By: Erica M. Hines

Last month, the Federal Circuit issued its decision in Abraxis Bioscience, Inc. v. Navinta LLC calling into question the ability of parties to rely on state law in interpreting provisions of a contract as to a patent assignment where no written assignment had been made as required by the Patent Act in 35 U.S.C. §261. In the case the Court found that Abraxis did not have standing to sue for infringement of patents as it did not have possession of a written assignment before the suit was brought.

Abraxis had previously entered into an Asset Purchase Agreement (“APA”) with AstraZeneca, which provided that AstraZeneca “shall cause”, either by itself or its affiliates, the transfer of the patents in suit to Abraxis as of the future effective date of June 28, 2006. The parties included a New York choice of law provision in their agreements. In accordance with the APA, AstraZeneca executed a patent assignment of the patents-in-suit to Abraxis on June 28, 2006. However, AstraZeneca later learned that as of June 28th, the patents were actually owned by AstraZeneca’s affiliated companies, Astra LÄkemedel Aktiebolag and AstraZeneca AB. In March of 2007, the affiliated companies assigned the patents to AstraZeneca, and on the same day, Abraxis sued Navinta LLC for patent infringement. In November 2007, AstraZeneca executed an additional document “confirming” that Abraxis had owned all right to the asserted patents “since no later than June 28, 2006” (the effective date of the APA).

In order to have standing to bring a patent infringement suit, a plaintiff must own the patents-in-suit. The issue in this case was whether Abraxis had standing to sue where AstraZeneca had agreed to cause transfer of the patents to Abraxis, but when AstraZeneca executed the patent assignments, they were actually owned by its affiliated companies. Since the affiliated companies had in fact assigned the patent rights to AstraZeneca before Abraxis brought suit, the district court found that the facts were sufficient to establish Abraxis’s ownership at the time it brought suit – this was clearly the intent of the parties. However, on appeal, the Federal Circuit panel held that in fact, Abraxis lacked standing to sue because on the date that suit was brought, there was no written assignment document from the patent owner to Abraxis. The majority and concurring opinions agreed with this position, finding that AstraZeneca’s June 28, 2006 assignment to Abraxis was insufficient to satisfy the legal requirement that patent assignments be in writing because “it is not possible to transfer an interest in a patent unless one owns the patents at the time of the transfer”. The majority found that this requirement was not satisfied until after suit was brought, when AstraZeneca executed the additional document “confirming” the transfer of patent rights to Abraxis in November 2007 (the district court, on the other hand, found that the November 2007 writing was irrelevant to the standing analysis, and was merely a belt-and-suspenders confirmation of what had already been accomplished under New York law).

In a scathing dissent, Judges O’Malley and Newman argued that Abraxis had standing to bring suit. It was undisputed that the parties intended the contracts to be governed by New York law, and under the district court’s interpretation of New York Law, the series of agreements executed between Abraxis and the AstraZeneca companies effectuated a written assignment sufficient to satisfy the writing requirement and to confer standing to sue. The dissent criticizes that the majority was only able to reach a different result by: “(1) confusing the law relating to the retroactive transfer of title with principles prohibiting retroactive conferral of standing; and (2) interpreting the parties’ agreements under our doctrine pertaining to future inventions”. The dissent cautions that the decision creates a new body of law to govern transfers of patent rights, which will impose unnecessary burdens on future transfers of patents, and will disrupt parties’ ownership expectations of existing patents. The dissent also warns that “Parties may now be barred from pursuing claims for infringement of patents they indisputably own under state law, and choice of law provisions in large-scale asset purchase agreements such as that at issue here will become meaningless where patents are involved.”

The Abraxis decision calls into question parties’ reliance on choice of law contract provisions. The immediate take away from the decision is for parties to be wary of relying on choice of law provisions to establish patent ownership. Plaintiffs must be certain that they are in possession of a written assignment of the patent-in-suit from the owner thereof prior to filing an infringement suit. In view of the Abraxis decision, one can no longer rely on state contract law interpretations when determining patent ownership for standing purposes.