Patents & the Financial Services Industry

In Lincoln National Life Insurance Co. v. Transamerica Life Insurance Co. (Fed. Cir. 2010), after a jury found claim 35 of Lincoln’s patent, U.S. Pat. 7,089,201, infringed by Transamerica and not invalid and awarded Lincoln $13 million in damages, the CAFC reversed on infringement.

What is interesting about this case is not only the subject matter of the patent – a computer system for administering an annuity plan with a guaranteed minimum payment feature – but also the claim language itself, which includes one of the ever-troublesome contingency words, “if”.  It is not unusual for method claims to be drafted in the format, “performing step A if X, and performing step B if Y”, or some variation of this arrangement.  There are inherent deficiencies in this approach, but the contingency nature of the arrangement sometimes assists applicants with differentiating their inventions from the prior art.

One of the difficulties with this approach, however, is determining when such clauses are infringed.  Must both scenarios be performed?  Does the claim read on a process that performs one of the steps and is configured to perform the other step, even if that latter step is not actually performed?  What if a process performs one of the steps and the would-be infringer is obligated to perform the other step but has not yet done so?

Here, the language employed by the claim at issue is not quite identical to the format identified above, but the same issues arise:

Claim 35

A computerized method for administering a variable annuity plan having a guaranteed minimum payment feature associated with a systematic withdrawal program, and for periodically determining an amount of a scheduled payment to be made to the owner under the plan, comprising the steps of:

a) storing data relating to a variable annuity account, including data relating to at least one of an account value, a withdrawal rate, a scheduled payment, a payout term and a period of benefit payments;

b) determining an initial scheduled payment;

c) periodically determining the account value associated with the plan and making the scheduled payment by withdrawing that amount from the account value;

d) monitoring for an unscheduled withdrawal made under the plan and adjusting the amount of the scheduled payment in response to said unscheduled withdrawal; and

e) periodically paying the scheduled payment to the owner for the period of benefit payments, even if the account value is exhausted before all payments have been made.

Lincoln’s patent is directed to computerized methods for administering variable annuity plans, which is a contract that guarantees the payment of money to an annuitant upon certain intervals.  The claimed annuity plan entails an accumulation phase followed by a distribution phase, where during the latter the insurer makes periodic benefit payments to the annuitant from the account the annuity owner deposited money during the accumulation phase.  Under a variable annuity option, when there is a sufficiently poor fund performance, the dollar amount of the annuitant’s benefit payments could drop to zero.

One of the steps of Claim 35 requires “periodically paying the scheduled payment to the owner for the period of benefit payments, even if the account value is exhausted before all payments have been made.”  Transamerica sells and administers riders that guarantees policy owners the right to minimum payments regardless of market performance, thereby ensuring – at least theoretically – that the payments are made to annuitants “even if the account value is exhausted before all payments have been made.”  Transamerica argued that it did not perform step (e) because:

(1)          none of its policy owners has ever had an exhausted account and, therefore, that it has never made payments after an “account value is exhausted”;

(2)          it has not yet implemented a computer system that will make a payment in the event an account becomes exhausted.

The Federal Circuit rejected the first argument, finding that, per the district court’s claim construction, step (e) does not require actual exhaustion, only that Transamerica’s computerized method of administering riders must necessarily make a scheduled payment in the event of an exhausted account.  If a computerized system is configured such that it does not make a payment if an account is exhausted, step (e) is not performed and there is no infringement.

However, the Federal Circuit agreed with Transamerica on its second point: that, because Transamerica’s computerized system will not make payments if account value is exhausted  it does not perform step (e).  Rather, when a policy owner’s account value drops to less than the scheduled withdrawal amount, Transamerica manually produces and sends a check for the policy owner.

