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TM PATENTS v. INTERNATIONAL BUSINESS MACHINES
November 13, 2000
TM PATENTS, L.P., AND TM CREDITORS, L.L.C., PLAINTIFFS,
INTERNATIONAL BUSINESS MACHINES CORPORATION, DEFENDANT.
The opinion of the court was delivered by: McMAHON, District Judge.
DECISION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
PLAINTIFF'S CLAIMS UNDER U.S. PATENT NO. 5,212,773 ("THE '773
PATENT") FOR LACK OF STANDING, OR IN THE ALTERNATIVE, GRANTING
DEFENDANT'S MOTION FOR SUMMARY JUDGMENT FOR NON-INFRINGEMENT
1. On November 8, 1999, this Court entered an order following
a so-called Markman hearing, see Markman v. Westview
Instruments, Inc., 517 U.S. 370, 116 S.Ct. 1384,
134 L.Ed.2d 577 (1996), 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577, in
which I construed the claims in suit under the '773 patent. A
supplemental Markman opinion was issued on December 17, 1999.
Familiarity with that decision is assumed. See TM Patents, L.P.
v. International Bus. Machs., 72 F. Supp.2d 370 (S.D.N.Y. 1999).
2. On July 28, 2000, this Court entered an order disposing of
a number of pending motions with regard to both the '773 patent
and the other patent in suit. However, the Court ordered a
hearing in connection with TM's motion for a declaration that
the '773 patent was in fact enforceable and the parties'
cross-motions for summary judgment on the issue of infringement
of the '773 patent. That hearing was held on September 21, 2000.
3. On September 12, 2000, IBM filed with the Court a
suggestion that TM had never obtained valid title to the '773
patent. I indicated that IBM's submission should be treated as a
motion to dismiss for lack for subject matter jurisdiction and
directed TM to respond. It filed papers in opposition on
September 20. IBM filed a supplemental brief on October 6,
addressing issues that were the subject of questions at the
September 21 hearing. TM, at the Court's invitation, filed a
reply to that brief on October 6. Thereafter, the parties filed
written responses to questions propounded by the Court.*fn1
IBM'S CHALLENGE TO THE COURT'S SUBJECT MATTER JURISDICTION
IBM contends that this Court lacks subject matter jurisdiction
because TM procured the '773 patent through assignment from
someone who never held valid title to the patent. While the
parties have not presented me with extensive affidavit testimony
or with live witnesses, they have assembled a plethora of
ancient memoranda in order to reconstruct the history of this
patent's ownership. The pertinent facts (which for the most part
are undisputed, though the conclusions that follow from them are
not) are as follows:
The invention under the '773 patent, entitled Wormhole
Communications Arrangement for Massively Parallel Processor, was
the brainchild of W. Daniel Hillis. At the time of the
invention, Hillis was a graduate student at Massachusetts
Institute of Technology. His attendance at M.I.T. was funded by
the Hertz Foundation, a private foundation. He was not the
direct recipient of federal government funding.
On April 28, 1983, Thomas Engellenner of M.I.T. wrote to the
Office of Patent Counsel at the Naval Underwater Systems Center
in Newport, Rhode Island, and enclosed two patent applications —
Hillis' application for what eventually became the '773 patent
(entitled "Parallel Processor"), and an application for a second
invention entitled "Processor/Memory Circuit." In his letter,
Engellenner disclosed to the Navy that M.I.T. was electing to
treat the two patents as having arisen
under Advanced Research Projects Agency ("ARPA") Contract
N-00014-80-C-0505, and was further electing not to apply for the
patents itself "because of budgetary constraints and the limited
commercial potential perceived in the short term." (IBM 9/12/00
Submission at Ex. 2.) IBM has not supplied the Court with a copy
of this contract, and given its extensive efforts (via document
requests and Freedom of Information Act inquiries) to locate one
from any and every possible source, I am constrained to conclude
that no copy exists. However, IBM has located a March 1982
document that appears to be a modification or extension of this
contract. (IBM's Oct. 17 Submission at Ex. 4.)
The wording of Engellenner's letter is curious, in that M.I.T.
does not assert that work on either invention was actually
funded by the Department of the Navy. Indeed, what MIT said was
almost deliberately opaque:
The inventors herein are primarily a group of
graduate students at M.I.T. but from time to time a
number of these inventors have been employed by
M.I.T. as research associates funded by ARPA.
