Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-04089/USCOURTS-cand-3_16-cv-04089-0/pdf.json

Parties Involved:
RPX Corporation
Counter-claimant
Sourceprose Corporation
Counter-defendant

Document Text:

ORDER — No. 16-cv-04089-LB

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

San Francisco Division

SOURCEPROSE CORPORATION,

Plaintiff,

v.

RPX CORPORATION,

Defendant.

Case No. 16-cv-04089-LB 

ORDER GRANTING THE 

DEFENDANT’S MOTION TO DISMISS 

AND GRANTING LEAVE TO AMEND

Re: ECF No. 28

INTRODUCTION

This case concerns an oral agreement for the sale of patents.1SourceProse alleges that it and 

RPX entered an agreement under which SourceProse would sell several patents to RPX.2 But RPX 

allegedly backed out and refused to buy, resulting in an unfavorable settlement for SourceProse in 

a separate patent-infringement case.3

SourceProse then sued RPX and asserted breach-of-contract and promissory-estoppel claims.4

RPX now moves to dismiss, arguing that SourceProse’s claims allege an unenforceable oral patent 

 

1

See generally First Amended Compl. – ECF No. 25. Record citations refer to material in the 

Electronic Case File (“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of 

documents.

2

Id.

3

Id. ¶¶ 35–37.

4

Id. ¶¶ 38–51.

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 1 of 9
ORDER — No. 16-cv-04089-LB 2

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assignment and thus fail as a matter of law.

5

SourceProse dismisses its promissory-estoppel claim 

without prejudice but argues that its contract claim survives because the parties entered a valid 

agreement to assign the patents, not an assignment.

6

The court can decide the matter without oral argument and vacates the February 2, 2017 

hearing. See Civil L.R. 7-1(b). Because a patent assignment must be in writing, and because 

SourceProse inadequately pleads an agreement to assign, the court dismisses the contract claim but 

grants leave to amend.

STATEMENT

RPX, “the leading provider of patent[-]risk solutions,” buys “patents and patent rights and 

grants licenses to its clients to use the same.”7SourceProse owns several patents and, in 2011, 

sued five mobile-telephone carriers for patent infringement, including AT&T, MetroPCS, Sprint, 

T-Mobile, and Verizon.8Separately, Google sued SourceProse seeking a declaration that it was 

not infringing SourceProse’s patents.9The two patent cases were consolidated.10

Some defendants in the consolidated patent case were and are RPX’s clients.11 So RPX, 

through its Director of Acquisitions, approached SourceProse to discuss buying the patents and 

resolving the litigation.12 RPX called “to discuss [SourceProse] selling the Patents to [RPX],” 

which would then license the patents to its client (the patent-infringement defendants), mooting

that litigation. 13 The parties entered a nondisclosure agreement.14 They then met to discuss the 

 

5 Motion to Dismiss – ECF No. 28.

6

See Opposition – ECF No. 32 at 12.

7

FAC ¶ 8.

8

Id. ¶¶ 7, 9. 

9

Id. ¶ 10. 

10 Id. ¶ 11.

11 Id. ¶ 12.

12 Id. ¶ 13.

13 Id. ¶¶ 13, 16.

14 Id. ¶ 14.

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 2 of 9
ORDER — No. 16-cv-04089-LB 3

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transaction, during which SourceProse “agreed to all material terms of the agreement proposed by 

[RPX]” — except the price.15 RPX offered “$3 million to buy the Patents” but SourceProse 

demanded $4.2 million.16 The parties negotiated the price and, after a few weeks, SourceProse 

called and accepted the $3 million offer on the same terms as previously agreed.

17

RPX “acknowledged that an agreement had been reached between RPX and [] SourceProse 

with regard to selling the Patents, which would also resolve the Patent Litigation.”18 The parties 

discussed when to inform opposing counsel in the patent case: “[a]t [RPX]’s request, SourceProse 

agreed to refrain from making any announcements or filings” about the deal.19 SourceProse told

RPX, though, that it “would cease all further work on the Patent Litigation[ because it] could no 

longer continue the litigation” in light of the parties’ agreement.20 And it believed that it had an 

obligation to tell opposing counsel in the patent case about the agreement with RPX because it 

“had agreed to sell the Patents to RPX and settle” the case.

