MEMORANDUM
Plaintiff Lloyd Randall Anderson has filed a Motion for Temporary Restraining Order and Preliminary Injunctive Relief (“Motion for Preliminary Injunction”), to which the defendant, TOL, Inc. (“TOL”), filed a Response in opposition (Docket No. 23), and Anderson filed a Reply (Docket No. 34). TOL has filed a Motion to Dismiss or Transfer (Docket No. 16), to which Anderson filed a Response in opposition (Docket No. 26), and TOL filed a Reply (Docket No. 40). Anderson has also filed a Motion for Leave to File Motion for Partial Summary Judgment (Docket No. 33), to which TOL has filed a Response in opposition (Docket No. 41).
On February 7, 2013, the court held a preliminary injunction hearing (“PI Hearing”). At the conclusion of that hearing, the court ruled from the bench and issued a preliminary injunction against TOL and Overbreak, LLC. This Memorandum further explains the court’s reasoning for that decision. Furthermore, for the reasons explained herein, the Motion to Dismiss or Transfer and the Motion for Leave to File a Motion for Partial Summary Judgment will both be denied without prejudice.
BACKGROUND
I. Factual Background
This case involves claims by an inventor, Lloyd Randall Anderson, who claims that TOL is liable to him for patent infringe
On February 25, 2002 — before Anderson had applied for any patents concerning the rigid helium balloons — Anderson filed a voluntary petition for Chapter 13 Bankruptcy. See In Re Anderson, No. 3:02-bk-02305 (Bankr.M.D.Tenn. Feb. 25, 2002) (“Bankruptcy Case”).
On February 5, 2003, Anderson filed Articles of Organization for “PhoenixArts, LLC” (“PhoenixArts”), a Tennessee limited liability company for which Anderson served as the President and sole owner. (See O’Brien Decl. II, at Ex. 1 (pp. 10-11); Anderson Decl. ¶ 4; Verified Compl. ¶ 14). On February 14, 2003, Anderson filed a patent application with the United States Patent and Trademark Office (“USPTO”) in his own name, seeking a patent for his rigid helium balloon invention (hereinafter, “838 Patent Application”). {See Verified Compl., Ex. B, at p. 1.) On February 22, 2003, PhoenixArts entered into a License Agreement with Overbreak, in which PhoenixArts purported to license the 838 Patent Application and all related applications and patents to Overbreak, in return for Overbreak’s promise to pay PhoenixArts royalties based on its “Net Sales” of the HoverDisc. (Docket No. 5 (filed under seal) (“License Agreement”).) The USP-TO ultimately issued the 838 Patent in Anderson’s name on December 9, 2003 (“838 Patent”). (Verified Compl., Ex. B, at p. 1.)
On August 19, 2003, Anderson filed a follow-on patent application (“151 Patent Application”), which the USPTO granted and issued on May 29, 2007 (“151 Patent”). {Id., Ex. B, at p. 12.) On November 12, 2003, Anderson applied for a patent related to the 838 Patent (hereinafter, “487 Patent Application”), which the USPTO granted and issued on February 6, 2007 (“487 Patent Application”). {Id.)
Anderson has claimed that he orally conveyed to PhoenixArts the right to sub-license the Patents — including, apparently, the right to sub-license Anderson’s interest in the Patent Applications while they were pending. {See Docket No. 19, Anderson Decl. ¶¶ 4-5; PI Hearing Transcript at 35:16-25; 98:24-99:5; Verified Compl. ¶¶ 14-16.) Anderson has not stated when he entered into this alleged oral licensing agreement with PhoenixArts. Anderson did not disclose the Patent Applications or the Patents at any time during the five-year duration of his Chapter 13 bankruptcy plan.
At any rate, pursuant to the License Agreement, Overbreak began manufacturing and selling HoverDiscs, which became a popular children’s toy. (Sieling Decl. I ¶ 4; Sieling Decl. II ¶ 4.) Overbreak remitted approximately $1.5 million in royalties to Anderson through 2007. {Id.)
In the interim, several relevant events occurred. First, beginning in 2004, Over-break procured foreign patents in Anderson’s name in at least four foreign jurisdictions (collectively, “Foreign Patents”). (PI. Hearing Ex. 1; PI Hearing Transcript 44:9-46:19.) However, without notice to PhoenixArts as required by the License Agreement, Overbreak permitted the Foreign Patents to expire, with no prospect of re-filing. (Id.) It appears that Anderson did not disclose the Foreign Patents in the Bankruptcy Case. Second, PhoenixArts was administratively dissolved under Tennessee law on September 17, 2004, was reinstated on October 27, 2004, and was again administratively dissolved (for the second and last time) on August 19, 2005. (O’Brien Decl. II, Ex. 1 (p. 9).)
On June 15, 2007, Overbreak entered into an “Assignment of Rights” with TOL, a company consisting of the same shareholders, officers, assets, and operations as Overbreak. (Sieling Decl. II ¶ 5; Docket No. 28, Ex. A.) That assignment conveyed only Overbreak’s rights — not Overbreak’s liabilities — and did not reference the License Agreement, let alone purport to comply with certain specific conditions of assignment set forth therein.
