United States Court of Appeals for the Federal Circuit
2006-1012, -1081
IPVENTURE, INC.,
Plaintiff-Appellant,
v.
PROSTAR COMPUTER, INC. and MIDERN COMPUTER, INC.,
Defendants-Cross Appellants.
Richard M. Birnholz, Irell & Manella LLP, of Los Angeles, California, argued for
plaintiff-appellant. With him on the brief were Morgan Chu and Rudy Y. Kim.
Ian N. Feinberg, Mayer Brown LLP, of Palo Alto, California, argued for
defendants-cross appellants. With him on the brief were Donald M. Falk, Brandon D.
Baum, and Eric B. Evans. Of counsel were Michael A. Molano, John C. Kloosterman,
and Joshua M. Masur.
Appealed from: United States District Court for the Central District of California
Judge Dale S. Fischer
United States Court of Appeals for the Federal Circuit
06-1012, -1081
IPVENTURE, INC.,
Plaintiff-Appellant,
v.
PROSTAR COMPUTER, INC. and MIDERN COMPUTER, INC.,
Defendants-Cross Appellants.
__________________________
DECIDED: September 28, 2007
__________________________
Before NEWMAN, LOURIE, and BRYSON, Circuit Judges.
NEWMAN, Circuit Judge.
IpVenture, Inc. owns and licenses patents on inventions related to the management
of personal computer systems. The company is owned by Mr. Peter Tong and Mr. C.
Douglass Thomas. On August 14, 2003 IpVenture sued two computer manufacturers,
ProStar Computer, Inc. and Midern Computer, Inc. (together "Defendants"), charging them
with infringement of United States Patent No. 6,216,235 (the '235 patent) entitled "Thermal
and Power Management for Computer Systems," the joint invention of C. Douglass
Thomas and his father, Alan E. Thomas.
Mr. C. Douglass Thomas had for several years been employed by the Hewlett-
Packard Company as a patent attorney. The Defendants moved for dismissal on the
ground that IpVenture did not have standing to sue because it did not own the entire
interest in the '235 patent, based on Mr. Thomas' obligations under his employment
contract with Hewlett-Packard. The district court agreed, and dismissed the suit without
prejudice. 1 IpVenture appeals the dismissal, and the Defendants cross-appeal for attorney
fees. We conclude that the dismissal was in error, for Hewlett-Packard had no assignment
of an interest in the patent, and had disclaimed any interest therein.
DISCUSSION
Only the entity or entities that own or control all substantial rights in a patent can
enforce rights controlled by that patent, lest an accused infringer be subjected to multiple
suits and duplicate liability. See Independent Wireless Tel. Co. v. Radio Corp. of Am., 269
U.S. 459, 468 (1926); Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1551 (Fed. Cir. 1995)
(en banc); see generally Intellectual Property Development, Inc. v. TCI Cablevision of
California, Inc., 248 F.3d 1333 (Fed. Cir. 2001). Thus all entities with an independent right
to enforce the patent are indispensable or necessary parties to an infringement suit. When
such an entity declines to join in the suit it may be joined involuntarily, either as a party
plaintiff or party defendant; the purpose is to assure that all interested parties are before the
1 IpVenture, Inc. v. ProStar Computer, Inc., No. CV03-5780-DSF (C.D. Cal.
Aug. 26, 2005).
2006-1012, -1081 2
court and that their interests are considered, as the Court explained in Shields v. Barrow,
58 U.S. (17 How.) 130, 141 (1854):
[A]s is observed by this court in Mallow v. Hinde, 12 Wheat. 198, when
speaking of a case where an indispensable party was not before the court,
"we do not put this case upon the ground of jurisdiction, but upon a much
broader ground, which must equally apply to courts of equity, whatever may
be their structure as to jurisdiction; we put it on the ground that no court can
adjudicate directly upon a person's right, without the party being either
actually or constructively before the court."
Questions of necessary parties, as well as ownership rights, receive plenary review. Rite-
Hite, 56 F.3d at 1551. The question is whether Hewlett-Packard had an ownership interest
in the '235 patent when the suit was filed, and if so, the effect of Hewlett-Packard's later
statement that it "never has had any legal or equitable rights" in the patent. We conclude
that Hewlett-Packard was not a necessary party, on the facts of this case; we need not
reach the question of whether the district court had discretion, in applying Fed. R. Civ. P.
19(a), to permit the addition of parties in this case without requiring dismissal and refiling by
the plaintiff. See generally 7 C. Wright & A. Miller, Federal Practice and Procedure, '1611
(3d ed. 2001) (the intent behind Rule 19(a) is to permit greater discretion in the courts).
