Court Opinion

ID: 884791
Source: CourtListenerOpinion
Date Created: 2013-06-05 03:16:18.546062+00
Date Added: 2024-06-11T09:07:59.108269
License: Public Domain

97-315

                                                                              No. 97-315

                                              IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                                              1998 MT 41

                                                                     BILLY B. MILLHOLLIN,

                                                                 Plaintiff and Appellant,

                                                                                      v.

                                                                    THE CONVEYOR COMPANY,

                                                                Defendant and Respondent.

                           APPEAL FROM:           District Court of the Sixteenth Judicial District,
                                                    In and for the County of Rosebud,
                                              The Honorable Joe L. Hegel, Judge presiding.

                                                                       COUNSEL OF RECORD:

                                                                          For Appellant:

                                      Richard C. Conover, Attorney at Law, Bozeman, Montana

                                       A. Lance Tonn; Lucas & Monaghan, Miles City, Montana

                                                                         For Respondent:

                              Neil G. Westesen; Crowley, Haughey, Hanson, Toole & Dietrich,
                                                    Billings, Montana

                                                     Submitted on Briefs: October 16, 1997

                                                             Decided:             February 24, 1998
                                                                                  Filed:

                                                __________________________________________
                                                                   Clerk

                                  Justice Karla M. Gray delivered the Opinion of the Court.

¶1   Billy B. Millhollin (Millhollin) appeals from the judgment entered by the Sixteenth
Judicial District Court, Rosebud County, on its order granting the motion for summary
judgment filed by The Conveyor Company (TCC) and denying his summary judgment
motion. We affirm.

¶2        The dispositive issue on appeal is whether the District Court erred in concluding that

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (1 of 7)4/20/2007 2:52:34 PM
 97-315

TCC did not breach its contract with Millhollin and in granting TCC's motion for summary
judgment on that basis.

                                                  BACKGROUND

¶3   Millhollin invented a device for aligning conveyor belts which he called a Conveyor
Belt Return Training Device (Belt Trapper). He applied for a United States patent for the
invention in 1991, and the patent was issued on April 27, 1993.

¶4   In 1992, Millhollin and TCC entered into an Agreement regarding the Belt Trapper.
Millhollin granted TCC the exclusive right to make, use and sell the Belt Trapper in both the
United States and foreign countries and, in return, TCC agreed to pay Millhollin a royalty
on each Belt Trapper it sold, plus a percentage of the price of all replacement parts and
accessories it sold, with a guaranteed minimum payment to Millhollin in each of the first five
years covered by the Agreement. During both the United States patent application process
and the negotiation of the Agreement, Millhollin was represented by Bozeman attorney
Richard Conover (Conover).

¶5   Article VI of the Agreement gave TCC the right to pursue additional patent
applications, both foreign and domestic, at its own expense. In the event TCC chose not to
file any patent applications, Millhollin retained the right to do so at his own expense. The
Agreement further required TCC to assign any patent applications it filed to Millhollin.

¶6   TCC decided to file foreign patent applications for the Belt Trapper in Europe and
Canada. It requested Conover to file the applications because of his familiarity with the
earlier United States patent application. Conover filed the requested European and Canadian
patent applications and TCC paid the fees and expenses he incurred. Eventually, however,
TCC decided to use a different attorney to pursue the foreign patent applications because it
believed the fees and expenses charged by Conover were too high. TCC informed Conover
of its decision to terminate his services via a letter which also stated that a check for the
balance due him was being sent to its corporate attorney, Robert Dwyer (Dwyer), who would
forward the check to Conover after TCC received all of the files pertaining to the foreign
patent applications from Conover. Acting on instructions from Millhollin, Conover refused
to turn the patent application files over to TCC. As a result, Dwyer did not forward payment
for the remainder of Conover's bill.

¶7   Millhollin subsequently sent TCC a written notice of default which asserted that TCC
was in breach of Article VI of the Agreement by failing to pay the expenses incurred in its
pursuit of the foreign patent applications; the notice gave TCC 30 days to remedy the alleged
breach by paying Conover's bill in full. Because the patent application files still had not
been received from Conover, TCC did not make payment within 30 days.

¶8   Thereafter, Millhollin declared that the Agreement was terminated, pursuant to Article
XII, and filed this declaratory judgment action requesting the District Court to declare that
the Agreement was properly terminated. He also requested an award of damages, including
reimbursement of the amount he paid Conover for the patent application-related expenses
which TCC had not paid.

¶9   TCC and Millhollin both moved for summary judgment. The District Court granted
TCC's motion and denied Millhollin's, concluding that TCC had not breached the Agreement
and that, even if a breach had occurred, it was not sufficiently material to justify termination
of the Agreement. Judgment was entered and Millhollin appeals.

