Ipventure, Inc. v. Prostar Computer, Inc.

• Decision Date: 28 September 2007
• Docket Number: No. 2006-1012.,No. 2006-1081.,2006-1012.,2006-1081.
• Parties: IPVENTURE, INC., Plaintiff-Appellant, v. PROSTAR COMPUTER, INC. and Midern Computer, Inc., Defendants-Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

503 F.3d 1324

IPVENTURE, INC., Plaintiff-Appellant, v. PROSTAR COMPUTER, INC. and Midern Computer, Inc., Defendants-Cross Appellants.

No. 2006-1012.

No. 2006-1081.

United States Court of Appeals, Federal Circuit.

September 28, 2007.

Richard M. Birnholz, Irell & Manella LLP, of Los Angeles, CA, 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, CA, 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.

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, 46 S.Ct. 166, 70 L.Ed. 357 (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 court and that their interests are considered, as the Court explained in Shields v. Barrow, 58 U.S. (17 How.) 130, 141, 15 L.Ed. 158 (1854):

[A]s is observed by this court in Mallow v. Hinde, 12 Wheat. [193] 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:

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...