Federal Circuit Continues
Expansion of "Federal common law"
Shortly after its inception, the Federal Circuit
made the first in a series of ruling that certain legal consequences of patent
assignment and of contracts promising to assign patent rights, are matters are
governed by "Federal common law." This Federal common law is created by their
decisions, and then it is applied to cases throughout the
United States. The cases claim this is
authorized by Congress in 35 USC §261, a statute stating among other things that
patents can be assigned and setting up a system for recording assignments.
A recent expansion of the Federal common law is
discussed in a dissent from the Federal Circuit decision refusing rehearing of
an earlier panel decision. Abraxis
Bioscience Inc. v. Navinta LLC, 97 USPQ2d 2011 (Fed. Cir. 2011). The
plaintiffs had executed a contract to acquire the patents which called for
assignments to be effective on a stated future closing date, which was before
the patent infringement suit was filed. The acquisition apparently closed
on schedule but without executing a written patent assignment. The
contract explicitly stated its terms were to be governed by
New York law. Precedents under
New York state law would have recognized ownership in
all of the property acquired in the transaction to be effective from
The Federal Circuit panel nevertheless held that
Federal common law governed the effectiveness of the acquisition to contract to
transfer title in the patent on the closing date, and that under their precedent
it did not. Since the written assignment confirming the transfer was not
signed until after the infringement suit was filed the case was dismissed.
The majority of the Federal Circuit is correct
that Congress can legislate to preempt state law in the area of patent
assignments. But they are very wrong in saying §261 gives them
authorization to create a Federal common law for assignments.
The statute says "patents shall have the
attributes of personal property." This statute was enacted after
the US Supreme Court decision of Erie v. Tompkins, a case well known to
every law school student. Erie held there is no general
body of Federal common law. After
Erie, federal courts deciding questions
relating to other kinds of personal property law (for instance a dispute over
ownership of a car), must apply the relevant state law on the issue.
Because of the
Erie decision, one of the most obvious attributes of
personal property is that it is governed by state law. Therefore, instead of
giving federal courts authority to create a common law of assignments, the
literal language of §261 requires that patent assignment questions be decided
according to the same law that applies to other personal property.
Curiously, although in the Abraxis case discusses the law of New York
extensively on the issue of a contract's effective date, and argues that the New
York law should govern the decision, there is no mention of Erie or its
impact on the proper interpretation of §261.
Someday we expect the US Supreme Court will
grant review of one of these "Federal common law " assignment cases and reverse
the whole series. Just because Congress chose to legislate on a patent law
issue doesn't mean that they have chosen to preempt state law. What
Congress actually said in 35 USC §261 was "don't create Federal common law."
update was prepared by Walter Steinkraus. Walter is a shareholder at Vidas,
Arrett & Steinkraus. For more information about this update, please contact
Walter at 952-563-3004 or via email.
update should not be considered legal advice. Your receipt of this update does
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