Federal Circuit Rules Federal Law Trumps State Law in Interpretation of Patent Ownership Rights
By Flora Amwayi – Edited by Jonathan Allred
Abraxis Bioscience, Inc. v. Navinta LLC, 2009-1539, 2011 WL 873298 (Fed. Cir. Mar. 14, 2011)
The Federal Circuit denied a petition for an en banc rehearing of a Federal Circuit panel order dismissing Abraxis’ patent infringement case against Navinta. The court dismissed the case on the grounds that Abraxis did not have standing to sue for infringement since it did not own the patents at the time the original complaint against Navinta was filed. The original panel order hinged on whether interpretation of patent ownership should be governed by New York state law (as outlined in choice of law provisions) or by federal rules of patent ownership and assignment (Federal Circuit law). See 35 U.S.C. § 261.
By denying the en banc rehearing, the court affirmed the panel’s holding that the resolution of ownership and assignment question is an issue of Federal Circuit law since it determines a plaintiff’s standing to sue for patent infringement. In so holding, the court stated that “state law cannot retroactively override federal law to revive failed agreements.”
Abraxis had an asset assignment agreement with AstraZeneca effective in June 2006, indicating that the actual transfer of the patents was to occur in the future. At that time, AstraZeneca’s subsidiaries owned the patents in question (4,870,086, 5,670,524, and 5,834,489), which cover Naropin, an anesthetic. On March 15, 2007, Abraxis sued Navinta claiming that Navinta’s abbreviated new drug application (ANDA) constituted patent infringement. See 35 U.S.C. §271(e)(2). On the same day, AstraZeneca’s subsidiaries assigned its patents to AstraZeneca. Subsequently, AstraZeneca assigned the patents to Abraxis in November 2007.
Under New York state law, which was specified by a choice of law provision in the asset assignment agreement, the November 2007 transfer would be deemed retroactive to June 2006 since the parties’ intent would trump the language of the agreements. Under Federal Circuit law, Abraxis lacked standing at the time the lawsuit was filed since Federal Circuit law requires ownership of the patent at the time of the transfer and also requires that the assignment be in writing. See 35 U.S.C. § 261. The original Federal Circuit panel applied Federal Circuit law, under which both requirements were not met since AstraZeneca did not own the patents until March 2007, and the actual transfer of the patents to Abraxis did not occur until November 2007. The panel rejected Abraxis’ argument that the failed June 2006 transfer could be corrected by nunc pro tunc assignment in November 2007, which was intended to grant Abraxis the right to sue for infringement relating back to the date of the original assignment on June 2006. The panel held that the requirement to have legal title to the patents on the date the infringement suit was filed could not be met retroactively except if a written assignment expressly grants the party the right to sue for past infringement, an exception that was not met here.
The dissent, penned by new Federal Circuit judge Kathleen O’Malley and joined by Judge Newman, voiced concern that the Federal Circuit panel had created federal common law to govern assignments of patent rights in a case where there was no “significant conflict” between state law and federal policy or interest. The dissent also noted that the decision would destabilize parties’ expectations regarding ownership of patents and add unnecessary burdens on future transfers of patents, which would need to be reviewed under separate Federal Circuit law since choice of law provisions in complex asset purchase agreements would not apply to patents.
As the Patent Law Blog notes, the scope of this decision is currently uncertain: the decision could be construed broadly to mean that Federal Circuit law applies over contract cases that require resolution of patent ownership rights, or narrowly to mean that Federal Circuit law applies only when the patent ownership resolution is related to a standing issue.
Flora Amwayi is a 1L at the Harvard Law School.