Be careful what you sign...

By: Brian Lefort Tuesday December 23, 2014 0 comments Tags: Brian Laforte, legal advice


By Brian Lefort

Earlier this month, the Court of Appeals for the Federal Circuit issued a staunch reminder that individuals and companies should be careful when signing patent-related documents.

The case was Memorylink Corp. v. Motorola Solutions, Inc. et al. Memorylink alleged that Motorola infringed its patent. However, the asserted patent was assigned to both Memorylink and Motorola. So, Motorola responded by stating that it couldn't infringe a patent to which it jointly owned.

Specifically, the asserted patent included four inventors--two inventors were associated with Memorylink, and two inventors were associated with Motorola. When the patent application was filed, all four inventors signed an assignment document transferring their rights to the patent to both Memorylink and Motorola. In the patent lawsuit, Memorylink argued that the two Motorola inventors should not have been listed as inventors, thereby preventing Motorola from having an ownership interest in the asserted patent. Memorylink also argued that its two inventors did not receive consideration for executing the assignment.

Because the assignment document clearly transferred the rights of the patent to both Memorylink and Motorola and because the assignment stated that all four inventors received consideration, the Federal Circuit upheld the district court's finding that the assignment was proper. Accordingly, Motorola was a joint owner of the asserted patent and not liable for patent infringement.

In order for a contract to be binding upon the parties, it must be supported by consideration. Consideration is anything of value promised to and/or received by another. In the Memorylink ruling, the Federal Circuit stated that only 'nominal consideration' is sufficient to support a contract and "Courts will not inquire into the adequacy of the consideration." The four inventors to the asserted patent in the Memorylink case all executed the assignment document, which included the following classic language: "[f]or and in consideration of the sum of One Dollar to us in hand paid, and other good and valuable consideration, the receipt of which is hereby acknowledged . . . ."

Even though Memorylink argued that its two inventors never received the consideration, the Federal Circuit held that "the 'four corners' of the agreement quite clearly contain recitals of consideration." That is, even though the consideration language may be considered boilerplate, such language does not make it nonexistent. To the contrary, if someone signs an agreement stating that they have received consideration, then the agreement speaks for itself, and the court is very unlikely to investigate whether the signatory to the assignment received consideration.

In sum, when companies are executing legal documents, including patent assignments and other intellectual property related documents, it is important to have a clear understanding of their content.
Brian Lefort

About the Author: Brian Lefort

Brian Lefort is a Boulder-based intellectual property attorney who specializes in helping innovative startup and emerging businesses identify and protect their valuable technology assets. Brian has more than 15 years of legal experience building and enforcing strategic patent and trademark portfolios for innovative products in the medical device, telecommunications, software and other high technology industries. He can be reached at [email protected] or 303-447-7723.