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Schwendimann v. Arkwright Advanced Coating, Inc.

Mutual Error in Patent Assignment, Corrected by Trial Court, Precludes Neither Standing nor Liability

Schwendimann v. Arkwright Advanced Coating, Inc., __ F.3d __, 2020 WL 2466231 (Fed. Cir. May 5, 2020) (O’Malley, Reyna (dissenting), WALLACH) (D. Minn.: Tunheim) (3 of 5 stars)

Fed Cir affirms judgment holding Arkwright liable and awarding damages for infringement of Ms. Schwendimann’s patents. Ms. Schwendimann’s patents generally relate to the transfer of images from a polymer film onto some other article such as a t-shirt. Though this appeal involved a dispute over Ms. Schwendimann’s ownership of the asserted patents, the opinion explains that this is not a “standing” issue, per Lone Star, 925 F.3d 1225 (Fed. Cir. 2019). Ms. Schwendimann’s complaint, by alleging ownership, established standing. “As long as a plaintiff alleges facts that support an arguable case or controversy under the Patent Act, the court has both the statutory and constitutional authority to adjudicate the matter.” Op. at 9–10 (citing Lone Star). The opinion criticizes the dissent’s contrary view as incompatible with both Lone Star and with Supreme Court precedent.

The district court did not err in determining that Ms. Schwendimann was, at the time of her complaint, a patentee entitled to sue for infringement. Nothing about § 261 precluded the district court from applying state law contract principles to reform a defective submission to the PTO into a valid assignment. The opinion describes how the law firm of Schwegman, Lundberg & Woessner (“SLW”), when filing assignment paperwork with the PTO, attached the incorrect assignment. Notwithstanding SLW’s error, the PTO accepted the filing and updated its records. The opinion describes how there was no “serious dispute” that the relevant parties had intended to assign, and there was contemporaneous evidence of that intention in the record. It approves the district court’s reasoning that SLW’s filing failed to express the parties’ real intentions, due to a mutual mistake of fact, and thus the court “properly reformed the [filing] as an assignment for the [correct] application[.]” Op. at 14 (citing Tri-Star, 619 F.3d 1364 (Fed. Cir. 2010), and Speedplay, 211 F.3d 1245 (Fed. Cir. 2000)). Nothing in § 261 precluded that approach. “The written instrument requirement of § 261 does not define when the agreement occurs, it merely requires that some writing confirm the fact of assignment. By virtue of the reformation, the written instrument was corrected nunc pro tunc, to the point of the assignment.” Op. at 15.

The district court did not abuse its discretion in awarding prejudgment interest, at a rate of 10 percent per year, on the entire damages from the first infringement date. Per Nickson, 847 F.2d 795 (Fed. Cir. 1988), and Comcast, 850 F.3d 1302 (Fed. Cir. 2017), it was appropriate to award interest on the entire judgment beginning on the first date of infringement. The 10 percent figure was supported by Minnesota statute, and was not abuse of discretion.

Judge Reyna’s opinion: Judge Reyna’s opinion reasons that Ms. Schwendimann’s rights under the patent were only confirmed by the district court retroactively, and finds a conflict with the general principle that constitutional standing must be present at the time of filing. It criticizes the majority for bypassing this issue. It also cites cases from the Supreme Court and Federal Circuit as precluding retroactive correction of standing issues. Judge Reyna would have dismissed the case and required re-filing.

KEYWORDS: ASSIGNMENT; STANDING; CONSTITUTIONAL LAW; ARTICLE III; PRE-JUDGMENT INTEREST