The U.S. Court of Appeals for the Federal Circuit held that title to a patent obtained through a state court foreclosure action on a promissory note secured by the pending application could not be challenged as fraudulent under the guise of a challenge to standing. MyMail, Ltd. v. America Online, Inc., et al., Case Nos. 06-1147, -1172 (Fed. Cir., Feb. 20, 2007) (Bryson, J.).
MyMail obtained ownership of the patent-in-suit from Mr. Derby, who acquired the patent application by way of a state court foreclosure action on a promissory note secured by the application. MyMail later asserted the patent against America Online (AOL). AOL did not attempt to nullify the state court judgment but proceeded to challenge MyMail’s standing on the basis that the promissory note was fraudulently procured. The Federal Circuit held that the defendants could not collaterally attack the promissory note and affirmed the district court’s ruling that MyMail had standing to assert the patent-in-suit.
The defendants appealed, arguing that the underlying promissory note was fraudulent, which destroyed the chain of title and robbed MyMail of standing. The defendants asked the district court to inquire into the ownership issue, but did not identify who the alleged legal owner was.
The Federal Circuit reaffirmed that the “plaintiff must demonstrate legal title to the patent at the inception of the lawsuit to be entitled to sue for patent infringement.” Although standing is governed by federal law, state law governs the question of legal title. MyMail’s reliance on “an enforceable state court judgment that transferred title under Texas law,” was sufficient to prove ownership. The Court noted that the alleged infringers needed to nullify that state court judgment to establish a break in the title chain. The defendants argued that fraud could be raised at any time and justified an independent review. The Federal Circuit distinguished between fraud associated with the procurement of a patent and fraud relating to patent ownership. The Court noted “[s]tate law, not federal law, addresses such property ownership disputes.”