Speedplay Inc. v. Bebop Inc.

• Decision Date: 01 March 2000
• Parties: (Fed. Cir. 2000) SPEEDPLAY, INC., Plaintiff-Appellant, v. BEBOP, INC., Defendant/Cross-Appellant. 98-1527,-1528 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1245

211 F.3d 1245 (Fed. Cir. 2000)

SPEEDPLAY, INC., Plaintiff-Appellant, v. BEBOP, INC., Defendant/Cross-Appellant.

98-1527,-1528

United States Court of Appeals for the Federal Circuit

DECIDED: March 1, 2000

Rehearing Denied March 24, 2000.

Appealed from: United States District Court for the Southernof San District of California, Judge James F. Stiven

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Eleanor M. Musick , Brown, Martin, Haller & McClain, of San Diego, California, argued for plaintiff-appellant.

Jeffrey L. Fillerup , Luce, Forward, Hamilton & Scripps, LLP, of San Francisco, California, argued for defendant-cross appellant. With him on the brief was Richard R. Spirra .

Before BRYSON, Circuit Judge , SKELTON, Senior Circuit Judge , and GAJARSA, Circuit Judge .

BRYSON, Circuit Judge.

I

Serious bicyclists often use pedal assemblies that enable them to secure their feet to the bicycle pedals. The effect of such assemblies is to allow the bicyclists to increase the power transmitted to the wheels by simultaneously applying a downward, pushing force with one foot and an upward, pulling force with the other. Clip-less pedal and cleat assemblies offer one method of performing that function. With clip-less pedals and cleats, a rider can attach his feet securely to the pedals yet release them easily, in contrast to earlier systems using straps or cages. The cleats attach to the rider's shoes and engage the pedals, which are specially designed to interact with the cleats. In most clip-less pedal systems, the rider attaches his foot to the pedal by stepping straight down on the pedal until the cleat engages with the pedal. The rider typically releases his foot by rotating his foot to the side, which disengages the cleat from the pedal.

Richard Bryne, the chief executive officer and founder of Speedplay, Inc., is the inventor and primary designer of Speedplay's bicycle pedals. He obtained U.S. Patent No. 4,942,778 (the '778 patent) on a clip-less pedal and cleat system, and in 1992 entered the market with a product based on that patent. Shortly thereafter, Bryne was issued U.S. Patent No. 5,213,009 (the '009 patent), which claims a multilayered cleat design. Within two years of its founding, Speedplay entered into two agreements with Bryne. The first granted Speedplay a license under the '778 patent and improvements thereon, while the second assigned to Speedplay all of Bryne's bicycle-related inventions made during his employment with the company. Steven Zoumaras, who held a 50% interest in the '778 patent in return for financing its procurement, was also a party to the license, but he assigned his entire interest to Speedplay during the course of the trial.

John Steinberg, the president and founder of Bebop, Inc., is the inventor of the Bebop bicycle pedals. In 1989, Steinberg conceived the basic idea for the Bebop pedal, which features a hollow, cylindrical body. Over the next few years, Steinberg refined the concept, obtained a patent on the invention, and marketed two Bebop pedal designs.

Shortly after Bryne saw a Bebop prototype in 1993, the parties clashed over intellectual property and commercial tort issues. The dispute led to the present lawsuit, in which Speedplay claimed that Bebop was infringing the '778 and '009 patents by manufacturing and marketing the Bebop clip-less bicycle pedals. In addition, Speedplay alleged that Bebop was infringing Speedplay's trade dress under section 43(a) of the Lanham Act, 15 U.S.C. 1125(a), was engaging in unfair competition under California common law, and was violating the California Business and Professions Code.

Bebop counterclaimed, seeking a declaration that the '778 and '009 patents were invalid, that they were not infringed by Bebop's products, and that Bebop's products did not infringe Speedplay's trade dress. Bebop also sought relief for alleged unfair competition and intentional interference with prospective economic advantage. While the case was pending, Bryne was issued U.S. Patent No. 5,606,894 (the '894 patent) on a clip-less bicycle pedal, and Speedplay amended its complaint to add an allegation of infringement of the '894 patent. Bebop responded by alleging that the '894 patent was invalid and that all three patents were unenforceable because of inequitable conduct.

Following a 10-day bench trial, the trial court entered judgment against Speedplay on all the claims in its amended complaint. With respect to Bebop's counterclaims, the court held the '894 patent invalid because the invention was on sale more than one year before the patent application was filed. See 35 U.S.C. 102(b). The court denied relief to Bebop, however, on its state law claims, on its request to hold Speedplay's other two patents invalid and all three patents unenforceable, and on its request for attorney fees. Both parties appealed.

