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Abraxis Bioscience, Inc. v. NAVINTA LLC
Citations: 672 F.3d 1239; 97 U.S.P.Q. 2d (BNA) 2011; 2011 U.S. App. LEXIS 5006; 2011 WL 873298Docket: 2009-1539
Court: Court of Appeals for the Federal Circuit; March 14, 2011; Federal Appellate Court
Original Court Document: View Document
In the case of Abraxas Bioscience, Inc. v. Navinta LLC, the United States Court of Appeals for the Federal Circuit denied both the plaintiff-appellee's petition for panel rehearing and the petition for rehearing en banc. The court's decision, rendered by a panel of circuit judges, included concurring opinions and a dissent. Circuit Judge Gajarsa, joined by Judges Linn and Dyk, concurred in the denial, asserting that the issues presented did not warrant an en banc review. They clarified that the majority opinion did not establish a federal common law that displaces state law regarding patent assignments. The background of the case involves a 2006 Asset Purchase Agreement between AstraZeneca, AZ-UK, and Abraxis, which aimed to transfer three asserted patents to Abraxis. However, at the time of the agreement, the patents were owned by Astra Läkemedel Aktiebolag and AstraZeneca AB, not AZ-UK. AZ-UK's subsequent attempts to assign the patents to Abraxis were unsuccessful because AZ-UK lacked ownership of the patents. Abraxis filed a patent infringement lawsuit against Navinta LLC on March 15, 2007, but did not have a written assignment of the patents at the time of filing, as required by 35 U.S.C. 261. The court concluded that Abraxis lacked standing under Article III to pursue the lawsuit since it did not own the patents when the suit was initiated. The dissent argued for the application of state law, suggesting it would preempt federal law, a position the majority rejected, emphasizing that federal law prevails when Congress has established a statutory scheme in a specific area. The court's mandate is set to issue on March 21, 2011. AZ-UK's attempt to reinstate a failed patent assignment to Abraxis from June 28, 2006, through a subsequent transfer on March 15, 2007, is deemed inadequate under section 261 and federal standing law. The court clarified that a valid patent transfer requires ownership at the time of transfer, which AZ-UK lacked. The district court's reliance on party intent, purportedly under New York law, cannot retroactively rectify this ownership issue or grant standing in federal court. The panel majority correctly followed precedent, determining that Abraxis did not have standing and could not remedy this after the lawsuit began. A dissenting opinion from Circuit Judge O'Malley argues that the panel's establishment of federal common law for patent assignments conflicts with both established precedent and Supreme Court rulings that limit judicial creation of federal rules without significant state-federal conflict. O'Malley contends that this decision disrupts expectations around patent ownership and complicates future patent transfers, potentially barring parties from pursuing infringement claims under state law. The case fundamentally revolves around whether the contracts effectively transferred patent titles to Abraxis prior to the lawsuit, a determination the majority did not dispute despite the differing interpretations of applicable law. The majority misapplied New York law in interpreting contracts related to patent transfers by instead establishing a new federal common law rule, referencing dicta from DDB Technologies v. MLB Advanced Media. This new rule concluded that Abraxis did not acquire title until months after filing suit, resulting in a lack of standing for subsequent litigation. Such a rule, created without a conflict between state law and federal policy, is typically rejected by the Supreme Court, which maintains that the judicial creation of federal rules displacing state law is rare and limited to significant conflicts. The Supreme Court has consistently stated that federal courts, being courts of limited jurisdiction, should defer to state law unless Congress explicitly states otherwise. The case of Wallis serves as a precedent, where the Supreme Court favored state law over federal common law for transferring federally granted land interests, emphasizing that state law governs contractual relationships unless there is a significant conflict with federal interests. The principles of preemption suggest that unless Congress clearly indicates an intent to occupy a field traditionally governed by states, such as contract law, state law should prevail. Furthermore, it has been established that issues of patent ownership are governed by state law. Patent assignment agreements are governed by state contract law, as established in several Federal Circuit cases, with ownership being the primary issue. Disputes over property ownership fall under state law, not federal law. State law doctrines regulate the assignment of ownership, and 35 U.S.C. § 261 does not indicate Congress intended to fully displace state regulation of these agreements. Instead, it affirms that patents possess attributes of personal property, suggesting that state contract law should apply similarly to patent assignments as it does to other personal property transfers. The only requirement under § 261 is that assignment agreements must be in writing. Preemption of state law by federal law is only warranted if there is a significant conflict with the writing requirement or other federal interests. License agreements are also treated as contracts under state law principles. A notable exception was established in DDB Technologies, where federal law might displace state law regarding whether a patent assignment clause provides for automatic assignment of future inventions or merely obligates assignment. This case emphasized that the question of standing in patent cases is closely tied to this issue. Subsequent decisions have invoked this exception narrowly, focusing on whether new inventions are automatically assigned upon their creation or require additional actions for assignment. The DDB Technologies case itself involved whether an inventor had assigned patent rights to their employer through an employment agreement, a situation that did not intend to broadly alter the treatment of existing patent assignments. The plaintiff claimed exclusive ownership, arguing that the employment agreement did not result in an automatic assignment, thus allowing various defenses to challenge the employer's claim. The court's inquiry centered on whether the employment agreement constituted a