreement to reassign, and had no ability to control the enforcement of the patent.

The above determinations are consistent with a finding, consistent with the intent of the parties, that when the suit was filed by Hailo, Hailo had the right to sue under the patent, and Ayed did not have the right to sue under the patent.    The court concluded that the assignee, Hailo Technologies, had standing to sue for infringement of the Patent.

This case illustrates that it is possible to be creative with the allocation of rights under patent assignments, but care must be taken to ensure that the intended allocation of rights between the assignee and assignor are unambiguously spelled out.

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