Two other interesting observations:

(1)  Legal Obligation to Perform Claimed Step.  Lincoln also argued that Transamerica was contractually obligated to practice the claimed method through its sale of riders, and Lincoln asserted that the riders require Transamerica to continue making payments to policy owners even in the event of account exhaustion.  The Federal Circuit disagreed that this was insufficient:

“More fundamentally, even if the GMWB riders did obligate Transamerica to perform the claimed method, this would not be sufficient to establish infringement. “The law of this circuit is axiomatic that a method claim is directly infringed only if each step of the claimed method is performed.” Muniauction, 532 F.3d at 1328 (emphasis added). A contractual obligation to perform an act is not performance; indeed, a party could avoid infringement simply by breaching its contract. To the extent the court’s instruction to the jury implied that Lincoln could establish direct infringement by relying on the terms of the GMWB riders rather than on Transamerica’s actual performance of the claimed steps, this instruction was erroneous.”

(2)  Contingency Language Such as “If”.  Lincoln also argued that, because the district court construed the “even if” clause of step (e) to be a contingent limitation, that limitation need not be performed to support a finding of infringement unless the condition occurred (i.e., Transamerica had an exhausted account).  That is, Transamerica’s system infringed, even though the computerized system would not make payments to exhausted accounts, because the “even if” clause need not be performed unless account exhaustion occurs.  The Federal Circuit likewise rejected this line of argument:

Because Transamerica’s computerized system does not make a payment if an account is exhausted, the system does not make a guaranteed payment regardless of the account value. Therefore, Lincoln failed to prove that Transamerica performs step (e). The undisputed evidence of record shows that Transamerica’s computerized system for administering its . . . riders does not make a scheduled payment if an account is exhausted. Rather, Transamerica’s computerized system stops making payments when an account becomes exhausted and [Transamerica] provides a manual check to the policy owner.”

The Federal Circuit left the issue of patentable subject matter under §101 undecided, finding it moot based on its non-infringement holding.  That in itself is not particular interesting but a good reminder that we have a mere 3 days until the S.Ct. publishes its opinion in Bilski v. Kappos.  Let the fun begin!

From Court House News Services:

     The Federal Circuit has clarified the circumstances under which courts may block attorneys from prosecuting certain patents to keep them from inadvertently disclosing confidential information gleaned in another case.
     The ruling marks the first time the Washington, D.C.-based court has outlined the standards and scope of patent prosecution bars, which prohibit attorneys from using confidential material exchanged during litigation for any other purpose.
     The decision stems from Deutsch Bank’s efforts to block attorneys for Island Intellectual Property from prosecuting any patents related to financial “deposit sweep services.”
     Island had sued the bank for patent infringement, and Deutsch was concerned that if Island’s lawyers gained access to its confidential documents, they might disclose that sensitive information while prosecuting Island’s patents in other cases…

See complete order here: In Re Deutsche Bank Trust Co. Americas

 From Bloomberg.com:

U.S. Bancorp, Minnesota’s largest bank, should pay $27 million for infringing patents related to digital checks owned by DataTreasury Corp., a jury in Texas said Friday.

The trial is the first of three on DataTreasury’s infringement claims that may lead to more than $1 billion in damages against the banking industry.

The patents relate to the imaging of checks, their transmission and their storage in a central repository.

U.S. Bancorp denied infringing the patents. The company’s lawyers had no comment on the verdict.

On its face, this case is a David versus Goliath story about a small Plano-based company with just a few patents to its name fighting against the behemoth commercial banks of the world, including U.S. Bank any many others.  DataTreasury is asserting it’s patents against U.S. Bank, Wells Fargo, Bank of America, Wachovia, Deutsche Bank, and many, many others.  Although some of the banks have already settled with DataTreasury, about a dozen are still fighting the suit.

Background

Being in the check processing business got expensive for banks.  Declining volumes and high fixed-costs made per-check processing fees go up for paper checks.  Not surprisingly, many banks sought to find a cheaper way to process checks; rather than sorting physical checks and lugging them about the county every day, some banks decided to exchange electronic images of checks rather than the original checks themselves.  This worked fine for the banks that agreed to the electronic alternative, but a large number of banks were unwilling to sign on (they still liked to get the paper checks) and, as was their right under previous laws, they could demand that the original paper check be presented for payment.  Therefore, it was a practical impossibility for a bank to switch to an electronic-only system because that would require it to obtain electronic presentment agreements with all other banks and there were still holdouts.

