Patent ownership may change by operation of law, including operation of foreign lawMarch 31, 2008

In a decision today, the Federal Circuit vacated a district court's dismissal of a case for lack of standing on the basis of insufficient evidence of patent ownership. The inventor of the patent died intestate as the only owner of the patent. While his two daughters executed transfers of ownership to the inventor's widow, the district court held that under 35 U.S.C. § 261, the executor of the estate had to first transfer the patent rights to the heirs, and without such a transfer, there was no standing to bring suit.

The Federal Circuit vacated, noting that while § 261 states that patents are assignable only in writing, previous decisions have held that state law controls the issue of patent ownership. Further, ownership may transfer by operation of law, and when a patent owner dies, it is state probate law that determines to whom ownership passes.

The court held that this concept applied in this case, even though it would be Japanese law that would determine ownership rather than a state's law. Because it was unclear from the record whether an administrator is required under Japanese law when a person dies intestate, the court remanded the case to make that determination, which would resolve the standing issue.

Yasumasa Akazawa, a Japanese citizen, is the sole inventor of a patent relating to an apparatus for changing engine coolants. Mr. Akazawa was the sole owner of the patent until his death in 2001. He died intestate, and was survived by his wife (Hitomi) and two daughters, and they are his only heirs under Japanese law. The daughters assigned their interest in the patent to their mother, Akazawa's widow, who then transferred it to Akira Akazawa.

In 2003, Akira (and Palm Crest, Inc.) brought suit against Link New Technologies ("Link") for infringement of the patent. Link moved for summary judgment on the issue of standing, asserting that Hitomi did not ever take effective ownership of the patent. The district court agreed, and found that while "Japanese law may determine who the [patent] could be transferred to upon Yasumasa's death," under § 261, any assignment had to be "in writing by the legal representative of the estate." Because there was no such written assignment, the district court found ownership of the patent had not been proven, and granted the motion for summary judgment.

The Federal Circuit vacated this decision. As an initial matter, the court noted that while § 261 states that assignments of patent rights must be in writing, the court has previously held that ownership of a patent may change by operation of law. For example, in a previous case applying Texas probate law, title to the decedent's property, including any patents, vested "immediately" in the decedent's heirs. In such a situation, ownership of the patent changed by operation of law, notwithstanding the language of § 261.

The court held that the same outcome was appropriate even though the applicable law would not be that of a U.S. state, but rather Japan. Because of this, "interpreting Japanese intestacy law, not United States patent law, is the first step in determining whether Akira possessed standing to bring the present suit." The plaintiffs asserted that because the patent transferred immediately upon Yasumasa's death, no separate transfer document from his estate was necessary; the defendant argued that the absence of such a transfer defeated standing. Rather than decide the issue in the first instance on appeal, the court remanded the case for a determination of this issue of Japanese law by the district court.

This case further underscores the importance of an issue in patent infringement cases that is easy to overlook, namely the identity of the proper owner of the patent, including any issues regarding the chain of title. When the issue is disputed, additional time and expense are incurred in resolving the issue before even reaching the specifics regarding infringement or validity.

To read the full decision in Akazawa v. Link New Tech. Int'l, Inc., click here.