(Id.) Engellenner did not identify how many inventors were
involved in creating the two inventions and also did not state
which (or how many) of those inventors fell within the ambit of
"a number of inventors" who had been "employed by M.I.T. as
research associates funded by ARPA." In particular, M.I.T. did
not specifically identify Hillis as one of those
Governmentfunded graduate students, or the invention for which
Hillis alone was responsible as having been ARPA-funded.
Nonetheless, M.I.T. included Hillis' invention in the ambit of
its ARPA disclosure. (Id.) And even though his fellowship was
privately funded, Hillis, in contemporaneously published
articles, admitted that he was working on an invention at MIT's
Artificial Intelligence Laboratory, funded in part by Contract
N-00014-80-C-0505 (IBM 10/6/00 Submission at Ex. 9, 10.) — the
very contract under which Engellenner claimed Government
sponsorship for both inventions disclosed in his letter to the
Navy. This "connection machine," as he called it, was the
invention eventually embodied in the '773 patent can be seen by
reading a 1982 article in the International Journal of
Theoretical Physics, where Hillis described the proposed
architecture of the connection machine as "a locally connected
array of processing-memory cells." (IBM 10/6/00 Submission at
In addition, documents provided to IBM by M.I.T. include a
copy of Hillis' original patent application (Ser. No. 499, 474),
filed on May 31, 1983. It contains a handwritten notation "3803"
in the corner; "3803" is the case number assigned to Hillis'
invention by M.I.T. (Id. at Ex. 6.)
On the same day that Engellenner wrote to the Navy, he also
wrote a memorandum to Hillis, summarizing discussions they had
held during the preceding weeks (IBM 9/12/00 Submission at Ex.
3.) It appears from the memorandum that Hillis and his patent
attorney had approached the M.I.T. Patent, Copyright & Licensing
Office on a relatively urgent basis in order to clarify his own
ownership rights — and perhaps to induce M.I.T. to accept
reassignment of the inventions — so that he could enter into an
arrangement with IBM to manufacture prototype chips employing
the invention. The first of these discussions apparently took
place on March 23, 1983, according to a memorandum that
Engellenner wrote to Arthur A. Smith, Jr., the head of M.I.T.'s
patent office, on that very day. (TM 9/20/00 Submission at Ex.
Engellenner's memorandum to Smith, if taken at face value,
discloses that even Hillis conceded that some portion of his
work could be considered Governmentfunded:
(Id. at p. 1.) (emphasis added). Of course, the highlighted
language is hearsay within hearsay,*fn2 and I have some
difficulty concluding that it would be admissible, even under
the liberal standard of Fed.R.Evid. 807 — both because Hillis
himself later created documents suggesting that neither patent
was created under Government sponsorship or belonged to M.I.T.
(IBM 9/12/00 Submission at Ex. 5), and because the memo contains
certain representations that appear to be inconsistent with the
record. For example, Engellenner's memorandum states that Hillis
claimed "a routing circuit" as belonging to him, while
acknowledging that "a processing element (which was purportedly
developed with ARPA sponsorship)" probably did not. (TM 9/20/00
Submission at Ex. C at 2.) However, M.I.T. Case No. 3802, which
was assigned to a "Processor/Memory Circuit" (emphasis added),
is listed in the relevant documentation as having been invented
by Hillis and seven other graduate students (Id. at Ex. D.),
while Hillis' singular invention was assigned M.I.T. case number
3803 and entitled "Parallel Processor." (Id.)*fn3
Nonetheless, no one disputes that M.I.T. lacked interest in
owning and exploiting the inventions itself and was more than
happy to waive its rights in the invention. However, in its
letter to the Navy disclosing the patents (IBM 9/12/00
Submission at Ex. 2.), M.I.T. conceded nothing in terms of
Hillis' sole ownership of any patents. Indeed, in his memorandum
to Hillis, Engellenner identified Hillis (and another student)
as having "from time to time been employed as research
assistants funded by ARPA." (Id. at Ex. 3 at p. 1.) Thus, it
seems that M.I.T. took the position that any and all patent
rights associated with both inventions belonged to it in the
first instance, whether Hillis thought so or not. And while the
university volunteered to waive its rights in Hillis' invention,
M.I.T. also specifically advised Hillis that he would need to
file papers with the Department of the Navy in order to protect
his title to the invention. (Id. at Ex. 2.)