future promise to assign or an automatic assignment upon patent issuance. The DDB Technologies panel recognized that state law primarily governs contract interpretation but highlighted that the classification of patent assignment clauses as automatic or merely obligatory is a federal issue tied to standing in patent cases. The panel clarified that federal law applies specifically to agreements concerning rights to future inventions. If a contract explicitly grants rights to future inventions, the transfer of title occurs automatically upon the invention's creation, requiring no further action from the assignee. Conversely, contracts that only obligate the inventor to assign future rights do not confer legal title to the promisee until the inventions are made. DDB Technologies established an exception for future invention assignments but did not extend this exception to existing patents. Any extension to existing patents would have been considered dicta since the case did not involve such agreements. Furthermore, a preemption analysis was necessary to justify any broader application of DDB Technologies, as judicial displacement of state law must be based on a significant conflict with federal interests. The panel failed to demonstrate any such conflict, which is required by precedent. Thus, the majority's attempt to establish federal common law without identifying a conflict with state law was not substantiated. A relationship exists between property rights, ownership, and standing, but this does not create a significant conflict with federal patent policy that would warrant establishing a federal common law for patent assignments. The variability in the outcomes of ownership and standing based on applicable law does not justify such a preemption, as uniformity alone would lead to excessive federal common law rules. Key legal questions surrounding patent ownership, such as the implications of divorce decrees on co-ownership interests, the validity of state court judgments, and foreign intestacy laws, remain closely tied to standing but do not justify creating federal common law for issues like marital property or state court judgments. The concurrence suggests that the case revolves around Abraxis lacking a written assignment at the time of filing, while the district court allowed state law to retroactively resolve the standing issue. However, prior to the lawsuit, AZ-UK and its affiliates had executed agreements deemed sufficient under New York law to meet the writing requirement and establish Article III standing. The majority's conclusion was reached by conflating retroactive title transfers with standing principles and misinterpreting agreements related to future inventions. In patent cases, standing is determined by ownership of patent rights, which are assessed under state law when ownership is claimed via assignment. The law stipulates that a valid written transfer must exist at the time a complaint is filed in federal court. In this case, five writings were involved, with one executed post-filing. The initial Asset Purchase Agreement (APA) from April 2006 stipulated that AZ-UK would transfer all rights in the relevant patents to Abraxis, effective June 28, 2006. An IP Assignment Agreement (IPAA) executed on the same date formally sold and assigned these rights to Abraxis. In early 2007, AZ-UK discovered that the title to certain patents was still held by two of its affiliates and had not been assigned to Abraxis. On March 15, 2007, the affiliates executed documents to assign these patents to AZ-UK. Later, in November 2007, AZ-UK executed an additional document affirming that Abraxis had owned all rights to the patents since June 28, 2006. The district court, interpreting the agreements under New York law, determined that ownership of the patents was conferred to Abraxis as of March 15, 2007, due to the effective retroactive nature of the assignments. Thus, all necessary documents for the title transfer to Abraxis were executed by March 15, 2007, providing Abraxis with standing at the inception of its lawsuit. However, the panel majority argued that AZ-UK's assignment to Abraxis on June 28, 2006 did not satisfy the writing requirement under 35 U.S.C. § 261 because AZ-UK lacked legal title at that time. They contended that even with retroactive effect, the March 15, 2007 assignments did not automatically transfer the patents to Abraxis, necessitating a subsequent written agreement. This reasoning confused ownership with standing, as AZ-UK was not attempting to sue on June 28, 2006 but sought to transfer title to Abraxis. The key question was whether the March 15, 2007 documents could retroactively vest title to AZ-UK as of June 28, 2006, allowing for a valid transfer to Abraxis. The district court affirmed that under New York law, AZ-UK could retroactively vest title to the patents, and neither 35 U.S.C. § 261 nor Article III imposed additional prohibitions on the transaction. The panel majority's analysis incorrectly referenced federal common law principles of contract interpretation, which only apply to future inventions, concluding erroneously that the March 15, 2007 agreements did not result in an immediate transfer of rights to Abraxis. A subsequent written assignment for patent rights was deemed necessary by the panel majority in the Abraxis case, which occurred almost eight months after the lawsuit was filed. However, New York law does not mandate such a requirement. The majority's ruling incorrectly applied principles from 'promise to assign' cases to existing patent transfers, resulting in a precedent that undermines state law regarding patent assignments. This precedent imposes unnecessary burdens on parties transferring patent rights in large business transactions, where choice of law provisions are crucial for ensuring that agreements reflect the parties' intentions. The district court found that the parties intended an earlier effective date for the patent transfer agreements, which is permissible under New York law. The panel majority, however, disregarded the chosen state law and the intent of the parties, potentially causing parties to lose standing in infringement actions despite owning the patents under state law. This ruling could allow infringers to evade liability based on technicalities regarding assignment agreements. The dissent argues that the majority's expansion of existing patent assignment rules significantly impacts the legal landscape and warrants en banc consideration, as the ruling diverges from established law and could disrupt intellectual property transfers.