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (2 of 7)4/20/2007 2:52:34 PM
 97-315

                                                                       STANDARD OF REVIEW

¶10 We review a district court's summary judgment ruling de novo, using the same Rule
56, M.R.Civ.P., criteria as the district court. Clark v. Eagle Systems, Inc. (1996), 279 Mont.
279, 283, 927 P.2d 995, 997 (citations omitted). Pursuant to Rule 56(c), M.R.Civ.P., the
moving party must establish, in light of the pleadings and other evidence before the court,
the absence of any genuine issue of material fact and entitlement to judgment as a matter of
law. Clark, 927 P.2d at 997-98 (citations omitted). Only when this initial burden has been
met must the nonmoving party come forward with evidence raising a genuine issue of
material fact. Clark, 927 P.2d at 998.

¶11 Ordinarily, our review in summary judgment cases begins with a determination of
whether the moving party established the absence of disputed and material fact issues. See,
e.g., Montana Metal Buildings, Inc. v. Shapiro (Mont. 1997), 942 P.2d 694, 696-97, 54
St.Rep. 731, 732. Here, however, Millhollin does not contend that a genuine issue of
material fact exists. He argues only that the District Court erred in concluding that TCC did
not breach the Agreement and that it was entitled to summary judgment on that basis. We
review a district court's conclusions of law to determine whether those conclusions are
correct. Albright v. State, by and through State (1997), 281 Mont. 196, 205, 933 P.2d 815,
821.

                                  DISCUSSION
¶12             Did the District Court err in concluding that TCC did not breach its
                contract with Millhollin and in granting TCC's motion for summary
                judgment on that basis?

¶13 In concluding that TCC did not breach the Agreement, the District Court determined
that Article VI of the Agreement granted TCC the primary right to pursue the foreign patent
applications, which right necessarily included the right to possession of the files created by
an attorney, at TCC's expense and direction, during the patent application process. On that
basis, the District Court concluded that TCC "had the right to legally tender payment to
attorney Conover conditioned on receipt of the files for which it had paid" and that this
conditional tender of payment was not a breach of the Agreement between TCC and
Millhollin.

¶14 Millhollin raises several arguments in support of his overall contention that the
District Court's conclusions were erroneous. He first argues that TCC's tender of payment
was not legally sufficient to avoid breaching the Agreement because a tender of payment in
fulfillment of a contractual obligation cannot be qualified or conditional. His underlying
legal premise, however, is incorrect. A tender of payment may be conditional as long as the
attached condition is one on which the tenderer has the right to insist. See § 28-1-1211,
MCA; Advance-Rumely Thresher Co., Inc. v. Hess (1929), 85 Mont. 293, 301, 279 P. 236,
238; 74 Am. Jur. 2d Tender   24 (1974). Thus, whether TCC's conditional tender of
payment to Conover was sufficient to avoid breaching the Agreement depends on whether
TCC had the right to insist that Conover deliver the patent application files to TCC, and this
question leads directly to Millhollin's second assertion of error regarding the District Court's
conclusion that TCC did not breach the Agreement.

¶15 Millhollin asserts that, as the inventor of the Belt Trapper, he retains complete
ownership of the invention, the patent applications and the patent application files and,
because of his sole ownership, TCC had no right to possession of the files. Thus, he
contends that TCC did not have the right to insist on delivery of the foreign patent
application files as a condition of its paying the outstanding fees and expenses related thereto

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (3 of 7)4/20/2007 2:52:34 PM
 97-315

and, as a result, TCC's conditional tender of payment was not sufficient to avoid breaching
the Agreement. We disagree.

¶16 Prior to obtaining a patent on an invention, an inventor possesses inchoate rights to
the exclusive use of the invention and to apply for a patent thereon. Hendrie v. Sayles
(1878), 98 U.S. (8 Otto) 546, 551, 25 L. Ed. 176, 178; Gayler v. Wilder (1850), 51 U.S. (10
How.) 466, 467, 13 L. Ed. 504, 511. Once obtained, a patent confers upon the patentee the
right to exclude others from manufacturing, using or selling the invention during the life of
the patent. 35 U.S.C. § 154; Bell Intercontinental Corp. v. United States (Ct. Cl. 1967), 381
F.2d 1004, 1010. A patent has the attributes of personal property and is owned by the holder
of the patent. 35 U.S.C. § 261; see, also, Cammeyer v. Newton (1876), 94 U.S. (4 Otto) 225,
226, 24 L. Ed. 72, 72.

