A Ropes & Gray IP litigation team has won a critical court ruling on behalf of Ropes & Gray client Aerotel, Ltd. in patent infringement suits it filed against multiple defendants in the Southern District of New York.

On August 8, US District Judge Richard J. Holwell dismissed motions challenging Aerotel's legal ownership of the patent in the suit and in turn the company's standing to sue for infringement. The court determined that Aerotel is the sole legal owner of US Patent No. 4,706, 275 (the '275 patent) and has legal standing to sue for patent infringement.

The long-running patent battle over the '275 patent, which covers methods and systems of making prepaid telephone calls, began in 2003 when Aerotel sued IDT. The suit was stayed for two years pending the outcome of several consolidated reexaminations before the US Patent and Trademark Office, also handled by Ropes & Gray. In 2004, Aerotel also sued Primus, Radiant, Telco and 9278 in the Southern District of New York for their infringement of the ‘275 patent and this action was likewise stayed. In 2005, the patent came out of the reexaminations with no claim amendments. Thereafter the stays were lifted and the actions consolidated for pretrial purposes.

The defendants then filed motions to dismiss the case under Rule 12(b)(1) on the grounds that Aerotel does not have legal ownership of the '275 patent and therefore lacks standing to sue for patent infringement under Article III of the US Constitution. The defendants claimed that the named inventor, Mr. Kamil, was legally obligated to assign the inventions of the ‘275 patent to Elscint Ltd., an Israeli company, by virtue of the terms of his employment there. The defendants also argued that Mr. Kamil was divested of ownership by operation of Section 132(a) of Israeli patent law because he conceived of the '275 patent inventions while working for either Elscint or Beta Engineering and Development Ltd, a second Israeli company.

When this issue was first addressed by the Court in 2007, Judge Holwell accepted Aerotel’s argument that the equitable rights of a third party in a patent may not be asserted as a defense to patent infringement. Aerotel .v IDT Corp., 486 F. Supp. 2d 277, 281-82 (SDNY. 2007). Judge Holwell further held that a defendant may challenge a patentee’s standing, however, based on a “statute or contract that constitutes a present assignment of future legal title.” Id.

In his August 2008 Opinion and Order, Judge Holwell rejected defendants’ argument that Mr. Kamil had a legal obligation to assign the inventions of the ‘275 patent to Elscint. In so doing, the court found that to the extent any agreement regarding ownership of inventions existed between Mr. Kamil and Elsicint, “it was not a ‘present assignment of future legal title,’” and that defendants “are merely asserting the equitable rights of the third-party Elscint.”

The court also rejected defendants’ argument that Mr. Kamil was divested of ownership by operation of Section 132(a) of Israeli patent law. The court considered and relied upon, among other things, affidavits from experts in Israeli law directed to Section 132(a) and its application to the defendants’ motions to dismiss. The court found that under paragraph 76 of the Israeli Patents Law, it was defendants’ burden to establish that Section 132(a) applied to Mr. Kamil’s inventions. The court then applied a five-prong test that has been used by the Israeli courts, including whether the invention was arrived at in consequence of the employee’s service (the “causal test”). The court found that the “causal test” had not been met with respect to either Elscint or Beta because, among other things, Mr. Kamil’s work with these companies, the purpose of his employment, and the scope of the businesses of Elscint and Beta were all unrelated to telecommunications and to the inventions of the ‘275 patent.

Since neither Elscint nor Beta owned subject invention, Aerotel, as assignee of Mr. Kamil's invention, had standing to sue for infringement.

"This is a great victory for Aerotel because now the company can proceed with enforcing its patent against these defendants as well as other infringers," says partner Jeanne Curtis, one of the lead attorneys in the case." In addition to being an important victory for our client, this was also a novel legal issue because it implicated Israeli patent law as well as US patent law."

Aerotel currently has pending patent infringement claims against various other companies relating to the '275 patent. In May 2007, Curtis' team obtained a favorable settlement from ID. Primus settled out of the case shortly thereafter.

In addition to Curtis, the team representing Aerotel includes partner Bob Morgan; associates Matthew Traupman, Michael Burling, Brandon Stroy; litigation specialist Richie Allen and paralegal Charlie Brustman.

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