M.I.T. advised Hillis, at the time it offered to waive its
rights in the invention that became the '773 patent, that it did
so "subject only to the following conditions:"
first, your patent application should be amended to
recite that "the government has rights in this
invention pursuant to a contract with the Advanced
Research Projects Agency No. N-00014-80-C0505" and
any licenses issued to commercial concerns under
these inventions should acknowledge the government's
royalty-free license to these inventions. . . .
[other conditions omitted]
(Id. at Ex. 3 at pp. 1-2.) Engellenner then stated, "If these
terms are agreeable to you, I will be happy to present your case
to the patent committee." (Id.) There is no evidence in the
record to indicate whether Hillis did or did not consent to
M.I.T.'s conditions, although, as will be seen below, the 1991
patent application that resulted in the issuance of the '773
patent did not contain any of the language demanded by the
M.I.T. as a condition of its waiver. (Id. at Ex. 11.)
I surmise that the '773 patent application did not contain
MIT's suggested language because Hillis took the position that
at least one of the inventions he discussed with Engellenner was
his invention and his alone. Indeed, Hillis represented to the
Department of the Navy, in a letter he wrote on November 14,
1984, that both inventions were his. Nonetheless, in that
letter, Hillis very deferentially asks the Navy to authorize his
rights in both inventions:
Naval Underwater Systems Center
Newport, Rhode Island 02840
SUBJECT: Invention Disclosure under ARPA
MIT Case 3802 "Processor/Memory Circuit"
MIT Case 3803 "Parallel Processor"
I am writing to request authorization to
retain the patent rights on the inventions cited
Because these inventions were developed when I
was a student at MIT supported by a fellowship from
the private Hertz Foundation and not through any
government grants, it is my understanding that I
retain the rights to patents that may be issued. I
further understand that without addressing the
question of ownership of the patent rights, MIT has
elected not to seek patent protection for these
inventions and suggested that retention of rights
by the inventors is in the best interest of the
public, as letters from MIT to your office
Through my affiliation with Thinking Machines
Corporation, I am actively involved in continuing
and expanding development of the inventions. We are
integrating computer architecture and software
innovations that promise important improvements in
addressing urgent and very large scale Department
of Defense problems. We are also exploring the
application of my inventions to solving data
processing concerns of other Federal agencies, and
are both convinced of and dedicated to realizing
the potential for comparable gains for non-Defense
computational problems. Further, related to my deep
appreciation of the value of the technology
transfer to the civilian economy, we are
aggressively designing applications software for
responding to classes of problems of direct
interest to society at large.
I close by repeating my request for your
consideration in authorizing my retention of patent
rights on the referenced inventions.
Your kind attention to this matter is very much
(Id. at Ex. 5.) (emphasis added)
It is not true, as TM now asserts (See TM 9/20/00 Submission
at n. 4.), that the Navy "dropped the matter" after receiving
the above-quoted letter containing Hillis' rather veiled claim
of right to the patents. What is true is that the Government was
perfectly willing to authorize Hillis to retain ownership of the
patents. Indeed, the Navy forwarded the necessary forms on at
least two occasions: once to M.I.T. in November 1984, together
with a request to provide the forms to those inventors who
wanted to retain rights in the ARPA contract inventions (IBM
9/12/00 Submission at Ex. 4.), and once directly to Hillis in
April 1986 (IBM 9/12/00 Submission at Ex. 7.). However, the
Navy, having been notified by M.I.T. that it elected to treat
the patents as having arisen under Government sponsorship, took
the position that Hillis' rights in the invention were subject
to the same conditions as M.I.T.'s rights. These, of course,
included a royalty-free license to the Government.
I can only speculate about why Hillis, having asked the Navy
for permission to keep his inventions, did not sign the forms
that were sent to him by both M.I.T. and the Navy. The record is
devoid of evidence on the subject; it contains no affidavit from
Hillis, and his deposition testimony demonstrates a total lack
of recall about the forms. There is no dispute, however, that he
did not sign them. M.I.T. sent a set of confirmatory instruments
(possibly those sent to M.I.T. by the Navy in November 1984) to
Dr. Hillis at least as early as May 3, 1985. That they had not
been signed and returned some 11 months later is evidenced by
his receipt of a letter from M.I.T. dated April 3, 1986, warning
Hillis that he was endangering his title by failing to return
We have recently been called by Ms. Ina Griffith of
the Office of Naval Research who told us that you
have not yet returned the instruments to ONT. Ms.
