Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_03-cv-05085/USCOURTS-cand-3_03-cv-05085-48/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:145 Patent Infringement

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

FRISKIT, INC.,

Plaintiff,

v.

REALNETWORKS, INC., et al.,

Defendants.

 /

NO. C 03-05085 WWS

ORDER RE MOTION TO

DISMISS

Defendants RealNetworks, Inc and Listen.com (“Real”) have moved to

dismiss this patent infringement action, contending that Plaintiff Friskit, Inc. does

not own the patents in suit. Ownership of a patent is a prerequisite to standing in

a patent infringement action. See Crown Die & Tool Co. v. Nye Tool & Mach.

Works, 261 U.S. 24, 34-42 (1923). 

Friskit is the assignee of Aviv Eyal, the inventor of the patented

technology. Eyal was employed by Microsoft Corporation from May 1998

through December 31, 1999. On January 24, 2000, Eyal and Friskit filed a

provisional application covering the patents in suit. Real contends that Eyal

developed the technology covered in the patents while he was still working for

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1 The employment agreement in addition contained moonlighting guidelines

establishing requirements governing outside work by Microsoft employees. While the

guidelines state that in case of failure to comply, “[u]nder the Assignment of Inventions

(continued...)

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Microsoft. It further contends that “Eyal’s employment agreement required him

to assign to Microsoft all rights in any inventions he created during the

employment,” and that therefore “Microsoft, not [Friskit], is the true owner of the

technology covered by the patents.”

The relevant provisions of the employment agreement state:

Assignment of Inventions. I will make prompt and full

disclosure to MICROSOFT, will hold in trust for the sole benefit of

MICROSOFT, and will assign exclusively to MICROSOFT all my

right, title, and interest in and to any and all inventions, discoveries,

designs, developments, improvements, copyrightable material, and

trade secrets (collectively herein “Inventions”) that I solely or jointly

may conceive, develop, author, reduce to practice or otherwise

produce during my employment with MICROSOFT. I waive and

quitclaim to MICROSOFT any and all claims of any nature

whatsoever that I now or hereafter may have for infringement of any

patent application, patent, or other intellectual property right relating

to any Invention so assigned to MICROSOFT.

My obligation to assign shall not apply to any

Invention about which I can prove the following:

a) it was developed entirely on my own time;

b) no equipment, supplies, facility, services, or trade

secret information of MICROSOFT were named

in its development;

c) it does not relate (i) directly to the business of

MICROSOFT or (ii) to the actual or demonstrably

anticipated business, research or development of

MICROSOFT; and

d) it does not result from any work performed by me for

MICROSOFT.

The employment agreement also contained a “Best Efforts/Conflicting

Interest/Moonlighting” clause, which states:

Best Efforts/Conflicting Interest/Moonlighting. I will diligently

perform my assigned duties and devote my entire working time,

abilities and efforts to such duties and to furthering the best interests

of MICROSOFT. During my employment, I will not engage in any

activity of investment that (a) conflicts with MICROSOFT’s

business interests, (b) occupies my attention so as to interfere with

the proper and efficient performance of my duties for MICROSOFT,

or (c) interferes with the independent exercise of my judgment in

MICROSOFT’s best interests.1

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1

(...continued)

section of the employment agreement, [Microsoft] will own your work,” they add

nothing to the terms of the agreement. 

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For the purposes of this motion, it is not necessary to determine whether

conception of the inventions occurred while Eyal was at Microsoft, or whether

the employment agreement applies to the conceived inventions. Nor is it

necessary to determine whether he violated any obligations to Microsoft imposed

by the employment agreement. What matters is whether he assigned his

inventions to Microsoft. In the absence of an assignment, Microsoft is not the

owner and Eyal therefore was free to assign his inventions to Friskit.