21 Indeed, SourceProse “no longer had 

the right to assert the claims made in the lawsuit.”22

SourceProse eventually told the opposing counsel that it entered “a confidential agreement 

with a third party” that would settle the case.23 It also said that it would “stand down on discovery 

and” work toward dismissing the case.24 But, two days later, RPX informed SourceProse that the 

parties did not have an agreement and that it did not intend to perform.25 RPX’s refusal to honor 

 

15 Id. ¶¶ 15–17.

16 Id. ¶¶ 16–17.

17 Id. ¶¶ 19–24.

18 Id. ¶ 25.

19 Id. ¶ 27.

20 Id. ¶ 28.

21 Id. ¶ 31.

22 Id.

23 Id. ¶ 33.

24 Id.

25 Id. ¶ 35.

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 3 of 9
ORDER — No. 16-cv-04089-LB 4

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the agreement “prejudiced SourceProse’s ability to continue the Patent Litigation” and resulted in 

a less-favorable settlement of that case.26

SourceProse therefore sued RPX. It alleged three claims in its First Amended Complaint 

(“FAC”): (1) breach of contract (nondisclosure agreement); (2) breach of contract (patent-sale

agreement); and (3) promissory estoppel. RPX moves to dismiss claims two and three.27

SourceProse agrees to dismiss its promissory-estoppel claim but opposes dismissal of its contract 

claim.

28

RULE 12(B)(6) LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of a 

“failure to state a claim upon which relief can be granted.” A dismissal under Rule 12(b)(6) may 

be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under 

a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 

2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

A complaint must contain a “short and plain statement of the claim showing that the pleader is 

entitled to relief” to give the defendant “fair notice” of what the claims are and the grounds upon 

which they rest. See Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 

(2007). A complaint does not need detailed factual allegations, but “a plaintiff’s obligation to 

provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a 

formulaic recitation of the elements of a cause of action will not do. Factual allegations must be 

enough to raise a claim for relief above the speculative level . . . .” Twombly, 550 U.S. at 555 

(internal citations omitted). 

To survive a motion to dismiss, a complaint must contain sufficient factual allegations, 

accepted as true, “‘to state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 

 

26 Id. ¶ 37.

27 See Motion to Dismiss.

28 See Opposition.

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 4 of 9
ORDER — No. 16-cv-04089-LB 5

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U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when 

the plaintiff pleads factual content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a 

‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted 

unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are 

‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and 

plausibility of ‘entitlement to relief.’’” Id. (quoting Twombly, 550 U.S. at 557).

If a court dismisses a complaint, it should give leave to amend unless the “the pleading could 

not possibly be cured by the allegation of other facts.” Cook, Perkiss and Liehe, Inc. v. Northern 

California Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990).

ANALYSIS

1. The Court Dismisses the Breach-of-Contract Claim (Claim Two)

SourceProse alleges that RPX breached the parties’ patent-sale agreement. The issue is 

whether SourceProse pleads an assignment of the patents (which must be in writing) or an 

agreement to assign the patents in the future (which need not be in writing). 

“A patent is a creature of federal statute and may be transferred only according to the terms of 

the patent statutes.” United States v. Solomon, 825 F.2d 1292, 1296 (9th Cir. 1987). Under those

statutes, patent assignments must be in writing. 35 U.S.C. § 261; Sky Techs. LLC v. SAP AG, 576 

F.3d 1374, 1379 (Fed. Cir. 2009); Solomon, 825 F.2d at 1296 (“[T]he necessity of a writing, like 

the necessity of an automobile certificate or a deed, to effect a valid transfer of a patent right has 

long been a matter of hornbook law.”). But “[a] contract to assign a patent is legally 

distinguishable from an assignment of a patent.” Id.; see also Arachnid, Inc. v. Merit Indus., Inc., 

939 F.2d 1574, 1580–81 (Fed. Cir. 1991) (distinguishing between an agreement to assign a patent 

in the future, which “may vest the promisee with equitable rights” in a patent, and an assignment, 

which grants legal title to a patent).