Griffin asked us to contact you on this matter. We
strongly advise you to complete these instruments,
since the lack of them can endanger your title to the
(IBM 9/12/00 Submission at Ex. 6.) (emphasis added) In spite of
this, Hillis did not return the forms, as reflected in M.I.T.'s
June 24, 1987 "Report of Inventions and Subcontracts (Final)"
for Contract No. N-00014-80-C-0505, which indicated that
confirmatory instruments for Case No. 3803 had not been
forwarded to the Navy as Contracting Officer. (IBM 10/6/00
Submission at Ex. 4.)
Ultimately, the '773 patent application, under the title
"Wormhole Communications Arrangement for Massively Parallel
Processor," was filed on Feb. 22, 1991. Hillis listed himself as
the sole inventor. He did not disclose any governmental interest
in the patent, including any compulsory license. The application
for the '773 patent explicitly relates back to the May 31, 1983
application, Ser. No. 499,474 ("Parallel Processor") ("the great
grandfather application"), which the parties agree is M.I.T.
Case No. 3803, the original Hillis invention. As discussed
below, the '773 patent is the result of successive applications
that could not, as a matter of law, contain additional
information or a different invention than that described in the
In view of the foregoing, IBM contends that Hillis lacked
title to assign to Thinking Machines, because he failed to file
the paperwork required by 35 U.S.C. § 201(d). Of course, if
Hillis did not have valid title, then he could not convey good
title to Thinking Machines, which in turn could not convey good
title to plaintiffs — or so IBM argues. Since only a patent
owner has standing to sue for infringement (except in a few
discrete instances that are not relevant here), such a finding
would be the end of the matter where the '773 patent is
Plaintiffs do not dispute that Hillis never sent in the forms
that would have perfected his title as against the Government.
They read the documents to suggest that Hillis never agreed with
M.I.T. about Government sponsorship of the invention that became
the 773 patent, and argue that Hillis needed no waiver by the
Government because the invention was not Government-sponsored.
Plaintiffs do admit, however, that there was never any formal
adjudication of this controverted issue. As happens all too
often in these situations, both Hillis and his assignor,
Thinking Machines, were content to leave the situation murky.
IBM, which has a lot riding on
being able to knock out TM's claims under '773 patent, is not.
Plaintiffs do not suggest that this Court embark on the
time-consuming task of resolving whether '773's wormhole routing
message network was invented with ARPA sponsorship back in the
early 1980s — at least, not at this juncture. Rather, they make
a number of purely legal arguments about why this Court has
jurisdiction over the '773 infringement claims.
First, TM argues that it has sufficiently pled jurisdiction
and standing, and that the resolution of any factual disputes
must abide the trial of this action.
Second, plaintiffs contend that IBM is estopped to challenge
TM Creditors' title, because it has repeatedly admitted TM's
title in documents previously filed in this action — indeed, as
recently as last summer.
Third, plaintiffs assert that the Bankruptcy Court's award of
title to the '773 patent to TM Creditors during Thinking
Machines' bankruptcy proceeding — a proceeding to which both IBM
and the Government were parties, and in which TM contends the
issue of defective title could and should have been raised — is
res judicata on the question.
Fourth, TM claims that its title to the patent was secured by
virtue of its recording of same following the bankruptcy
proceeding, citing the patent recording statute,
35 U.S.C. § 261.
Fifth, if all else fails, TM asserts that IBM has the burden
to offer sufficient competent evidence to warrant a finding that
it lacks ownership of the patent, and that it has failed to do
so. At a minimum, TM asserts that there is a disputed issue of
fact on the question.
A. The Issue of Standing is Jurisdictional and Must Be
Determined by the Court at the Outset
Before a federal court can consider the merits of a legal
claim, the person seeking to invoke the jurisdiction of the
court must establish the requisite standing to sue. See
Whitmore v. Arkansas, 495 U.S. 149, 154, 110 S.Ct. 1717,
109 L.Ed.2d 135 (1990). "Whether a claimant has standing is the
threshold question in every federal case, determining the power
of the court to entertain the suit." In re Gucci,
126 F.3d 380, 387-88 (2d Cir. 1997), (quoting Warth v. Seldin,
422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). It remains open
to review at all stages of the litigation. See National Org.
for Women v. Scheidler, 510 U.S. 249, 255, 114 S.Ct. 798, 802,
127 L.Ed.2d 99 (1994).
Standing requirements drawn from the Constitution look to
whether the plaintiff has made out a `case or controversy'
between himself and the defendant within the meaning of Article
III. See Warth v. Seldin, 422 U.S. 490, 498-499,
95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975). The plaintiff can do this by
showing he has an "injury in fact," or a "distinct and palpable
injury." Association of Data Processing Serv. Orgs. v. Camp,
397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Valley Forge
Christian College v. Americans United for Separation of Church
and State, 454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982).