In 2003, Congress passed the Check Clearing for the 21st Century Act, which came into effect on October 28, 2004.  The Act facilitates electronic check exchange by a authorizing a new negotiable instrument called a “substitute check.”  A substitute check is a paper reproduction of an original check, and it is the legal equivalent of an original check.  Under the Act, all banks must accept substitute checks in place of the originals, even if the banks do not choose to create substitute checks.  Thus, by creating legally equivalent substitute checks for presentment to banks, even those banks that had not agreed to accept checks electronically previously now must accept the paper reproduction of the original check.  The ability to eliminate the need to sort and ship checks around the country saved the banking sector $2 to $4 billion annually under some estimates.

The timing of the Check Clearing for the 21st Century Act worked out quite nicely for DataTreasury, which received two patents covering its check-imaging technology, U.S. Patents 5,910,988 and 6,032,137, in 1999 and 2000 respectively.  Initially, DataTreasury sought to partner with banks in a check-imaging joint venture, but the prospective banks ending up going it along or enlisting the likes of IBM to develop their own technology without DataTreasury.

DataTreasury brought suit against dozens of banks, asserting the ‘988 and ‘137 patents and claiming that the banks’ systems for capturing and exchanging digital images of checks infringed the patents.  The banks attempted to fight the suit in Congress too: there was a failed legislative effort that would have granted banks immunity against DataTreasury’s patent lawsuit. Many of the banks entered into settlement agreements with DataTreasury, including JP Morgan Chase, Bank One, Ingenico and RDM, and they now pay licensing fees.  However, U.S. Bank is one of the defendants that decided to fight in court, and after many years the case is now finally being heard.

The Financial Services Industry: Prime Target for Patent Litigation

Regardless of whether DataTreasury is a patent troll (or more charitably, a “non-practicing entity” or NPE) or a true technology provider and innovator in the industry, it is clear that one of its greatest assets is its intellectual property, which it is currently licensing and asserting against dozens of banks.  Financial services corporations are prime targets for the business model of NPEs because they tend to have deep pockets and substantial transaction volume, which allows the NPEs to extract large sums even from relatively small per-transaction royalties, and financial institutions tend to be risk averse and prefer settlement, at least historically. 

Case in point: in the current litigation, DataTreasury is seeking a combined $1.6 billion in damages, with $200 million of that against U.S. Bank.  Such numbers are daunting, even for large companies, but the alternatives to fighting a patent suit are not particularly attractive either.  Those familiar with the upward trend of NPEs targeting financial services corporations understand that there are a number of ways to fight back or take proactive defensive actions to protect themselves, but there is no easy answer to the situation.

For example, rather than fighting the case in court, a bank might take a license from the licensor.  The cost-benefit analysis of taking a license may be doable, albeit probably more complicated than it initially seems, but the direct costs involved with paying a per-transaction royalty would not be the only cost at stake; once you take a license from NPE, expectations have been announced to other NPEs about how you deal with their threats.  Thus, taking a license may be the correct answer in some circumstances, but it’s not necessarily a cheap one and it has its own secondary and tertiary effects.  Alternatively, a bank may attempt to design around a family of patents that protect certain technology, such as check-imaging.  But again, there are costs involved: the design around may not be cheap, a licensor may still dispute whether a bank has effectively avoided infringement with the design-around, and the licensor will certainly still want to be compensated for perceived past infringement.

Current U.S. Bank Litigation

The current case dates back to 2002 and, in addition to the ‘988 and ‘137 patents, includes several other DataTreasury patents.  When DataTreasury asserted the various patents against numerous banks, several simply accepted a license with DataTreasury.  However, many other banks chose to fight the litigation instead, and the resultant case became so big and complex that the judge in the U.S. District Court’s eastern district of Texas broke it into three different trials.  The first trial, which includes U.S. Bank, is currently underway.  The second patent infringement trial will be against Well Fargo in August, and the third one will be in October against Bank of America.