A
Mr. Thomas was employed by Hewlett-Packard from 1992 to 1995. His employment
agreement included a provision concerning inventions made by him that relate to Hewlett-
Packard's business. The agreement provided:
This Agreement also concerns inventions and discoveries (whether or not
patentable) . . . (hereinafter called "Proprietary Developments") that are
conceived or made by me alone or with others while I am employed by HP;
that relate to the research and development of the business of HP, or result
from work performed by me for HP; or that do not qualify under the prevailing
provisions of California Labor Code Section 2870. Such Proprietary
Developments are the sole property of HP, and I agree:
2006-1012, -1081 3
a. to disclose them promptly to HP;
b. to assign them to HP; and
c. to execute all documents and cooperate with HP in all
necessary activities to obtain patent, copyright, mask work,
and/or trade secret protection in all countries, HP to pay the
expenses.
The patent application that led to the '235 patent was filed in 1994, as the joint invention of
C. Douglass Thomas and his father. On April 20, 2005 IpVenture and Hewlett-Packard
entered into an agreement that, inter alia, addressed issues of the '235 patent as follows:
IpVenture is the sole assignee of [the '235 patent and other patents] . . . HP
has never asserted any ownership rights to the IpVenture Patents and
agrees to forbear from asserting such rights at anytime in the future . . .
[Hewlett-Packard] has no rights . . . and never has had any legal or equitable
rights, including any shop rights, to any of the IpVenture Patents.
However, the district court declined to consider the content and effect of this agreement,
because it was executed after this suit was filed. The court ruled that this agreement could
not cure a "standing" defect, even if viewed as a retroactive assignment:
The agreement reached in April 2005 need not be considered because the
Complaint was filed in August 2003. Even if the April 2005 agreement were
deemed an assignment of HP's interest (which Plaintiff and HP do not claim),
acquisitions of rights in the patent at issue subsequently acquired do not cure
standing defects, even if the assignments are "retroactive."
IpVenture, slip op. at 19.
The district court stated that California law does not distinguish between an
assignment itself and an agreement to assign, and ruled that the employment agreement
"constituted an assignment of all Proprietary Developments to HP." Reviewing Federal
Circuit authority, the court concluded that this case is akin to the agreements in FilmTec
Corp. v. Hydranautics, 982 F.2d 1546, 1554 (Fed. Cir. 1992) (the employment agreement's
use of the phrase "does hereby grant" indicated a present assignment) and in Speedplay,
2006-1012, -1081 4
Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed. Cir. 2000) (the employment agreement's use
of the phrase "hereby conveys, transfers and assigns" was a present assignment). The
district court distinguished the agreement in Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d
1574 (Fed. Cir. 1991), where the employment agreement used the phrase "will be
assigned," and this court ruled that this was an agreement to assign, not a present
assignment. Thus the district court concluded that the Hewlett-Packard provision whereby
the employment agreement obligated Thomas to assign his inventions to Hewlett-Packard
served as an immediate assignment of all inventions when they were made.
However, the agreement in this case tracks that of Arachnid, not that of FilmTec.
The FilmTec usage "does hereby grant" is not present; nor is the Speedplay usage "hereby
. . . assigns." Instead, the Hewlett-Packard agreement says "agree to assign." This
difference is reinforced by the Hewlett-Packard 2005 statement that it "never has had any
legal or equitable rights" to the '235 patent. The district court should have considered this
statement, although it was written after this suit was filed, for it serves to remove any
uncertainty arising from the language of the employment agreement. While that agreement
is an agreement to assign, such interest in the '235 patent must be implemented by written
assignment. See Helvering v. San Joaquin Fruit & Investment Co., 297 U.S. 496, 499
(1936) (an option in a property right may be an equitable interest in the property but "it
would not follow that . . . he acquires property at the date of the option rather than at the
date of the conveyance").
Hewlett-Packard, by stating that it never had an interest in the '235 patent, confirmed
the situation as to that patent and removed the need to construe the employment
agreement. Hewlett-Packard also confirmed that there is no possibility of a separate
2006-1012, -1081 5
infringement suit by Hewlett-Packard, thus serving the policy purposes explained in
Independent Wireless, 269 U.S. at 468. The Hewlett-Packard statement that it "never has
had any legal or equitable rights" is effective in accordance with its terms. We know of no
public policy that is violated by giving this statement the meaning that is stated on its face,
at least when no intervening right or other equitable consideration is asserted.
In accordance with Arachnid, 939 F.2d at 1579, Hewlett-Packard was not an
assignee in 2003; the later document from Hewlett-Packard supports that position. We
conclude that the district court erred in ruling that dismissal was obligatory. The dismissal
is vacated. The cross-appeal is mooted, and is dismissed.
VACATED AND REMANDED; CROSS-APPEAL DISMISSED
2006-1012, -1081 6