Jones v. Cooper Industries, Inc., 14-95-00955-CV

• Decision Date: 12 December 1996
• Docket Number: No. 14-95-00955-CV,14-95-00955-CV
• Citation: 938 S.W.2d 118
• Parties: Marvin R. JONES, Appellant, v. COOPER INDUSTRIES, INC., Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 118

938 S.W.2d 118

Marvin R. JONES, Appellant, v. COOPER INDUSTRIES, INC., Appellee.

No. 14-95-00955-CV.

Court of Appeals of Texas,

Houston, (14th Dist.).

Dec. 12, 1996.

Rehearing Overruled Feb. 13, 1997.

John R. Feather, Jeffrey A. Pyle, Houston, for appellant.

Sylvia Matthews Egner, Michael O. Connelly, Karen K. Roberts, Houston, for appellee.

Before MURPHY, C.J., and ANDERSON and O'NEILL, JJ.

OPINION

O'NEILL, Justice.

This appeal involves a claim for breach of a patent agreement which was decided by the trial court on opposing motions for summary judgment. Marvin R. Jones ("Jones"), appellant, appeals the denial of his motion for summary judgment and the granting of summary judgment in favor of Cooper Industries, Inc. ("Cooper"), appellee. We affirm.

Background

This dispute arises out of a Patent Rights Agreement (the "PRA"), effective October 1, 1981, whereby Jones sold and assigned certain patent rights to Koomey Blowout Preventers, Inc. ("Koomey"). In return, Koomey agreed to pay Jones, during each year of the term of the agreement, the greater of $50,000 annually or 1/2 of 1% of the annual gross revenues as defined in the PRA. The term of the PRA is fifteen years from the date of its execution, or until the last applicable patent expires. According to Jones, at least one of the patents will continue in effect until 2004 or 2005. The PRA provides that it shall be binding upon "Koomey, its subsidiaries, successors, assigns or licensees." Cooper ultimately obtained the patents at issue, but did not expressly assume the obligations created by the PRA and has refused to pay Jones the amounts described therein.

The present case is not the only lawsuit to originate from the disputed ownership of technology between the parties. In 1983, Cameron Iron Works, Inc. (subsequently acquired by and hereinafter referred to as "Cooper") filed suit against Koomey, Jones, and others alleging that Jones, a former employee, ¹ disclosed to Koomey its confidential or trade secret information. Cameron Iron Works, Inc. v. Koomey Blowout Preventers, Inc., Cause No. 83-67214, In the 281st Judicial District Court of Harris County, Texas (hereinafter "the Cameron litigation"). Cooper claimed ownership of some of the technology involved in the patent rights subject to the PRA. During the pendency of the Cameron litigation, Koomey pledged the patents at issue to First City National Bank as security for a loan. When Koomey defaulted on the loan, the patents were foreclosed and sold to PB-BOP, Inc. (hereinafter "PBBOP"), who then intervened in the lawsuit. By Settlement Agreement dated November 26, 1990, Cooper settled the Cameron litigation. Pursuant to the settlement, PB-BOP transferred the patents at issue to Cooper. The settlement also provided that Koomey would indemnify Cooper for any claims brought by Jones based upon the bringing of the suit or its settlement.

Following the settlement of the Cameron litigation, Jones brought suit against KBOP, Koomey, PB-BOP, M.H. Koomey, Inc., and others for unpaid royalties in breach of the PRA. Jones v. Koomey Blowout Preventers, Inc., et. al., Cause No. 91-029277, In the 190th Judicial District Court of Harris County, Texas (hereinafter "the Koomey litigation"). Although Cooper held title to the patents, it was not made a party to the action. Jones ultimately settled the Koomey litigation for $100,000 and released the defendants from any and all liability under the PRA. Although Cooper was expressly excluded from the release, the settlement agreement provided that Cooper was released to the extent that Koomey and the other defendants might have joint and several liability with Cooper for a claim asserted by Jones.

In September of 1994, Jones brought the present suit against Cooper for royalties claimed due throughout the time Cooper has held title to the patents. Jones filed a motion for summary judgment on Cooper's alleged liability for breach of the PRA and, alternatively, for quantum meruit. Cooper also moved for summary judgment on the ground that no enforceable agreement existed between Jones and Cooper and, alternatively, that Jones' recovery was otherwise barred. The trial court denied Jones' motion and granted Cooper's motion, which rulings form the basis of this appeal.

