Affirming a decision dismissing a patent infringement suit without prejudice, the U.S. Court of Appeals for the Federal Circuit found that the plaintiff failed to prove ownership of the asserted patents and therefore lacked standing. Tyco Healthcare Group LP v. Ethicon Endo-Surgery, Inc., Case Nos. 08-1269, -1270 (Fed. Cir., Dec. 7, 2009) (Michel, J.; Newman, J., dissenting).

The litigation involved three patents directed to medical instruments that employed ultrasonic energy to cut and coagulate vessels in surgery. While the applications for these patents were pending, their respective inventors assigned their rights to either U.S. Surgical Corp (USSC) or Misonix Inc. Soon after, USSC obtained all rights to enforce the patents and entered into a “contribution agreement” with Kendall LLP, which later became Tyco. USSC then signed a settlement agreement with Ethicon to resolve five pending patent litigations.

The settlement agreement granted immunity from infringement liability to certain products made by Ethicon. Both parties agreed that the products accused in the infringement cases are the same type of products immunized by the settlement, but that products made or sold after the effective date of the settlement were not immunized.

The issue addressed by the court goes to terminology used in the contribution agreement. That agreement transferred assets including patents, except “[a]ny and all patents and patent applications relating to any pending litigation involving USSC,” and included reference to an “excluded assets schedule” although the contract gave no explicit definition of the phrase “related to pending litigation.” The issue of standing was raised for the first time during the trial in connection with the testimony relating to the contribution agreement and whether, under the “related pending litigation” language, there had been a transfer of the patent in suit to plaintiff. At the close of the plaintiff’s case, Ethicon moved for judgment as a matter of law on the issue of standing. The district court granted the motion and dismissed the case without prejudice. Tyco appealed.

The Federal Circuit analyzed the contribution agreement and found that, based on the intent of the parties to the agreement, the excluded assets provision covered any patents or patent applications in the same family or so related in subject matter that they were or could have been reasonably asserted in or affected by a litigation pending at the time the contribution agreement was executed.

The Court held that it was Tyco’s burden to prove that the patents-in-suit could not have been asserted in or affected by any litigation pending as of the date of the two agreements. In other words, Tyco bore the burden of proving that the patents are not “related to” any litigation pending at the time the contribution agreement was executed. Finding that Tyco failed meet its burden, the Court affirmed the district court’s dismissal of the suit.

In dissent, Judge Newman accused her colleagues of ignoring the rationale of the district court and devising a new “theory” that went beyond the provisions of the agreement in issue. According to Judge Newman, the panel ignored the evidence which established that the litigation that the settlement agreement resolved litigation concerning products which were only vaguely related to ultrasonic devices such as those in issue in the present case. She further criticized the majority for holding that the absence of the schedule related to pending litigation removes these later-granted patents from transfer under the agreement.