If TM is not the true owner of the patent, it suffers no injury
in fact as a result of any alleged infringement. To bring suit
for patent infringement, a plaintiff must have legal title to or
be the exclusive licensee of the patent in suit. See Enzo APA &
Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1093 (Fed. Cir. 1998);
Abbott Lab. v. Diamedix Corp., 47 F.3d 1128, 1130 (Fed. Cir.
1995); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574,
1578-79 (Fed. Cir. 1991). Thus, patent ownership is a
prerequisite for application of the infringement statute, and
also confers standing.
There is some confusion as to whether the question of patent
ownership should properly be characterized as a challenge to
TM's standing to bring suit, or to the
court's subject matter jurisdiction. Two other courts in this
district have dismissed infringement claims when the plaintiff
did not own title to the patent, on the basis that plaintiff
"lacked standing to invoke the subject matter jurisdiction of
the court." RAD Data Communications, Inc. v. Patton Elecs.
Co., 882 F. Supp. 351, 352 (S.D.N.Y. 1995); Imatec, Ltd. v.
Apple Computer, Inc., 81 F. Supp.2d 471 (S.D.N.Y. 2000); see
also GAIA Techs., Inc. v. Reconversion Techs., Inc.,
93 F.3d 774, 780 (Fed. Cir. 1996) (calling the standing question
"jurisdictional" and dismissing plaintiffs infringement claims
on standing grounds). These holdings may have improperly
conflated the issue of standing with subject matter
jurisdiction. Cf. DaSilva v. Kinsho Int'l Corp., 229 F.3d 358
(2d Cir. 2000)*fn5; However, I need not delve into this
theoretical problem at the present time. It does not matter
whether this Court should properly treat the defendant's
challenge to ownership as a motion for lack of subject matter
jurisdiction under Fed.R.Civ.P. 12(b)(1), or for failure to
state a claim due to lack of standing under 12(b)(6), or even as
a motion for summary judgement on the merits of the question of
ownership. As will be seen below, TM has failed to make the
necessary showing of ownership under any theory.
B. Judicial Estoppel Does Not Bar IBM From Raising the Issue
IBM has consistently admitted during the course of this
litigation that TM Creditors LLC has title to the '773 patent.
(See Defs Answer to the First Am. Compl., filed March 6, 1998, ¶
15; Defs Am. Answer to the First Am. Compl., filed August 28,
2000, ¶ 15.) IBM also moved to add TM Creditors, which was not
originally a party to this action, as a party plaintiff,
asserting in connection with its motion that title to the '773
patent belonged to TM Creditors. (See Def.'s Mem. in Supp. of
Def.'s Mot. To Dismiss, filed May 1, 1997, at p. 2, 12.) While
it is arguable that the first answer, and even the joinder of TM
Creditors, predates IBM's awareness of the Hillis issue, it is
quite clear that IBM's amended answer, filed August 28, 2000,
came long after defendant became aware of a possible cloud on
TM's title. Indeed, IBM first raised the jurisdictional issue
with counsel for TM by letter dated April 4, 2000. (IBM 9/12/00
Submission at Ex. 10.) Nonetheless, it admitted TM Creditors'
ownership of the '773 patent almost five months later — and a
mere two weeks before it filed the suggestion of lack of
jurisdiction with the Court. As far as TM is concerned, that
should end the matter.
TM argues that these admissions should prevent IBM from
challenging TM's ownership of the patent under the theory of
judicial estoppel. An admission made during the course of the
litigation, however, is not the same as judicial estoppel, which
"prevents a party from asserting a factual position in a legal
proceeding that is contrary to a position previously taken by
[the party] in a prior legal proceeding." Bates v. Long Island
R. Co., 997 F.2d 1028, 1037 (2d Cir. 1993); see also 18
Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Fed.
Pract. & Proc. § 4477 (1981). The theory may be invoked where,
(1) the party against whom the estoppel is asserted took an
inconsistent position in a prior proceeding, and (2) that
position was adopted by the first ...