In the current trial against U.S. Bank, DataTreasury asserts that U.S. Bank makes, uses, sells, or offers for sale a system or method that infringes claims 1, 26, and 46 of the ‘988 patent and claims 42 and 43 of the ‘137 patent, in part through direction or control of The Clearing House Payments Company L.L.C., or Viewpointe Archive Services, L.L.C.  A sample claim from the ‘988 patent is reproduced below:

26. A method for central management, storage and verification of remotely captured paper transactions from documents and receipts comprising the steps of:

capturing an image of the paper transaction data at one or more remote locations and sending a captured image of the paper transaction data;

managing the capturing and sending of the transaction data;

collecting, processing, sending and storing the transaction data at a central location;

managing the collecting, processing, sending and storing of the transaction data;

encrypting subsystem identification information and the transaction data; and

transmitting the transaction data and the subsystem identification information within and between the remote location(s) and the central location.

Among U.S. Bank’s defenses are non-infringement, invalidity, no direct infringement coupled with lack of control over third parties (namely Viewpointe and The Clearing House), and standing (defendants argue that DataTreasury is not the rightful owner of the patents in suit and therefore lacks standing).  And not surprisingly, the case has been bitterly disputed at every step of the way.  A read of the court’s 116-page claim construction order alone shows how the parties challenged every possible issue.

For example, in construing the term “image” (e.g., claim 26 recites “capturing an image of the paper transaction data at one or more remote locations and sending a captured image of the paper transaction data”), the plaintiff requested that the court merely construct the term as “an electronic representation of an object” whereas the defendants requested the narrower construction of “electronic representation of an object having a pictorial likeness of the object.”  As with other construed elements, the court tried to find a measured middle ground, construing “image” as “an electronic, visual representation of at least part of an object,” which falls short of the defendants request that the “image” must to be a pictorial likeness of the object but requires that the image be a visual representation of at least part of an object, which accounts for “snippets” that might not be considered “visual representations” of an entire object but are “images” nonetheless as the term is discussed in the patent.

The hard-fought battle is understandable.  According to an order issued by the judge, Bank of America handles about 62 percent of the alleged check volume and faces about 55% of the alleged damages — $868.7 million –  and Wells Fargo accounts for $100.6 million of the alleged damages (6.3% of the total) and U.S. Bank’s share is just under $202 million (13% of the total).  If the defendants lose, the damages could be trebled.  So, the stakes are high and many banks are watching to see what happens to U.S. Bank.  Who knew writing checks could be so interesting.  And expensive.

“Global Standard Financial, Inc. (GSF) www.gsf-inc.com announced today the awarding of two patents by the US Patent and Trademark Office which cover the fundamental processes necessary to securely create paperless Check 21-based checks or Electronic Payment Orders (EPO). The term EPO was described in a November 2009 Chicago Federal Reserve Policy Paper which outlined the benefits of paperless checks and was used to distinguish pure digital checks from paper-based Check 21 image processing.” 

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In Trading Technologies International Inc. v. eSpeed et al. (Fed. Cir. 2010), the CAFC upheld a $2.5 million infringement ruling against eSpeed Inc., a commodities exchange operator, and several of its affiliates.  The suit was brought by Trading Technologies International Inc. (TTI), which asserted U.S. Patent Numbers 6,766,304 and 6,772,132.

The patents-in-suit claim methods for displaying the market data for a commodity traded in an electronic exchange that includes a graphical user interface with “a dynamic display for a plurality of bids and for a plurality of asks in the market for the commodity and a static display of prices corresponding to the plurality of bids and asks.”  The GUI purportedly facilitates more accurate and efficient orders in a trading environment.  The problem solved by the invention relates to market fluctuations and rapid changes in bids and asks prices listed in those grids.  For example, when a trader wishes to place a buy at the inside market he may place the mouse cursor on the grids for the inside market and click the mouse.  However, as traders send bids and offers to the market, the price and quantity of the traded commodity change, which alter the inside market.  With earlier fixed grids, traders who wished to place an order at a particular price would miss that market opportunity if the inside market moved as the trader tried to enter an order, and in a fast moving market, missing an intended price could happen often and have very significant economic consequences.