¶17 However, an inventor may assign ownership of an invention, a patent or a patent
application to another. See 35 U.S.C. § 261; Kenyon v. Automatic Instrument Co. (6th Cir.
1947), 160 F.2d 878, 882. For an agreement to constitute an assignment granting ownership
title to an invention or patent, it must confer on the assignee the rights to make, use and sell
the invention. Kenyon, 160 F.2d at 882. In other words, the agreement must indicate the
inventor's intent to transfer all of his or her substantial rights in the invention to the
assignee.
Bell Intercontinental, 381 F.2d at 1011. A transfer by the inventor of anything less than the
full rights to make, use and sell an invention constitutes only a license and does not give the
licensee any ownership title in the invention or patent. Kenyon, 160 F.2d at 882.

¶18   Millhollin asserts that his Agreement with TCC is merely a license granting TCC the
right to use the Belt Trapper, rather than an assignment transferring ownership of the
invention and related patents to TCC. We note that Millhollin refers to the Agreement as the
"License Agreement" in an attempt to buttress his argument. However, the document at issue
here is clearly entitled "Agreement" and not "License Agreement."

¶19       Moreover,
          whether the transfer of an interest or right under a patent is an assignment or
          a license, does not depend upon the name by which it is called, but upon the
          legal effect of its provisions. No particular form is required for an assignment
          but the instrument of transfer must be unambiguous and show a clear and
          unmistakable intent to part with the patent.

Kenyon, 160 F.2d at 882 (citing Waterman v. MacKenzie (1891), 138 U.S. 252, 256, 11
S. Ct. 334, 335, 34 L. Ed. 923, 925-26). Thus, a contract which conveys the right to make,
use and sell an invention for the entire term of the patent is an assignment vesting title to
the
entire patent in the assignee without regard to its heading as a "license contract." Kenyon,
160 F.2d at 883. Consequently, Millhollin's references to the Agreement as a "License
Agreement" do not establish that it created a license rather than an assignment of title; nor
does the fact that the Agreement itself repeatedly refers to the "Licensed Product" establish
that it is a mere license. Rather, the extent of the rights conferred under the Agreement is
determinative.

¶20 While language in an agreement by which an inventor grants exclusive rights to make,
use and sell an invention is the primary indicator of an inventor's intent to assign ownership
of an invention or patent, there are additional factors which are indicative of an intent to
assign ownership. For example, an inventor's conveyance of the right to sue patent infringers
is a fundamental characteristic of an assignment. Sybron Transition v. Nixon, Hargrave, et
al. (W.D.N.Y. 1991), 770 F. Supp. 803, 808 (citing Waterman, 138 U.S. at 255). A transfer

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (4 of 7)4/20/2007 2:52:34 PM
 97-315

of the right to manufacture, use and sell an invention for the full term of the patent on that
invention, rather than a transfer for a period less than the remaining life of the patent, also
is indicative an assignment rather than a mere license to use. Bell Intercontinental, 381 F.2d
at 1020. Further, an agreement which does not allow the grantor to terminate at will prior
to the expiration of the patent indicates that the grantor intends an assignment of the
invention or patent. Bell Intercontinental, 381 F.2d at 1022. Retention by the grantor of the
right to terminate the agreement upon the grantee's default or the occurrence of some other
subsequent event beyond the grantor's control, however, is not inconsistent with an
assignment of ownership. Bell Intercontinental, 381 F.2d at 1011.

¶21 With these considerations in mind, we examine the Agreement here to determine the
extent of the rights conferred by Millhollin to TCC. Of primary note is Article II of the
Agreement, where Millhollin "hereby grants to [TCC] the exclusive rights to make, use and
sell the [Belt Trapper] in the United States and throughout the world." The Agreement also
provides, in Article VII, that the Agreement will "continue in effect until the last
patent . . .
obtained anywhere in the world and covering the [Belt Trapper] expires." Along the same
lines, Article XI grants TCC the rights to bring patent infringement lawsuits, to have
exclusive control over prosecuting infringement suits and to retain all proceeds resulting
from any infringement suits. Finally, the Agreement provides that it may not be terminated
by either Millhollin or TCC except upon a failure by the other party to fulfill obligations
under the Agreement or upon the occurrence of either of two specified events which are not
at issue in this case.

¶22 Millhollin's grant to TCC of the exclusive right to make, use and sell the Belt Trapper
for the entire term of any patents on the invention, combined with the grant of the right to
bring patent infringement suits and Millhollin's failure to retain a right to terminate the
Agreement at his discretion, manifests an intent by Millhollin to "surrender all his substantial
rights to the invention" and assign those rights to TCC. See Bell Intercontinental, 381 F.2d
at 1011. Indeed, in Bell Intercontinental, one of the agreements at issue contained provisions
nearly identical to the Agreement here in that it granted the exclusive right to manufacture,
use and sell the invention, the agreement was to continue until the expiration of the last
patent that might issue on the invention, the grantee had the right to bring patent infringement
suits and retain any recovery from such suits, and the grantor had no unilateral right to
terminate the agreement. Bell Intercontinental, 381 F.2d at 1011-13. There, the United
States Court of Claims determined that the grantor had divested itself of all control and
ownership in the invention and assigned ownership of the invention to the grantee for the life
of all patents issued thereon. Bell Intercontinental, 381 F.2d at 1013. Here, based on the
terms of the Agreement before us, we conclude that Millhollin similarly assigned his
ownership of the Belt Trapper to TCC.