II

Bebop raises a threshold issue concerning Speedplay's right to bring an action for infringement of the '778, '009, and '894 patents in its own name. The trial judge concluded that Bryne had transferred "all right, title, and interest to the inventions" to Speedplay, thereby securing to Speedplay the right to sue individually for infringement of the patents. We agree that Speedplay has standing to maintain this suit.

A party may bring an action for patent infringement only if it is the "patentee," i.e. , if it owns the patent, either by issuance or by assignment. See 35 U.S.C. 100(d), 261, 281. A party that has been granted all substantial rights under the patent is considered the owner regardless of how the parties characterize the transaction that conveyed those rights. Thus, in Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A. , 944 F.2d 870, 874, 873-76, 20 USPQ2d 1045, 1048, 1047-50 (Fed. Cir. 1991), this court held that the proper focus is on "the substance of what was granted," and that the grantee of an exclusive license could sue in its own name without joining the grantor if the license had the effect of conveying all substantial rights in the patent to the licensee.

Speedplay asserts that it obtained all substantial rights in the '778, '009, and '894 patents from Bryne, and that it may therefore sue for infringement in its own name. To support that assertion, Speedplay must produce a written instrument documenting the transfer of proprietary rights in the patents. See 35 U.S.C. 261; Enzo APA & Son, Inc. v. Geapag A.G. , 134 F.3d 1090, 1093, 45 USPQ2d 1368, 1370-71 (Fed. Cir. 1998). Speedplay relies on two documents, a Contribution and License Agreement and a Confidentiality and Inventions Agreement, to support its assertion of patent rights. Bebop contends that those two documents are insufficient to allow Speedplay to sue in its own name.

A

Through the Contribution and License Agreement (CLA), Speedplay issued common stock to Bryne and Zoumaras in exchange for broad rights in Bryne's initial pedal technology. The CLA defines two categories of rights. First, it defines "Licensed Product" as follows:

Bryne and Zoumaras are the owners of a design for a clipless bicycle pedal system as described and claimed in the United States Letters Patent 4,942,778, issued July 24, 1990 to Richard M. Bryne and entitled CLIPLESS BICYCLE PEDAL SYSTEM ("Licensed Product") . . . .

Second, it defines "Licensed Patents" as follows:

Bryne is the inventor and title holder of United States Letters Patent 4,522,221, and related foreign patent applications (collectively, the "Licensed Patents") .-.-. .

Based on those definitions, the grant to Speedplay consists of an "exclusive worldwide, royalty-free, right and license under and to the Licensed Patents and the exclusive rights and license to manufacture, have manufactured, distribute, market, use and sell the Licensed Product and any other apparatus, instrument, device or product covered in whole or in part by the Licensed Patents." In addition, the agreement permits Speedplay to exercise its granted rights through agents and sublicensees. All rights under the CLA terminate with the last to expire of the Licensed Patents, unless terminated earlier for various specified reasons such as breach or insolvency.

The primary problem with the CLA derives from the patent number cited in the definition of Licensed Patents. Although naming Bryne as the inventor, the definition refers to U.S. Patent No. 4,522,221, which is an unrelated patent on unrelated technology issued and assigned to some unknown third parties. Speedplay asserted at oral argument that the reference to that patent was a scrivener's error and that a reference to the '778 patent was intended. That contention finds support in the portion of the CLA that refers to "the Licensed Product and any other apparatus .-.-. covered .-.-. by the Licensed Patents," which indicates that the term Licensed Patents was meant to refer to patents that covered the Licensed Product. In addition, another provision of the CLA requires Speedplay to mark each Licensed Product with a notice "identifying by U.S. patent number the Licensed Patent." Because a Licensed Product is a pedal system "described and claimed" by the '778 patent, the CLA could not logically require such a product to be marked with any patent number other than 4,942,778. Consequently, we agree with Speedplay that despite the patent number erroneously set forth in the CLA, the explicitly defined Licensed Patents must be construed to mean the '778 and related foreign patents.

The conclusion that Licensed Patents include the '778 patent undermines Bebop's main argument that the CLA did not transfer all substantial patent rights to Speedplay because Speedplay did not receive the right to enforce the '778 patent. Under the CLA, Speedplay has the "sole right to enforce the Licensed Patents," which we construe as giving Speedplay the right to enforce the '778 patent.

Bebop argues in the alternative that Bryne and Zoumaras retained other substantial rights...