Standard of Review

The appropriate standard to be followed when reviewing a summary judgment is well-established:

1. the movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to summary judgment as a matter of law;

2. in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true; and

3. every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985); Karl v. Oaks Minor Emergency Clinic, 826 S.W.2d 791, 794 (Tex.App.--Houston [14th Dist] 1992, writ denied). When both parties have moved for summary judgment, the reviewing court rules on all issues presented, including the order denying one party's summary judgment. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988). Where, as here, the summary judgment order does not specify the grounds upon which summary judgment was granted, the reviewing court will affirm the judgment if any of the theories advanced in the motion is meritorious. State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989).

Discussion

In two points of error, Jones argues that the trial court erred in denying his motion for summary judgment and in granting Cooper's motion for summary judgment. Jones contends that Cooper, as an assignee of the patents, is obligated as a matter of law to pay Jones "royalties" under the PRA because: (1) Jones' title to the patents is a recorded legal title; (2) Jones' title is equitable because Cooper took the patents with notice of the PRA; (3) Cooper assumed the obligation to pay Jones' "royalties"; and (4) Jones is entitled to recover under quantum meruit. Cooper argues that it is entitled to summary judgment because: (1) Jones' claims are barred by the statute of frauds; (2) Cooper did not assume any obligations under the PRA; (3) Jones has released his claims against Cooper; and (4) a circuity of actions prevents Jones' recovery.

Jones first argues that, as a matter of law, Cooper's chain of title to the patents obligates Cooper to pay the royalties specified in the PRA. Specifically, Jones claims that when the PRA was executed, he severed and retained title to royalties for the life of the patents. Because Jones' title to the royalties is a recorded legal title, Jones argues, the obligation to pay royalties under the PRA is a condition of that title that runs with the patents. Therefore, Jones concludes, the patent royalties are payable by whoever possesses the patents at any point during the term of the PRA.

In support of his argument, Jones likens the royalty interest under the PRA to a royalty interest reserved in a mineral estate. When a mineral estate is sold and a royalty interest is reserved, that royalty interest attaches to the mineral estate and whomever owns the mineral estate must account to the royalty interest owner for any profits from the sale of the minerals. Sheffield v. Hogg, 124 Tex. 290, 297, 77 S.W.2d 1021, 1024 (1934), r'hrg overruled, 124 Tex. 290, 80 S.W.2d 741 (1935). In Texas, a royalty interest in a mineral estate is considered to be an incorporeal form of real property and is held to have the same attributes as real property. Id. Jones claims that the same should hold true for a patent royalty. Jones' argument is based upon two assumptions that are grounded in principles generally applicable to conveyances of real property: (1) that Jones could sever and retain one of the rights of title to the patents, i.e. the right to collect royalties; and (2) that, because title to a patent is recordable, contract provisions concerning sale of the patent are covenants that run with the patent.

Jones has cited no authority, nor have we found any, for the proposition that principles of real property should apply to patents. To the contrary, patents have been recognized not as a form of real property but a form of personal property. Section 261 of Title 35 of the United States Code, which governs ownership and assignment of patents, expressly provides that, "[s]ubject to the provisions of this title, patents shall have the attributes of personal property." 35 U.S.C. § 261. See Filmtec Corp. v. Allied-Signal Inc., 939 F.2d 1568, 1572 (Fed.Cir.1991) ("[w]hile early cases have pointed to the myriad ways in which patent rights ... are closer in analogy to real than to personal property, the statutes establish as a matter of law that patents today have the attributes of personal property"); Exxon Chem. Patents, Inc. v. Lubrizol Corp., 935 F.2d 1263, 1268 (Fed.Cir.1991) (1952 Act resolved conflicting precedent by providing that patents shall have the attributes of personal property). Therefore, Jones' right to collect royalties under the PRA is not akin to a royalty interest in a mineral estate. Moreover, Jones' argument fails because, unlike with real property, (1) Jones could not carve out and retain a right or condition of title in the form of "royalties" once he assigned the patents to Koomey, and (2) even if Jones could sever out a condition of title in the form of "royalties," that condition would not "run with" title to the patents and be binding upon subsequent assignees absent an express or implied assumption by the assignee.

The purpose of recordation of patents is to give notice to the world that a particular idea is owned and the owner is accorded a monopoly on the use of the idea. Waterman v. Mackenzie, 138 U.S. 252, 260-261, 11 S.Ct. 334, 337, 34 L.Ed. 923 (1891). "The monopoly thus...