The invention solved this problem by implementing static price levels, which are describe in more detail in the patents linked above:

(Claim 1 of the ’132 patent)

A method of placing a trade order for a commodity on an electronic exchange having an inside market with a highest bid price and a lowest ask price, using a graphical user interface and a user input device, said method comprising:

setting a preset parameter for the trade order;

displaying market depth of the commodity, through a dynamic display of a plurality of bids and a plurality of asks in the market for the commodity, including at least a portion of the bid and ask quantities of the commodity, the dynamic display being aligned with a static display of prices corresponding thereto, wherein the static display of prices does not move in response to a change in the inside market;

displaying an order entry region aligned with the static display prices comprising a plurality of areas for receiving commands from the user input devices to send trade orders, each area corresponding to a price of the static display of prices; and

selecting a particular area in the order entry region through single action of the user input device with a pointer of the user input device positioned over the particular area to set a plurality of additional parameters for the trade order and send the trade order to the electronic exchange.

 

(Claim 1 of the ’304 patent)

A method for displaying market information relating to and facilitating trading of a commodity being traded in an electronic exchange having an inside market with a highest bid price and a lowest ask price on a graphical user interface, the method comprising:

dynamically displaying a first indicator in one of a plurality of locations in a bid display region, each location in the bid display region corresponding to a price level along a common static price axis, the first indicator representing quantity associated with at least one order to buy the commodity at the highest bid price currently available in the market;

dynamically displaying a second indicator in one of a plurality of locations in an ask display region, each location in the ask

display region corresponding to a price level along the common static price axis, the second indicator representing quantity associated with at least one order to sell the commodity at the lowest ask price currently available in the market;

displaying the bid and ask display regions in relation to fixed price levels positioned along the common static price axis such that when the inside market changes, the price levels along the common static price axis do not move and at least one of the first and second indicators moves in the bid or ask display regions relative to the common static price axis;

displaying an order entry region comprising a plurality of locations for receiving commands to send trade orders, each location corresponding to a price level along the common static price axis; and

in response to a selection of a particular location of the order entry region by a single action of a user input device, setting a plurality of parameters for a trade order relating to the commodity and sending the trade order to the electronic exchange.

The district court ruled that eSpeed, Ecco, Eccoware, and eSpeed International nonwillfully infringed the two TTI patents, and the Federal Circuit affirmed.  One ruling of note related to the issue of priority.  On cross-appeal, eSpeed argued that the patents-in-suit did not deserve priority back to March 2, 2000, the filing date of the provisional application – both patents claimed priority back to a common provisional application – and that they were therefore invalid under the on-sale bar.

The crux of eSpeed’s argument about priority was that every claim of the patents-in-suit recites use of a “single action of a user input device,” but in contrast, the provisional application never used that phrase but instead referred only to “a single click of a computer mouse.”  It is well settled that, in order to enjoy the benefit the filing date of a provisional application, it must describe the invention in such a way that one of ordinary skill in the art “would understand that the genus that is being claimed has been invented, not just the species of a genus.”  eSpeed alleged that the district court erred in finding that one of ordinary skill in the art would understand the provisional application to mean that traders could enter orders through a “single action of a user input device.”

In its opinion, the Federal Circuit found that the patents-in-suit are indeed entitled to claim priority to the provisional application.  The provisional application distinguished between order entries performed in a single action and multiple-step actions, and the court agreed with TTI’s expert that the provisional did not distinguish a single-click from other types of single actions, and therefore one of ordinary skill in the art could read the provisional application to encompass any single actions.  Moreover, the parties’ experts did not dispute that one of ordinary skill in the art would have known about other forms of a “single action” such as a double-click or pressing a key.  The Federal Circuit reasoned that, considering the undisputed knowledge of those skilled in the art, disclosure of a species in this case provides sufficient written description and support for a later filed claim directed to a very similar and understandable genus.

In short, as long as the application did not distinguish a single-click from other types of single actions – such as a double-click or pressing a key – the disclosure of “a single click of a computer mouse” provides those skilled in the art with sufficient written description to support the broader “single action of a user input device.”  Presumably this would apply not just in a provisional/non-provisional context but also in a specification/claim context, where a claim recites a “single action of a user input device” and is sufficiently supported but a disclosure of “a single click of a computer mouse.”  This result makes sense; in the field of computer-based graphical user interfaces, skilled artisans understand a variety of I/O techniques, and this is particularly true in commodity trading interfaces or other financial transaction technologies.

