Are you kidding me? The law, government, and politics.

Publishers beware!

"Simply put, in the context of a patent or copyright license, a transfer occurs any time an entity other than the one to which the license was expressly granted gains possession of the license" (emphasis in original).

This federal common law was recently enforced by the US Court of Appeals for the Sixth Circuit in Cincom Systems, Inc. v. Novelis Corp., No. 07-4142 (September 25, 2009), and what it means is that before you buy a company, or even absorb your own subsidiary (i.e., child company) into your parent company, make sure you do your homework on what licenses that company has. Here's why:

Alcan had a license to use two copyrighted software programs owned by Cincom. The license prohibited Alcan from transferring the license to anyone else without the express, written consent of Cincom. After a series of corporate mergers and name changes, Alcan essentially disappeared, and Novelis became owners of the licenses by operation of Ohio state law (i.e., automatically). Because Cincom didn't consent in writing to the transfer -- actually, they weren't even notified -- the use of the software by Novelis was copyright infringement, and Cincom was awarded almost $460,000.00 in damages.

So, let's say you own ABC Publishing Corporation. You want to buy XYZ Publishing Corporation. XYZ Publishing Company has a license to use the images and storylines of my sci-fi novels. If, under the law of the state governing the license, the license will automatically transfer from XYZ to ABC, and if ABC continues to use my images and storylines, I'm going to sue ABC for copyright infringement, and I'm going to win. The same result occurs even if ABC Publishing Corporation owns XYZ Publishing Corporation and is simply merging XYZ into ABC. Also note that under federal law it is always assumed that the license may not be transferred without permission.

The lesson: If you seek to purchase or absorb a company that works with copyrighted or patented material that's owned by another party, get a hold of and read the licenses! Unless they actually say that the license can be transferred (or assigned) without permission, pick up the phone and start negotiating a new license -- or just don't use that material. Otherwise, you're in trouble, especially if the owner is an attorney. :^)

Posted by rbodine at 05:41 PM | Permalink | Comments (0) | TrackBacks (0)

Homes aren't the only things that can be foreclosed on. Patents can be, too.

First, what is a patent? According to the United States Patent and Trademark Office FAQ, it’s “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States.” The most common form of patent, the utility patent, is granted to “anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement” to one of those things.” So, if you invent something, you’re the only one who can take advantage of it in this country. Sometimes, that gives you a lot of market power.

The Federal government grants patents. It holds this power exclusively under the “arts and sciences” clause of the US Constitution, and so the states can’t grant patents; however,that doesn’t mean the states aren’t relevant to issues surrounding patents. For example, . . .

In Sky Technologies, LLC, v. SAP AG, 2009-1606 (August 20, 2009), the United States Court of Appeals for the Federal Circuit was faced with a dispute under both the federal Patent Act and Massachusetts state law. A patent owner, Ozro (a corporation), used its patent rights as collateral for a loan, much the way a homeowner will use a home as collateral for the loan to buy the house. Ozro and the lender, XACP, signed an agreement to secure the loan with the collateral (in the same way a homeowner and lender would sign a mortgage or deed of trust).

When Ozro defaulted on the loan, XACP foreclosed on the patents. Under Massachusetts state law, this automatically transferred ownership of the patents from Ozro to the XACP. XACP then transferred ownership of the patents to another company, plaintiff Sky Technologies, by written assignment.

When the defendant, SAP, made use of the patented invention, Sky sued SAP for patent infringement in the US District Court for the Eastern District of Texas. SAP asked the district court to throw out the case because Sky lacked standing. That is, SAP was arguing that Sky wasn’t the proper person to bring the lawsuit because Sky didn’t actually own the patents.

SAP argued that under the Patent Act, if a patent owner wants to transfer ownership of his patent to someone else, the assignment must be in writing, but there was no written assignment from Ozro to XACP, so XACP didn’t have the ability to assign the patents to Sky. Basically, SAP argued that the patent rights vanished into thin air when the company, Ozro, dissolved.

The Federal Circuit disagreed, stating that nothing in the Patent Act stated that an assignment was the only way to transfer ownership. Instead, any state law that transfered patent ownership automatically (that is, without the patent owner doing the transfer himself), was also valid. As support for its holding, the Federal Circuit relied on its prior holding in Akazawa v. Link New Technology Int’l, Inc., 520 F.3d 1354 (Fed. Cir. 2008), in which the patent owner died without a will, so his wife inherited the patent by operation of the state law governing inheritance.

So, if you want to take ownership of a patent directly from the current patent owner, that owner will have to execute a written statement giving you ownership. However, you can still inherit or otherwise receive ownership of a patent ‘automatically’ if a state law transfers the patent rights to you.

Posted by rbodine at 05:04 PM | Permalink | Comments (0) | TrackBacks (0)