Assignment of Patent not Prevented by Non-assignability of Exclusive Licence to the Patent

On September 28, 2016, in AU New Haven, LLC and Trelleborg Coated Systems US, Inc v YKK Corporation, the Southern District Court of New York found that in specific circumstances, the owners of a patent have standing to sue licensees for patent infringement when those licensees refuse to provide consent to transfer the licence agreement to a new patent owner.

The facts of the case involve a licensee, YKK Corp, which had negotiated an exclusive licence to manufacture patented zippers in exchange for a royalty on sales.  Ownership of the patent and licensor’s rights were subsequently assigned through a series of transfers, and ultimately acquired by Au New Haven, LLC which then assigned its rights to Trelleborg Coated Systems US, Inc (together “the Plaintiffs”), who sued YKK and its affiliates for patent infringement.  YKK challenged the Plaintiffs’ standing to sue because YKK had refused to consent to the assignment to Au New Haven, LLC.

The licence agreement stipulated that “[n]either party hereto shall assign … this Agreement…without the prior written consent of the other party. Any such attempted assignment … shall be void and have no force or effect.”

The licensee, YKK, argued that since the attempted assignment of the patent was done without consent, it was not an effective assignment, and thus the Plaintiffs did not own the patent, meaning the Plaintiffs had no right to sue for infringement of that patent.

In rejecting YKK Corp’s argument, the Court found that the clause did not prevent assignments of the underlying patent or render assignments of the patent invalid, since the clause only prohibited assignments of the agreement, and it did not specifically mention the assignment of the patent itself.

Accordingly, the transfer of the patent (even though it was done without YKK’s consent) was valid, meaning the Plaintiffs had the right to sue for infringement of that patent.

Additional commentary is available here.