¶23 Millhollin's assignment to TCC of the ownership of the Belt Trapper has two
significant results. First, when ownership rights to an invention are assigned prior to
obtaining a patent thereon, the assignee will receive the legal title to the patent when it is
subsequently issued. Filmtec Corp. v. Allied-Signal, Inc. (Fed. Cir. 1991), 939 F.2d 1568,
1572 (citing Gayler, 51 U.S. at 467). Thus, when the United States patent on the Belt
Trapper was granted in April of 1993, legal title to that patent vested in TCC. Additionally,
Millhollin's assignment to TCC of his entire interest in the Belt Trapper carried with it the
inchoate right to file patent applications on the invention, even absent any corresponding
provision in the Agreement. See Toner v. Sobelman (E.D. Pa. 1949), 86 F. Supp. 369, 380
(citations omitted). Consequently, Millhollin has not only assigned ownership of the Belt
Trapper to TCC, he has also divested himself of control and ownership of the patents and
patent applications related to the Belt Trapper.

¶24       As additional support for his argument that he retained complete ownership of the Belt

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (5 of 7)4/20/2007 2:52:34 PM
 97-315

Trapper, the patents and the patent applications, Millhollin points out that Article VI,
Paragraph B of the Agreement provides that all patent applications filed by TCC shall be
assigned to Millhollin. However, the fact that the patent applications "shall be assigned" to
him does not support his assertion that he "retained" ownership of the patent applications.
Rather, the term "shall be assigned" connotes a present ownership of the applications in TCC
and only a future ownership in Millhollin. Indeed, the patent applications had not been
assigned to Millhollin at the time the dispute at issue here arose.

¶25 Millhollin's argument in this regard is also unpersuasive in light of Article XII,
Paragraph D of the Agreement, which provides that, in the event the Agreement is terminated
as a result of a default by TCC, TCC shall assign to Millhollin, among other things, all
patents and patent applications pertaining to the Belt Trapper. Again, the provision that TCC
"shall assign" the patent applications to Millhollin implies that TCC is the present owner of
the applications. Absent an assignment to Millhollin, TCC retains its ownership interest in,
and control over the prosecution of, the patent applications.

¶26 We conclude that the terms of the Agreement between TCC and Millhollin constituted
an assignment to TCC of the ownership rights in the patent applications at issue here and that
TCC accordingly maintained full control over the manner in which the applications were
pursued. As a result, Millhollin's argument that TCC had no right to insist on possession of
the application files, based on his erroneous assertion that he owned the patent applications
and related files, fails. On this basis, we further conclude that the District Court did not
err
in determining that TCC had the right to tender payment to Conover conditioned on Conover
delivering possession of the application files to which it was entitled to TCC.

¶27 Most of Millhollin's remaining arguments in support of his assertions of error by the
District Court are premised on his flawed contention that he maintained ownership of the
patent applications and related files. As a result of our conclusion that Millhollin has
assigned ownership of the Belt Trapper, the existing United States patent and all patent
applications to TCC, we need not address those arguments.

¶28 Millhollin's final argument is that the application files could not be turned over to
Dwyer, TCC's corporate attorney, without Millhollin's permission because transferring the
files would have created a serious conflict of interest for Dwyer. Millhollin contends that,
if the files were given to Dwyer to complete the patent application process, Dwyer would be
required to act in a dual representative capacity as an attorney for both TCC and Millhollin,
which could not be allowed without Millhollin's consent. Millhollin did not raise this
argument in the District Court and, as a result, we decline to address it on appeal. See Matter
of R.B.O. (1996), 277 Mont. 272, 283, 921 P.2d 268, 274.

¶29 We conclude that Millhollin has failed to establish any error in the District Court's
determination that TCC had the right to tender payment of the amount due to Conover
conditioned on Conover delivering possession of the patent application files to TCC. We
hold, therefore, that the District Court did not err in concluding that TCC did not breach the
Agreement with Millhollin and in granting TCC's motion for summary judgment on that
basis.

¶30       Affirmed.

                                                      /S/      KARLA M. GRAY

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (6 of 7)4/20/2007 2:52:34 PM
 97-315

We concur:

/S/       J. A. TURNAGE
/S/       JAMES C. NELSON
/S/       TERRY N. TRIEWEILER
/S/       W. WILLIAM LEAPHART

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-315%20Opinion.htm (7 of 7)4/20/2007 2:52:34 PM