Over the past decade it has been common for companies to use their intellectual property rights as collateral to secure loans from financial institutions.  Likewise, recognizing that patents and other IP assets represent substantial value, it has also become common for commercial lenders to secure obligations of borrowers using as collateral not only their tangible assets but also their intangible intellectual property assets.  Not surprisingly, the issue of how state law and the UCC interact with the U.S. Patent Act has become increasingly important as banks and other lenders are finding more and more borrowers defaulting on secured loans.

In Sky Technologies v. SAP AG (Fed. Cir. 2009), the CAFC addressed the issue of chain of title of a patent portfolio that was used as collateral in a defaulted loan.  In short, the Court reaffirmed that, if assignment is the method of transfer of patent ownership, it must be done in writing, but that assignments are not the only method by which to transfer patent ownership.  Patent ownership may be transferred by means other than assignment, for example by foreclosure under state law, which may properly foreclose a security interest and transfer full title and ownership of a patent in accordance with a state’s law.  That is because state law controls any transfer of patent ownership by operation of law not deemed an assignment.

Background

The patents-in-suit had a somewhat detailed chain of title:

1)      Jeffrey Conklin founded TradeAccess, Inc. in 1996 and, along with the other inventors, assigned all of his right in his patent portfolio to TradeAccess.  The assignments were recorded with the USPTO.

2)      TradeAccess later changed its name to Ozro, Inc.

3)      On April 2, 2001, Ozro granted a security interest in the patents to Silicon Valley Bank (“SVB”).  The collateral included the entire patent portfolio.  The SVB Agreement was recorded with the USPTO on April 2, 2001.

4)      On April 3, 2001, Ozro executed a similar security agreement with Cross Atlantic Capital Partners, Inc. (“XACP”).

5)      Ozro used both agreements to secure loans.  In the event of default by Ozro, both SVB and XACP had “the right to exercise all the remedies of a secured party upon such default under the Massachusetts UCC,” which included right to take possession and sell the intellectual property collateral.  In the event of default, Ozro would also be required to “assemble the Intellectual Property Collateral and any tangible property in which [SVB or XACP] has a security interest and to make it available to [SVB or XACP].”

6)      In December 2002, SVB assigned its security interest to XACP through a Non-Recourse Assignment, giving XACP all of the right, title, and interest formerly held by SVB. This Assignment was recorded with the USPTO.  At that point, XACP held the security interest in all of the patents.

Ozro defaulted on its loan obligations and XACP foreclosed on the patents.  In the meantime, Conklin started a new company, Whitelight Technology, later known as Sky Technologies LLC (“Sky”).  At the foreclosure sale, XACP was the only bidder at a public auction and purchased the patent rights. Then, XACP assigned the patent rights to Sky Technology.  Nowhere in the chain of title did Ozro execute a written agreement assigning all of its right, title, or interest in the patents to XACP.

Sky subsequently filed a patent infringement suit against SAP asserting the patents, and SAP moved to dismiss the complaint for lack of standing arguing that, because no writing exists transferring the patents to XACP, Sky did not obtain legal title from XACP and therefore does not have standing in the matter.

Akazawa

The district court, relying on Akazawa v. Link New Technology International, Inc., 520 F.3d 1354 (Fed. Cir. 2008), held the patents were transferred from Ozro to XACP through the foreclosure proceedings. Akazawa held that patent ownership is determined by state, not federal law.  Because XACP properly complied with the Massachusetts UCC foreclosure requirements by placing the patent collateral up for sale at a public auction and notifying Ozro of the sale, the district court held title was transferred on the foreclosure, and the chain-of-title had not been broken.

Transfer of Title Under State Law

On appeal, the Federal Circuit found that Akazawa controls in this case and therefore Massachusetts UCC is the controlling law for governing patent title transfer.  Massachusetts UCC § 9-610 permits a secured party to sell the collateral after default, in a commercially reasonable manner, and that same party may purchase the collateral at a public disposition.  Moreover, section 9-617 of the UCC states that once a secured party disposes of collateral after default, the transferee for value takes all of the debtor’s rights in the collateral. Therefore, because XACP foreclosed on the patents in conformity with these provisions, XACP properly obtained title to the patents.