Unlike a patent assignment, an agreement to assign a patent — i.e. to assign a patent in the 

future — does not have a statutory basis and does not need to be in writing. See Univ. Patents, Inc. 

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 5 of 9
ORDER — No. 16-cv-04089-LB 6

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v. Kligman, 762 F. Supp. 1212, 1219 (E.D. Pa. 1991) (citing Lipscomb, Walker on Patents § 19:16 

(3d ed. 1986)). An oral agreement to assign a patent may therefore be enforceable: 

An oral agreement for the sale and assignment of the right to obtain a patent for an 

invention is not within the statute of frauds, nor within section 4898 of the Revised 

Statutes, requiring assignments of patents to be in writing, and may be specifically 

enforced in equity, upon sufficient proof thereof.

Dalzell v. Dueber Watch-Case Mfg. Co., 149 U.S. 315, 320 (1893). So, although “an assignment 

must be in writing, an agreement to assign may be oral.” 60 Am. Jur. 2d Patents § 895 (2016); 71 

Am. Jur. 2d Specific Performance § 178 (2016) (“Parol executory contracts to assign patent rights 

may also be enforced in equity although the statutes of the United States provide that the 

assignment itself must be in writing.”).

The parties agree that there is no written contract but dispute the type of agreement asserted in 

the FAC.

29 RPX asserts that SourceProse alleges an assignment which, absent a writing, is 

unenforceable.

30 But SourceProse argues that no writing was required because the FAC alleges an 

agreement to assign, not an assignment.

31 Accepting as true SourceProse’s position that it alleges 

(or intended to allege) an agreement to assign, it does so insufficiently. It must adequately plead 

the existence and terms of the agreement to put RPX on notice of the claim. In this case, that 

means identifying whether the agreement is an assignment or an agreement to assign. 

“To state a cause of action for breach of contract, it is absolutely essential to plead the terms of 

the contract either in haec verba or according to legal effect.” Langan v. United Servs. Auto. Ass’n, 

69 F. Supp. 3d 965, 979 (N.D. Cal. 2014) (quoting Twaite v. Allstate Ins. Co., 216 Cal. App. 3d 

239, 252 (1989)) (internal quotations omitted). “A plaintiff fails to sufficiently plead the terms of 

the contract if he does not allege in the complaint the terms of the contract or attach a copy of the 

contract to the complaint.” Id. “While it is unnecessary for a plaintiff to allege the terms of the 

alleged contract with precision, the Court must be able generally to discern at least what material 

obligation of the contract the defendant allegedly breached.” Id. (citation omitted).

 

29 See Opposition at 7, 11.

30 Motion to Dismiss at 11–13. 

31 See Opposition at 7, 11.

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 6 of 9
ORDER — No. 16-cv-04089-LB 7

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But here, the court cannot tell if the material obligation is the assignment of the patents or the 

promise to assign them in the future. The only identifiable term is that the parties allegedly agreed 

to the “sale” of the patents for $3 million. But the term “sale,” without identifying the timing of 

the transfer (i.e. immediately or in the future), is legally ambiguous in the context of assigning 

patent rights. See, e.g., DDB Techs., LLC v. MLB Advanced Media, L.P., 517 F.3d 1284 (Fed. Cir. 

2008) (“[W]hether an assignment of patent rights in an agreement such as the one in this case is 

automatic, requiring no further act on the part of the assignee, or merely a promise to assign 

depends on the contractual language.”); compare FilmTec Corp. v. Allied-Signal Inc., 939 F.2d 

1568, 1570 (Fed. Cir. 1991) (“agrees to grant and does hereby grant”), with Arachnid, 929 F.2d at 

1576 (“all rights . . . will be assigned”). This deficiency is evidenced by SourceProse’s postpleading assertion that the agreement would “ultimately” transfer the rights to RPX and its clients. 

