Speedplay, Inc. v. Bebop, Inc., Defendant/cross-Appellant
211 F.3d 1245 (2000)
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Rule of Law:
A licensee has standing to sue for patent infringement in its own name if it has been granted all substantial rights in the patent, effectively making it the patent owner. An agreement to assign future inventions transfers title automatically by operation of law upon the invention's creation if it uses language of present conveyance (e.g., 'hereby assigns') rather than language promising a future assignment.
Facts:
- Richard Bryne, an inventor, created a clip-less bicycle pedal system and obtained several patents, including the '778 patent.
- John Steinberg, another inventor, developed his own clip-less pedal system, the Bebop pedal.
- Bryne's company, Speedplay, Inc., entered into a Contribution and License Agreement (CLA) with Bryne, granting Speedplay an exclusive, worldwide license to the '778 patent and its improvements.
- The CLA gave Speedplay the 'sole right to enforce' the patent but gave Bryne a secondary option to sue if Speedplay failed to act within three months. It also required Bryne's 'reasonable' consent for Speedplay to assign its rights.
- Bryne and Speedplay also entered into a Confidentiality and Inventions Agreement (CIA) in which Bryne agreed that all his future inventions during his employment 'shall belong exclusively to [Speedplay]' and he 'hereby conveys, transfers and assigns' them to Speedplay.
- After these agreements were in place, Bryne was issued the '009 and '894 patents for related bicycle technology.
- Steinberg's company, Bebop, Inc., began manufacturing and selling its Bebop clip-less bicycle pedals.
- Bryne saw a prototype of the Bebop pedal in 1993, which led to a dispute over intellectual property rights.
Procedural Posture:
- Speedplay, Inc. sued Bebop, Inc. in federal trial court, alleging patent infringement of the '778 and '009 patents, trade dress infringement, and unfair competition.
- Bebop, Inc. filed counterclaims seeking a declaration that the patents were invalid and not infringed.
- Speedplay amended its complaint to add a claim for infringement of the newly issued '894 patent.
- Bebop amended its counterclaims to allege the '894 patent was invalid and that all three patents were unenforceable.
- Following a bench trial, the trial court entered judgment for Bebop on all of Speedplay's claims.
- The trial court also ruled in favor of Bebop that the '894 patent was invalid, but it denied Bebop's other counterclaims.
- Both Speedplay and Bebop appealed the trial court's decision to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Does a licensee have standing to sue for patent infringement in its own name when the licensing and employment agreements grant it the exclusive rights to manufacture, sell, and enforce the patents, even if the inventor retains a contingent right to sue and a right to reasonably consent to assignments?
Opinions:
Majority - Bryson, Circuit Judge.
Yes, a licensee has standing to sue for patent infringement in its own name under these circumstances. To determine standing, courts must look at the substance of the rights granted, not the formal name of the agreement. A party is considered the patent owner for litigation purposes if it has received 'all substantial rights' in the patent. Here, the agreements transferred all substantial rights from Bryne to Speedplay. Bryne's retained right to sue was 'illusory' because Speedplay could nullify it by simply granting the alleged infringer a sublicense. Similarly, the requirement that Bryne's consent to an assignment not be 'unreasonably withheld' was a mechanism to protect his financial consideration, not a retained proprietary right. For the later patents, the employment agreement used language of present conveyance ('hereby...assigns'), which, under the precedent of Filmtec Corp., automatically transferred title to Speedplay the moment the inventions were created. Because Speedplay possessed all substantial rights to all three patents, it had standing to bring the infringement suit in its own name without joining Bryne.
Analysis:
This case reinforces the Federal Circuit's 'all substantial rights' test for determining patent litigation standing, clarifying what constitutes a 'substantial' retained right. The court's distinction between a licensor's 'illusory' right to sue and a meaningful one provides guidance for drafting licensing agreements where standing is a concern. Furthermore, the decision solidifies the critical difference between a present assignment of future inventions ('hereby assigns') and a mere promise to assign, establishing a clear precedent that the former automatically transfers legal title. This has significant implications for corporate intellectual property management, emphasizing the need for precise contractual language in employment and consulting agreements to ensure clear ownership of future innovations.
