The Federal Circuit affirmed the district court’s decision that the patent ownership was properly transferred by the operation of state foreclosure law although the transfer was not done in writing.

Jeffrey Conklin, founder of TradeAccess, Inc., and inventors of TradeAccess, Inc. assigned all rights in their patent portfolio to TradeAccess, Inc.

The assignments were recorded with the USPTO. TradeAccess, Inc. later changed its name to Ozro, Inc., which granted a security interest in the patents to Silicon Valley Bank (SVB) and Cross Atlantic Capital Partners, Inc. (XACP). In the event of default by Ozro, both parties had “the right to exercise all the remedies of a secured party upon such default under the Massachusetts UCC,”¹ which included the right to take possession and sell, lease, or otherwise dispose of any or all of 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].” The SVB then assigned its security interest to XACP through a Non- Recourse Assignment, which was also recorded with the USPTO. Accordingly, XACP held a security interest in all of the patents originally assigned to TradeAccess, Inc.

Ozro then defaulted on its loan with XACP, and XACP foreclosed on the patents. In compliance with Massachusetts foreclosure law, XACP obtained ownership rights of the patents.

In doing so, XACP did not execute a written agreement with Ozro that would assign all rights of the patents to XACP and instead transferred its rights to XACP, which assigned the patents of the foreclosure to Whitelight, a company started by Conlin.

Sky Technologies then filed a patent infringement suit against SAP, which moved to dismiss the suit due to a lack of standing by arguing that Sky was not a valid title holder because Ozro had never assigned the patent rights to XACP.

Relying on Akazawa v. Link New Technology International, Inc., the district court held that the patents were transferred from Ozro to XACP due to the foreclosure proceedings. 520 F.3d 1354 (Fed. Cir. 2008). Because XACP complied with Massachusetts UCC foreclosure requirements, the title of the patents transferred to XACP gave XACP the right to assign the patents to Sky.

In affirming the district court opinion, the Federal Circuit stated that Akazawai was the governing precedent. Akazawa held that patent ownership is determined by state law, not federal law. Federal law only governs assignments of the patents, which must be in writing as required under 35 U.S.C. § 261. Accordingly, Akazawa held that the passage of title in the patents can take place through intestacy without a writing which is required for an assignment. Further, state law is not preempted because 35 U.S.C. § 261, which requires that assignment be made in writing, only applies to assignments for patents. However, as noted in the decision, an assignment is not the only method by which patent ownership may be transferred.

In applying Akazawa, the Federal Circuit held that because XACP properly complied with the Massachusetts UCC foreclosure requirements by selling the patent collateral at a public auction and notifying Ozro of the public auction, the title was transferred in the foreclosure, thus the chain-of-title had not been broken.

The Federal Circuit also noted that the title of patents can transfer through the operation of state law without a writing -- only assignments require a writing.