Abstract

A patent license agreement’s anti-assignment clause did not restrict the assignment of the licensed patent because it did not mention the patent expressly and the patent was not an "interest" under the license agreement. As a result, the assignment was valid and the patent assignee had standing to sue for patent infringement.

Background

YKK obtained an exclusive license to a patent on water-resistant zippers, the '214 patent, in exchange for agreeing to pay royalties for zippers it sold incorporating the patented technology. The license agreement contained an anti-assignment provision, which stated:

Neither party hereto shall assign, subcontract, sublicense or otherwise transfer this Agreement or any interest hereunder, or assign or delegate any of its rights or obligations hereunder, without the prior written consent of the other party. Any such attempted assignment, subcontract, sublicense or transfer thereof shall be void and have no force or effect. This Agreement shall be binding upon, and shall inure to the benefit of the parties hereto and their respective successors and heirs.

The patent owner assigned the '214 patent to Uretek in June 2006, obtaining YKK’s consent to the assignment after the fact. Uretek then assigned the '214 patent to Trelleborg in October 2014. Uretek asked for YKK’s consent to this assignment in May 2015, and YKK refused. Au New Haven and Trelleborg then filed suit for infringement of the '214 patent and breach of the licensing agreement against YKK.

YKK filed a motion to dismiss the lawsuit, arguing that Uretek’s assignment of the '214 patent to Trelleborg was void under the licensing agreement because Uretek did not obtain YKK’s consent to the patent assignment. Thus, according to YKK, Trelleborg did not have standing to sue for patent infringement, requiring dismissal of the case.

The Au New Haven Decision

In New York, an assignment of a license agreement is valid even where the agreement generally prohibits assignment, unless the agreement also specifies that any assignment would be invalid or void. Although the anti-assignment provision at issue in Au New Haven included such language declaring assignments invalid, the court in Au New Haven considered whether it extended to assignments of the '214 patent, which was licensed under the agreement.

The Court first considered the license agreement’s provision that prohibited the assignment of the agreement—"Neither party hereto shall assign . . . this Agreement"—and found it did not prevent assignments of the '214 patent or render assignments of the '214 patent void because it did not expressly mention the '214 patent. The Court noted that the parties could have drafted the anti-assignment clause of the licensing agreement to expressly reference the '214 patent, but did not do so.

The Court then went on to consider whether the license agreement’s provision that prohibited the assignment of any interest under the agreement—"Neither party hereto shall assign . . . any interest hereunder."—and found it did not prevent assignments of the '214 patent. The Court concluded that the '214 patent was not an unassignable "interest" under the license agreement because the '214 patent did not originate from the licensing agreement. The patent itself did not arise "under the written statement" of the agreement and was not "created in accordance with the terms" of the agreement.

The Court reached this finding by relying on the plain language meaning of "hereunder" and the narrow reading of anti-assignment clauses required under New York law, finding that "hereunder" means "under this written statement" or "in accordance with the terms of this document."

As a result, Uretek’s assignment to Trelleborg of the '214 patent was thus not void, and Trelleborg had standing to sue YKK for patent infringement.

Strategy and Conclusion

This case demonstrates the difference between prohibiting assignment of a license agreement and prohibiting assignment of patents licensed under the agreement. To prevent assignments of the patents licensed under the agreement, the parties should expressly mention that the agreement prohibits assignment of the patents under the agreement.

Further Information
The Au New Haven decision can be found here.