The Court’s discussion noted that, although assignments transferring patent ownership must be done in writing, assignments are not the only method by which to transfer patent ownership.  Patent ownership may be transferred by means other than assignment, for example by foreclosure under state law, which may properly foreclose a security interest and transfer full title and ownership of a patent in accordance with a state’s law.  That is because state law controls any transfer of patent ownership by operation of law not deemed an assignment.

The Federal Patent Act requires that all assignments of patent interest be in writing. 35 U.S.C. § 261 (2006). This requirement dates back to the 1881 Supreme Court decision in Ager v. Murray, which held that a debtor’s interest in a patent that would be used to satisfy a judgment against him was property, “assignable by him, and . . . [could not] be taken on execution at law.” 105 U.S. 126, 131–32 (1881). The Court held that the patentee was required to execute a writing to assign title, or a trustee would be appointed to execute an assignment, “if the patentee should not himself execute one as directed.” Id. at 126, 132. This decision was based on the idea that a creditor cannot reach incorporeal property, such as a patent, due to its intangible nature; the transfer (either voluntary or involuntary) to a purchaser must be done by written assignment “in order to vest [the purchaser] with a complete title to the property.” Id. at 130 (citing Stephens v. Cady, 55 U.S. (14 How.) 528, 531 (1852)).

 

Even though a transfer of patent ownership, if through an assignment, must be in writing, this court has held, “[T]here is nothing that limits assignment as the only means for transferring patent ownership. . . . [O]wnership of a patent may be changed by operation of law.” Akazawa, 520 F.3d at 1356.

 

. . .

 

We find that Akazawa controls in the instant case, and that the district court’s reliance on its reasoning was appropriate because transfer of patent ownership by operation of law is permissible without a writing. Akazawa says nothing about permitting assignments without a writing; rather, this court made it clear that if assignment is the method of transfer of patent ownership, it must be done in writing, pursuant to § 261. See Akazawa, 520 F.3d at 1356. However, assignment is not the only method by which to transfer patent ownership. As noted below, foreclosure under state law may transfer patent ownership. Here, XACP’s foreclosure on its security interest was in accordance with Massachusetts law; therefore, Sky received full title and ownership of the patents from XACP providing it with standing in the underlying case.

The Court also reaffirmed that 35 U.S.C. §261 (Ownership; Assignment) is not preempted by finding that state law allows transfers of patent ownership without a writing.  The opinion reasoned that § 261 “speaks only to assignments of patents; there exists no federal statute requiring a writing for all conveyances of patent ownership,” and therefore no federal law preempts the use of Massachusetts UCC foreclosure provisions to transfer patent ownership by operation of law.

After asserting its patent for encrypted data transmissions (U.S. Patent No. 5,412,730) against over 20 banks and major credit card companies, TQP Development reached an agreement with American Express Travel Related Services to settle the dispute.  TQP initially filed the suit in U.S. District Court for the Eastern District of Texas on March 25, 2009.

The Defendants include Barclays Bank, Prudential, Amazon,.com, Visa, and many more.  TQP previously settled the matter with MasterCard back in June and with Amazon.com in July.  This month is American Express.

As previously mentioned, on July 22, 2009 RealTime Data LLC (d/b/a IXO) sued numerous financial services defendants in the U.S. District Court for the Eastern District of Texas alleging infringement of four of RealTime’s patents relating to data compression.  The defendants included Morgan Stanley, Bank of America Corporation, The Bank of New York Mellon Corporation, Credit Suisse Holdings, The Goldman Sachs Group, HSBC Bank USA, JPMorgan Chase & Co., and SWS Group. Inc., and the four asserted encryption and compression patents were U.S. Patent Nos. 6,624,761, 7,161,506, 7,400,274, and 7,417,568.

Just two days later, on July 24, 2009, the Chicago Board Options Exchange filed a complaint requesting a declaratory judgment that the four patents are not valid and are not infringed by CBOE.  The complaint was filed by CBOE in the Northern District of Illinois.

More here on the RealTime Data lawsuit against Goldman Sachs, Thomson Reuters, Nyse Euronext, et al.