Abstract
A patentee did not lose the ability to bring a patent infringement lawsuit when it entered into a security interest agreement covering all of its intellectual property and the agreement was recorded at the USPTO
Background
Raffel, a manufacturer of electronic controls for the seating, bedding and industrial marketplaces, entered into an "Intellectual Property Security Agreement" with two different banks granting the banks a security interest in all of its intellectual property. The banks filed notices of their security interests with the USPTO. Shortly thereafter, Raffel sued
Trial Court's Decision
Lenders take security interests in a debtor's intellectual property and other assets to protect themselves if the debtor defaults on a loan. In some instances, the lender demands that the security agreement transfer the ownership in the intellectual property until the loan is repaid.
The trial court found the act of granting a security interest in intellectual property and recording that security interest at the USPTO did not transfer title of the patents from Raffel to the banks, and, therefore, Raffel retained the right to enforce the patents.
To have the ability or "standing" to sue for patent infringement, an entity must satisfy the requirements of the
In looking at the actual agreements with the banks, the court confirmed that "[n]othing in the Intellectual Property Security Agreements states that Raffel is assigning title of the patents to the banks; rather, the agreements specifically state that Raffel is granting a 'security interest' in its intellectual property." Thus, Raffel never transferred title and maintained standing. The court, therefore, denied the motion to dismiss.
Strategy and Conclusion
A party receiving a security interest in a patent may record the security agreement with the USPTO to protect itself against and give notice to subsequent bona fide purchasers or mortgagees. Standard security agreements that do not include language assigning title of the patents, however, will not prevent a patentee from bringing a patent infringement lawsuit. This case demonstrates the value of drafting the security agreement in a way that does not transfer ownership of intellectual property to the lender while the loan is pending.
The Raffel decision can be found here.
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