Protect Your Intellectual Property — Review Your Assignment Agreements Now

Previously published in JMBM Corporate Law Newsletter, Fall 2011

A number of recent Federal Circuit decisions have highlighted the importance of assignment clauses in the transfer of intellectual property, particularly patents. These cases often distinguish between an agreement to assign in the future or the current assignment of intellectual property that may be created in the future. Although the distinction in language is minor, the outcome of who owns the intellectual property created in the future is not. Choose the wrong language of assignment and you may find that you do not own the intellectual property that is created in the future.

The recent Federal Circuit decision in Abraxis Bioscience, Inc. v. Navinta LLC, Case No. 2009-1539 (Fed. Cir. Nov. 9, 2010), highlights the necessity of reviewing assignment clauses now to make sure future intellectual property rights are preserved and protected. In Abraxis, the parties went through three years of litigation and a trial on the merits, in which the district court found that the defendant infringed the patents at issue, only to have the Federal Circuit reverse on the ground that the plaintiff, Abraxis, did not have standing to pursue the infringement action because it did not own the patents at issue at the time the complaint was filed.

What went wrong for the plaintiff?

The chain of assignments of the patents at issue. In 2006, Abraxis entered into an asset purchase agreement that contained a "Further Assurances" clause, providing that the Seller would execute "any and all further . . . assignments . . . as necessary to . . . vest in Buyer [Abraxis] any of the Transferred Intellectual Property." On the day the action was filed, the Seller obtained the assignment of the patents at issue from two related entities. This assignment occurred several months after the asset and purchase agreement was executed. Eight months after the lawsuit was filed, the Seller executed a separate Intellectual Property Assignment Agreement that assigned the patents at issue to Abraxis.

At the district court, the defendant challenged that Abraxis did not own the patents at issue at the time of the filing of the complaint. As all of the parties on the Abraxis side of the transaction intended Abraxis to own the patents (as evidenced by, among other things, the Further Assurances clause), the district court found that the intent of the various Seller entities was sufficient to imply a nunc pro tunc assignment...