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Divorce and IP: Untying the knot may tie up patent rights

Jason Schwent March 10, 2011

Divorce is not normally something that IP lawyers consider in their day-to-day work. Recent case law, however, has shown that divorce should, perhaps, be given greater thought. Counsel, whether in-house or outside counsel, must account for the possible impact of divorce on patent ownership rights or face potentially disastrous consequences. The Federal Circuit recently dealt with the issue of divorce and patent ownership in the case of Enovsys, LLC v. Nextel Comm’n., Inc[1]. 

The plaintiff in Enovsys narrowly avoided losing an almost $3 million infringement judgment when the Federal Circuit found that the patents-in-suit were marital community property. In light of the Federal Circuit’s findings in Enovsys, it would behoove all counsel to account for the effect of divorce on the ownership of intellectual property rights in both patent right transfers and litigation or face potentially dire consequences. 

In the Enovsys case, Enovsys sued Sprint-Nextel for allegedly infringing two patents co-invented by one of Enovsys’ owners, Mundi Fomukong. Among the usual defenses of invalidity and non-infringement, Sprint-Nextel claimed that the case should have been dismissed for a lack of standing because Enovsys had failed to join Fomukong’s ex-wife — a party Sprint-Nextel regarded as a part owner of the patents-in-suit. 

At the time he filed the patent applications for the patents-in-suit, Fomukong was married to Fonda Whitfield. After divorcing his wife, Fomukong and his co-inventor assigned their rights in the two patents-in-suit to Enovsys. Sprint-Nextel claimed that the patents-in-suit were community property created during the marriage and, under California law, Fomukong’s ex-wife was a joint owner of those patents. According to Sprint-Nextel, by bringing suit without joining all holders of legal title, Enovsys lacked standing. The district court disagreed and Sprint-Nextel was ultimately found liable for patent infringement. 

On appeal, the Federal Circuit, applying California law, concluded that, because the patents were marital property acquired during the marriage, they were presumptively jointly owned by Fumokong and his wife. 

Had there been no further facts, Fomukong’s wife would have held an undivided ownership interest in the patents-in-suit. And because his ex-wife assigned her interest in the patents to Sprint-Nextel, Enovsys would have been out the $2.78 million it had been awarded for SprintNextel’s infringement. 

Unfortunately for Sprint-Nextel, there were additional facts. During Fomukong’s summary divorce proceedings[2], both Fomukong and his wife affirmed that they had no joint marital property. Thus, the California divorce judgment had concluded that there was no marital community property. Fomukong’s wife was therefore estopped from later arguing that she was a joint owner of the patents-in-suit and Sprint-Nextel (in privity thanks to the agreement with Fomukon’s ex-wife assigning her patent rights) was barred by res judicata from relitigating Fomukong’s ex-wife’s property rights in the Enovsys patent litigation. 

While Enovsys ultimately prevailed in its litigation with Sprint-Nextel, the more important takeaway from the case is that the result could have been far different. In community property states[3] like California, Fomukong’s ex-wife gained an undivided ownership interest in his patents simply by being married to him at the time the patent applications were filed. Had she not later chosen to pursue a California quickie divorce — a divorce which did not specifically address any patent ownership rights —  she could have easily retained that ownership interest. 

At a minimum, counsel would be wise to consider community property rights as they relate to patent ownership. In community property states (or when dealing with inventors from community property states), counsel should inquire with assignors about the marital status of inventors before executing assignments and require assignments from not just inventors but also inventor spouses. Counsel should also ensure that marital status is investigated prior to (or during) litigation to make sure that the plaintiff has the patent rights it claims. 

Ultimately, an ounce of investigation and due diligence will be worth far more than a pound of effort in trying to clean up a patent ownership issue during litigation or a merger or acquisition. 

[1] 614 F.3d 1333 (Fed. Cir. 2010). 

[2] In California, couples may obtain a streamlined summary dissolution of their marriage if they meet certain requirements. Specifically, the couple must either (1) have no community property, or (2) have signed a property settlement agreement listing and dividing all community assets and liabilities. In such a summary proceeding, there is no hearing or trial before a judge and both parties give up their rights to appeal. 

[3] There are only nine community property states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin.