Granting Security Interest In Patents Did Not Deprive Patent Owner Of Standing To Sue For Patent Infringement

• Published date: 02 July 2020
• Subject Matter: Intellectual Property, Patent
• Law Firm: Jeffer Mangels Butler & Mitchell LLP
• Author: Mr Stanley Gibson

Raffel Systems, LLC ('Raffel') filed a patent infringement action against Man Wah Holdings ('Man Wah'). Man Wah moved to dismiss the patent claims on the ground that Raffel did not possess title to the patents at the time the lawsuit was filed and therefore lacked standing to sue.

As explained by the district court, Man Wah asserted that Raffel lost title to the patents when Raffel mortgaged its patents to obtain loans with PrivateBank and East West Bank. Man Wah relied on the U.S. Supreme Court case of Waterman v. Mackenzie, 138 U.S. 252 (1891) for its position that because Raffel granted PrivateBank and East West Bank security interests in its patents and the banks recorded their security interests with the USPTO, this transferred title in the patents from Raffel to the banks.

In opposition to the motion, Raffel argued that its agreements with the banks are nothing more than standard security agreements granting the banks a security interest in the patents, not a conveyance of title.

To analyze the security interest issue, the district court noted that 'Courts that have addressed this issue have consistently found that the Patent Act does not address perfection of security interests'it addresses assignments of title. In In re Cybernetic Servs., the court explained that "[b]ecause transferring title no longer has significance in creating a security interest in personal property, most security interests created after adoption of the UCC do not involve the transfer of title." 239 B.R. at 921. The court explained that the Patent Office is concerned with the recording of transfers of title only. Id. The Code of Federal Regulations addressing patents speaks only to "assignments" which are defined as "transfers by a party of all or part of its right, title and interest in a patent or patent application." Id. (citing 37 C.F.R. ' 3.1). The court noted that neither the term "security interest" nor the term "lien" are found in any of the provisions governing patents and the reason for this is that "'[a]...