The plain words of the assignment clause state that Eyal “will assign

exclusively to Microsoft” any inventions developed during his employment with

Microsoft. (Emphasis added.) The agreement is not written as an assignment

instrument of prospective inventions. It simply obligates Eyal to assign his

inventions. It is not claimed–by Real or by Microsoft–that he ever made an

assignment. This may have been a breach of the terms of the agreement, but it

does not give Real standing to claim that Microsoft owns the patents when

Microsoft has itself never made such a claim.

Arachnid Inc. v. Merit Industries, 939 F.2d 1874 (Fed. Cir. 1991), is

squarely on point. There, a consulting agreement included a similar provision,

which the court concluded “was an agreement to assign, not an assignment.” Id.

at 1580.

Its provision that all rights to inventions developed during the

consulting period “will be assigned” by IDEA to Arachnid does not

rise to the level of a present assignment of an existing invention,

effective to transfer all legal and equitable rights therein to Arachnid

and extinguish any rights of IDEA. Nor does the provision amount

to a present assignment of an expectant interest. See Filmtec Corp.

v. Allied-Signal Inc., 939 F.2d 1568, 1572 (1991). Although an

agreement to assign in the future inventions not yet developed may

vest the promisee with equitable rights in those inventions once

made, such an agreement does not by itself vest legal title to patents

on the inventions in the promisee: 

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The legal title to an invention can pass to another only

by a conveyance which operates upon the thing invented

after it has become capable of being made the subject of

an application for a patent.

Id. at 1580-81 (quoting G. Curtis, A Treatise on the Law of Patents § 170 (4th ed.

1873)).

This case is not like Pinpoint, Inc. v. Amazon.com, Inc., 347 F. Supp. 2d

579, 582 (N.D. Ill. 2004), in which the invention was developed under a

sponsored research agreement which provided that inventions created pursuant to

the agreement shall be the property of the University. Pinpoint, moreover, lends

no support to a claim by a third party asserting ownership in the promisee for the

benefit of the third party.

Real contends that even if the agreement did not assign the inventions to

Microsoft, Microsoft still has equitable rights to the patent. Accordingly, Real

argues, Friskit does not have “all substantial rights” to the patent, and cannot

bring an action for infringement. See Aspex Eyewear Inc. v. Miracle Optics, Inc.,

434 F.3d 1336, 1342 (Fed. Cir. 2006). Aspex Eyewear is not applicable, as it

dealt with whether the temporary transfer of various legal rights was sufficient to

transfer legal ownership, or created only a license. Id. at 1342-43. Here, even if

Microsoft had some equitable rights to the patent, Friskit holds all of the legal

ownership rights, including the right to sue for infringement. Mas-Hamilton

Group v. LaGard, Inc., 156 F.3d 1206, 1210 (Fed. Cir. 1998) (“only the holder of

legal title to a patent at the time of the infringement can bring an action for

damages resulting from that infringement”). 

Finally, even assuming that the employment agreement did apply and that

Eyal breached his obligations to Microsoft by assigning ownership to Friskit,

Real cannot sue to enforce those obligations. Nothing in the agreement suggests

that the parties intended it to benefit Real or similarly situated parties, or to

govern ownership issues raised by a third party. Its intent was to serve the mutual

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interests of the parties to the employment relationship: Microsoft’s interest in the

loyalty of its employees and Eyal’s interest in being free from arbitrary restraint

on his professional freedom. Real is, at best, only an incidental beneficiary of the

employment agreement and, accordingly, lacks standing to sue for enforcement of

the agreement. See Castle v. United States, 301 F.3d 1328, 1339 (Fed. Cir.

2002); Coast Trading Co., Inc. v. Parmac, Inc., 587 P.2d 1071, 1076 (Wash. App.

1978). 

Accordingly, the motion to dismiss for lack of subject matter jurisdiction is

DENIED.

SO ORDERED.

DATED: July 6, 2006 ______________________________________

WILLIAM W SCHWARZER

SENIOR UNITED STATES DISTRICT JUDGE

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