In Sky Technologies LLC v. SAP AG and SAP AMERICA, INC., the United States Court of Appeals for the Federal Circuit held that a writing is not required under the Federal Patent Act to transfer ownership of patent rights pursuant to foreclosure.
In Sky Technologies, security interests in a certain portfolio of patents (the Patents) were granted to a lender as collateral for a number of loans. When the borrower defaulted under the loans, Cross Atlantic Capital Partners (XACP), the holder of the security interests, foreclosed on those interests in conformity with Massachusetts' Uniform Commercial Code (UCC). XACP purchased all rights to the Patents at the public sale under the UCC and subsequently assigned those rights to Sky Technologies, LLC (Sky) by written assignment.
Sky later filed a patent infringement suit against SAP AG and SAP America, Inc. (SAP) in the Eastern District of Texas. SAP moved to dismiss the complaint on the ground that Sky lacked standing. SAP argued that the Federal Patent Act requires a writing to assign patent rights and absent a written assignment, XACP did not have valid title to assign to Sky. The court denied the motion, holding that the Patent rights were transferred on the date of the foreclosure sale by operation of law, and no written assignment was necessary.
On appeal, the Circuit Court of Appeals affirmed the order of the District Court, holding that Akazawa v. Link New Technology International, Inc. was controlling and a writing was not necessary to transfer ownership of patent rights through foreclosure sale. In Akazawa, the Federal Circuit Court held that patent rights may be transferred by operation of law. 520 F.3d 1354, 1356 (Fed. Cir. 2008). Although the Federal Patent Act requires that all assignments are in writing, the Akazawa court held that if an assignment does not occur the writing requirement is not triggered. Id.; 35 U.S.C. § 261 (2006). The Court in Sky Technologies held that Sky, as purchaser at the foreclosure sale, obtained valid title to the Patents by operation of law. No assignment occurred, and therefore no writing was required by the Federal Patent Act.
This case is significant for holders of a security interest in intellectual property who find themselves foreclosing on that interest. If a secured party forecloses on its interest in intellectual property, title passes to the secured party by operation of law following a foreclosure sale without the need for a written assignment.
SAP AG and SAP America, Inc. have filed a writ of certiorari requesting that the Supreme Court of United States of America review the transfer of ownership issues raised in this case.