The FAC does not contain such language indicating a future obligation instead of an immediate 

transfer.

It is clear that SourceProse believed the parties’ agreement would resolve the patent litigation. 

But it is not clear if this is because, as RPX argues, the alleged agreement immediately divested 

SourceProse of its interest in the patents, or merely because the parties agreed that SourceProse 

would, for example, dismiss the case.

32

Because the FAC ambiguously alleges the agreement’s terms, particularly in this patentassignment context, the court dismisses the breach-of-contract claim (claim two). As discussed 

below, however, the court grants leave to amend.

2. The Court Grants Leave to Amend

Under Federal Rule of Civil Procedure 15(a), leave to amend should be given freely “when 

justice so requires.” Fed. R. Civ. P. 15(a); see Sonoma Cnty. Ass’n of Retired Empls. v. Sonoma 

Cnty., 708 F.3d 1109, 1118 (9th Cir. 2013). Because “Rule 15 favors a liberal policy towards 

amendment, the nonmoving party bears the burden of demonstrating why leave to amend should 

 

32 See Reply – ECF No. 33 at 6; FAC ¶¶ 13, 16.

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ORDER — No. 16-cv-04089-LB 8

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not be granted.” Genentech, Inc. v. Abbott Labs., 127 F.R.D. 529, 530–31 (N.D. Cal. 1989).

Courts generally consider five factors when assessing the propriety of a motion for leave to 

amend: undue delay, bad faith, futility of amendment, prejudice to the opposing party, and 

whether the party has previously amended the pleadings. Ahlmeyer v. Nev. Sys. of Higher Educ.,

555 F.3d 1051, 1055 n.3 (9th Cir. 2009).

Here, SourceProse seeks to amend its complaint to: (1) add allegations in support of its current 

express-contract claim, and (2) assert a new implied-contract theory of recovery.

33 RPX argues in 

response only that amendment would be futile.34

First, the court grants SourceProse leave to amend its express-contract claim. RPX argues that 

leave should be denied because, under federal law, SourceProse cannot allege an enforceable oral 

assignment. But accepting for now that SourceProse’s claim is based on an agreement to assign, 

not an assignment, RPX has not shown that amendment to support that claim would be futile.

Second, the court grants leave to amend to allege an implied-in-fact contract. The court agrees 

with RPX that SourceProse’s cited implied-in-fact contract cases appear inapplicable. For 

example, SourceProse does not allege facts suggesting that the hired-to-invent doctrine applicable 

in employment relationships is workable here. See Teets v. Chromalloy Gas Turbine Corp., 83 

F.3d 403 (Fed. Cir. 1996); Univ. Patents, 762 F. Supp. 1212. The cases allowing transfer by 

operation of law similarly appear inapplicable to support SourceProse’s alleged agreement to 

assign. See Sky Techs., 576 F.3d at 1380 (allowing the transfer of a patent by foreclosure). But the

record does not clearly preclude SourceProse from alleging an implied-in-fact contract, either. The 

court prefers to address the issue in the context of an amended complaint and a fully briefed 

challenge.

 

33 See Opposition at 13.

34 Motion to Dismiss at 18–19; Reply at 2, 7–8.

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ORDER — No. 16-cv-04089-LB 9

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CONCLUSION

The court grants RPX’s motion to dismiss and dismisses SourceProse’s contract claim (claim 

two), but the court grants leave to amend. The court also dismisses SourceProse’s promissoryestoppel claim. SourceProse must file an amended complaint within fourteen days of this order. 

IT IS SO ORDERED.

Dated: January 26, 2017

______________________________________

LAUREL BEELER

United States Magistrate Judge

Case 3:16-cv-04089-LB Document 38 Filed 01/26/17 Page 9 of 9