Northern California Judges Rule on Jurisdiction Matters in Patent Cases

A drawing from the Trend Micro Patent.

A pair of Northern California Judges recently released rulings in patent cases on juridiction matters:

Top Victory Electronics v. Hitachi is an action where TPV seeks a declaration of invalidity of seven patents related to digital television. Hitachi claims it doesn’t own the patents and moved to dismiss the case. There is a bit of a dispute as to who owns what. Hitachi filed documents with the USPTO stating it owned the patents when, in fact, they were owned by two of its subsidiaries who are not presently in the case… because the subsidiaries sued TPV and Vizio for infringement of the same patents in the U.S. District Court for the Eastern District of Texas.

While ownership, assignment or exclusive license is required to obtain legal remedies, an equitable owner can pursue equitable remedies.  Arachnid, Inc. v. Merit Indus., Inc., (Fed. Cir. 1991) (defining equitable title as “the beneficial interest of one person whom equity regards as the real owner, although the legal title is vested in another.”) Judge Charles R. Breyer explained that for present purposes, the parent can have equitable title of the subsidiary’s patent if it stands to lose something from the case, that is, when the boundaries between the parent and subsidiary have been broken.  Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., (Fed. Cir. 2010) (holding that where nothing in the record indicated that the parent was an exclusive licensee of the patent, the court could not exercise jurisdiction over the parent).

Judge Breyer dismissed the complaint without leave to amend.

Trend Micro Corporation v. WhiteCell Software, Inc. is a similar case to TPV above. Trend Micro has sued WhiteCell for a declaration of invalidity and WhiteCell has moved to dismiss stating it no longer owns U.S. Patent No. 7,698,744, the patent in question. It transferred the patent and rights to sue under it to Fortinet who currently has a covenant not to sue WhiteCell. Since there is no possibility Fortinet can sue WhiteCell (at least for two months until the covenant not to sue expires) there is no case or controversy for the federal court to address.

But Judge William H. Alsup wasn’t ready to go their just yet because WhiteCell noted that this had the makings of a clever ploy to allow Fortinet to chose the jurisdiction for the inevitable infringement suit:

First, according to Trend Micro, the agreement between WhiteCell and Fortinet was not a simply a one-way assignment of the ’744 patent. Rather, it was a “peculiar” (in Trend Micro’s words) patent swap, where the entities traded patents while simultaneously granting each other non-exclusive, non-assignable patent license. Second, Trend Micro points out that, not coincidentally, the attorney who prosecuted the patent-in-suit and recorded the patent assignments for WhiteCell and Fortinet — Attorney Michael DeSanctis — is the same attorney who prosecutes patents for Fortinet [.] Given these alleged facts, Trend Micro argues that this was a “choreographed ploy” to “evade this Court’s jurisdiction” and shield the patent-in-suit from a meritorious invalidity challenge.

Judge Alsup allowed some discovery as to the nature of the agreements to see if WhiteCell’s theory plays out.