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Freeland v. HPA Asset, LLC

Citation: 35 F. App'x 874Docket: No. 01-1610

Court: Court of Appeals for the Federal Circuit; April 24, 2002; Federal Appellate Court

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Daniel L. Freeland and the Rosby Corporation appeal a district court decision that awarded ownership of U.S. Patent No. 5,112,099 to HPA Asset, LLC. The Circuit Judge found that the district court misinterpreted the contract language and therefore reversed the decision and remanded the case. The dispute originated from the bankruptcy of Monon Corporation and Monon Trailer, Inc. in 1996, at which point their assets, including patents, were auctioned to HPA for $14 million. The Purchase Agreement included a provision that HPA acquired all rights to assets held or used by Monon, but also outlined certain 'Excluded Assets' that would not be sold, specifically mentioning patents owned by Rosby Corporation.

At the time of the bankruptcy, Thomas Rosby claimed that Rosby Corporation owned the '099 patent, not Monon, and was the registered owner of the patent when the Purchase Agreement was executed. To mitigate risk regarding Rosby's ownership claim, HPA simultaneously executed a License Agreement with Rosby Corporation, stipulating royalties for the use of the '099 patent. After Monon's bankruptcy, the bankruptcy estate, managed by Freeland, filed a lawsuit against HPA for unpaid royalties but was dismissed for lack of jurisdiction. A subsequent suit against Rosby led to a settlement where Rosby Corporation acknowledged the bankruptcy estate as the true owner of the '099 patent and agreed to transfer all rights to the Trustee.

The bankruptcy court approved a settlement agreement on September 17, 1999, in which Rosby signed a 'Notice of True Owner of Patent' declaring Monon Corporation as the 'true owner' of the '099 patent. This notice was filed with the PTO. Following this, the Trustee initiated a lawsuit against HPA for breach of license and patent infringement. HPA counterclaimed, asserting ownership of the '099 patent. In a summary judgment motion, the district court ruled in favor of HPA, dismissing the other claims as moot. The court determined that the essential question was patent ownership as of the 1997 Purchase Agreement and concluded that the agreement transferred Monon's patents to HPA, excluding those owned by Rosby. The court also deemed Rosby’s statement regarding Monon’s ownership of the '099 patent a binding judicial admission, affirming that the ownership had always been with Monon and correctly transferred to HPA under Section 2.1 of the Purchase Agreement. The Trustee and Rosby Corporation appealed. The appellate review confirmed that summary judgment is appropriate when no genuine issues of material fact exist, and it emphasized parties' intent in contract interpretation per Indiana law. HPA argued the Purchase Agreement allows for two scenarios regarding the '099 patent's ownership, which are inconsistent with Section 2.2(1) that addresses patents of unclear title. This section implies a third category of patents, suggesting the '099 patent falls under disputed ownership. The settlement agreement and Notice of True Owner were interpreted as resolving the ownership dispute, establishing the basis for the licensing provision rather than an admission of ownership by Monon.

The court rejects HPA’s interpretation of the contract, asserting that it would render the licensing provision in Section 2.2(1) meaningless. It confirms that the Trustee holds equitable title to the '099 patent and claims ownership free of any license. The Trustee argues that the Purchase Agreement's reference to a license "on terms and conditions substantially similar to those" in the agreement between Rosby Corporation and HPA lacks sufficient specificity to define the licensing conditions, characterizing it as merely an agreement to agree. The court disagrees, noting that the existing license between Rosby Corporation and HPA outlines clear terms, including royalties and sublicensing conditions. Consequently, the court determines that the '099 patent is indeed subject to a license to HPA as per the terms outlined in the Rosby-HPA license. The case is reversed and remanded for further proceedings consistent with this ruling, with no costs awarded.