Affirming a district court’s denial of a motion to dismiss a patent infringement suit for lack of standing, the U.S. Court of Appeals for the Federal Circuit held that a successor corporation had standing to sue by giving effect to the parties’ intent, even though the inventor’s assignment transferred ownership rights to a predecessor corporation that no longer existed. Tri-Star Electronics Int’l, Inc. v. Preci-Dip Durtal SA, Case No. 09-1337 (Fed. Cir., Sept. 9, 2010) (Newman, J.).
In 2008, Tri-Star, a Delaware corporation, sued Preci-Dip for infringement of a patent relating to a hoodless electrical socket contact. Tri-Star was originally incorporated as an Ohio corporation in 1991. In 1998, Tri-Star Ohio merged into a newly created California corporation (Tri-Star California); Tri-Star California then merged into a newly created Delaware corporation (Tri-Star Delaware) in 2005. In 1999, the inventor of the patent executed an assignment for a continuation-in-part (CIP) application, using the same form as the parent application filed the previous year, to "Tri-Star Electronics International, Inc., its successors, legal representatives, and assigns," which identified Tri-Star as an Ohio corporation.
Preci-Dip moved to dismiss the case for lack of standing, arguing that the inventor had assigned his patent rights to a non-existent entity, Tri-Star Ohio. The district court denied the motion to dismiss and certified the ruling for interlocutory appeal, which the Federal Circuit accepted. The Federal Circuit affirmed the district court’s holding that Tri-Star California, as the existing successor to Tri-Star Ohio, received assignment of the patent at the time of the assignment.
The Court confirmed the district court’s interpretation of the assignment as conveying ownership to Tri-Star California because it "maintains the validity of every contract provision … and gives effect to the contract’s purpose of assigning the invention to [the inventor’s] employer." The Court ruled that both Ohio law and Federal Circuit law state that the "intention of the parties to a contract controls its interpretation" and it was not disputed that the parties to the agreement agreed that Tri-Star California, as successor to Tri-Star Ohio, was the intended recipient of the patent ownership rights. Moreover, the "letter of the assignment" conformed with this intent by conveying ownership to "Tri-Star Electronics International, Inc., its successors, legal representatives and assigns."
The Court also agreed with the district court’s observation that under Ohio law, a predecessor corporation continues to exist for the purpose of allowing its property to vest even after a merger, under Ohio Rev. Code Section 1701.82(A)(1)(2010). The Court found that Section 1701.82(A)(1) further supported a finding that Tri-Star Ohio continued to exist for the purpose of vesting property rights, including assignment of the patent application in the successor, Tri-Star California.
Practice Note: If there are any uncertainties relating to the proper conveyance of ownership in a patent assignment, a court’s interpretation of the assignment will be controlled by the intention of the parties.