Federal Circuit upholds ruling on patent ownership clash

The US Court of Appeals for the Federal Circuit has affirmed a ruling by the US District Court for the District of New Jersey that dismissed patent infringement claims centring on interactive software, and remanded questions back to the New Jersey Superior Court in a precedential ruling.

Eric Inselberg, the appellant, had invented various systems which audiences can use to interact with live events such as football games and live concerts.

The patents he received for his inventions were formerly held by Inselberg Interactive (also a party in the appeal).

Interactive received a loan of $500,000 in August 2010 from Frank Bisignano, who was granted a security interest in the patent portfolio owned at the time. Inselberg personally guaranteed the loan.

The following year, federal authorities brought criminal charges against Inselberg, and he and Interative defaulted on the loan.

Inselberg, a sports memorabilia dealer, was indicted on charges of fraud. He was accused of trafficking in fake game-worn jerseys, allegedly worn by New York Giants’ players.

However, according to the  Washington Post, Inselberg produced evidence suggesting that Giants equipment managers lied about him and prosecutors dropped the charges.

Inselberg and Bisignano entered into an agreement that “purported to convey Interactive’s patent portfolio to Bisignano”.

The agreement specified that Interactive transferred “all right, title and interest” in the patent portfolio

Shortly after the agreement, Bisignano became the CEO of First Data, a payment technology solutions company based in Atlanta, Georgia.

In 2014, Inselberg and Bisignano met to discuss the potential value of the patents.

According to the Federal Circuit, Inselberg noticed that First Data was using the patented technology without a licence and so proposed that First Data purchase or license the patents.

Inselberg also began claiming that the assignment to Bisignano was invalid.

Inselberg sent First Data a claim chart in November 2014 and, shortly after, Bisignano granted First Data a royalty-free licence.

“Inselberg’s counsel wrote to First Data in September 2015 stating that the assignment had ‘severe problems’ that likely made it void under New Jersey state law,” said the court.

Two cases were filed based on this dispute.

Bisignano and First Data filed a complaint in the US District Court for the District of New Jersey seeking declaratory judgment regarding the validity of the licence agreement and Bisignano’s ownership of the patent portfolio.

Inselberg and Interative then filed a complaint in the New Jersey Superior Court, asserting state law claims in the complaint, but no patent claims.

After filing their answer and counterclaims, Bisignano and First Data removed the state court action to the New Jersey District Court.

District Judge Kevin McNulty found that all of Inselberg’s claims were state law claims involving property rights created by state statute or common law.

“Indeed, it is the other way around; unless Inselberg prevails on his state law claims and regains ownership of the patents, he cannot possess a federal claim of infringement," said McNulty.

The alleged patent law issues were “incidental and contingent” because Inselberg and Interactive were not the current patent owners, and neither were suing as the patentee.

McNulty dismissed the federal claims and remanded the state law claims back to state court.

Bisignano and First Data then appealed against the district court’s orders to the Federal Circuit.

On Friday, September 15, the Federal Circuit affirmed the district court’s actions, stating that the lower court had correctly dismissed the federal claims for lack of subject matter jurisdiction.

Circuit Judge Kathleen O’Malley, on behalf of the court, said that if Inselberg and Interactive are successful in recovering the patents, then First Data’s and Bisignano’s claims would no longer be contingent on a future event that “may not occur at all”.

“Until that time, however, an infringement dispute between these parties is not ripe,” she said.

The Federal Circuit also held that it was precluded from reviewing the remand order.

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