Unbeknownst to Anderson, Overbreak (and later TOL) continued to manufacture and sell HoverDiscs after March 2007, albeit in limited quantities. (Sieling Decl. I ¶ 6; PI Hearing Transcript 143:12-22.)
Anderson received his bankruptcy discharge on April 10, 2007, having completed the payments under his Chapter 13 Plan, and, on August 7, 2007, the bankruptcy court closed the Bankruptcy Case. (O’Brien Decl. II, Ex. 2.) Under the Plan, Anderson had paid to the Trustee, for the benefit of his creditors, $27,705. (Id.)
In approximately June 2012, Anderson, believing that he possessed unfettered ownership of the Patents, approached TOL (among other toy manufacturers) to explore the possibility of re-launching the HoverDisc. (PI Hearing Transcript at 64:25-67:5.) Anderson claims that, during these negotiations, TOL essentially acknowledged that it did not have any rights
In any event, after the parties had agreed on potential terms for a new license agreement, Anderson backed out of the prospective deal. (See PI Hearing Exs. 9 (draft Letter of Intent) and 12 (10/16/12 email from Anderson to Sieling); PI Hearing Transcript 70:2-3 and 74:8-21.) However, upon receiving Anderson’s communication of withdrawal from the new licensing agreement, TOL responded by claiming that it had rights in the Patents all along and would proceed with its plans to re-launch the HoverDise in early 2013. (PI Hearing Ex. 13; PI Hearing Transcript 75:3-15.)
On December 20, 2012, Anderson filed this lawsuit, claiming that TOL was liable for breach of contract, fraud, and patent infringement, for which Anderson sought immediate injunctive relief in the form of a temporary restraining order (“TRO”) and/or a preliminary injunction.
ANALYSIS
The parties vigorously dispute various basic facts of this case, including whether Anderson and/or TOL are parties to the License Agreement, whether Anderson owns the Patents, and whether and when the License Agreement terminated. The court’s consideration of some of these disputes impacts both the jurisdictional analysis (with respect to TOL’s Motion to Dismiss or Transfer) and the merits of the underlying claims (with respect to Anderson’s request for a preliminary injunction).
I. Parties to the License Agreement and Ownership of the Patents
The original License Agreement was made between PhoenixArts as “Licensor” and Overbreak as “Licensee.”
The License Agreement permitted Over-break to assign the agreement to a third party under either of two circumstances: (1) with the explicit consent of PhoenixArts (License Agreement ¶ 29), or (2) without PhoenixArts’ consent, provided that the unilateral assignment from Overbreak include, inter alia, a 1% increase in royalties and an assignment of all rights and “obligations and limitations” under the License Agreement (id., ¶ 2(g)).
Overbreak did not satisfy either of these conditions in its “assignment” to TOL in June of 2007. First, Overbreak did not seek consent from PhoenixArts or Anderson for the assignment. Second, Overbreak’s unilateral “Assignment of Rights” did not comply with ¶ 2(g) in two respects: (1) it failed to assign its obligations (as well as its rights) under the License Agreement; and (2) it failed to include a provision for a 1% increase in royalties.
With respect to PhoenixArts, the parties vigorously dispute (a) what rights, if any, Anderson originally conveyed to PhoenixArts before it entered into the License Agreement with Overbreak; and (b) to the extent that Anderson conveyed any rights to PhoenixArts, whether those rights reverted to Anderson when PhoenixArts was administratively dissolved.
As an initial matter, under 35 U.S.C. § 261, assignments of a patent or patent application must be in writing to be effective. See Waymark Corp. v. Porta Sys.
Having reviewed the License Agreement closely, it is not clear to the court whether the parties to that agreement engaged in sloppy drafting, whether PhoenixArts made an affirmative misrepresentation, or whether the agreement simply incorporates some form of mutual mistake. For example, the “Background” section on the first page of the agreement defines PhoenixArts as the “Licensor” and states that “Licensor filed on February 14, 2003 for a United States utility patent, attached hereto as Schedule A, with respect to Rigid Helium Balloons.” However, the attached “Schedule A” is a copy of the 838 Patent Application filed by Anderson in his own name. Accordingly, unless the court construes “Anderson” and “Licensor” synonymously in this particular context, it is difficult to understand how the language of the License Agreement can be reconciled with the 838 Patent Application attached as Schedule A, which on its face was not filed by PhoenixArts. At any rate, however the parties intended the License Agreement to be construed, its language would not have overridden the requirements of federal statutory law, which does not appear to recognize oral assignments of patent ownership.
Therefore, based on the existing record, the court is satisfied that Anderson currently owns the Patents, regardless of the language in the License Agreement.
II. Venue
TOL argues that, under the forum selection clause in the License Agreement, Anderson was required to file this lawsuit in California. Anderson argues that he was not bound by the forum selection clause because (1) he did not agree to the venue provisions (PhoenixArts did), (2) his lawsuit falls within ¶ 19 of the License Agreement, which permits a lawsuit to be filed “in any court” of law for violations of the agreement’s confidentiality provisions, and/or (3) the License Agreement terminated before he sued TOL.
Finally, TOL has not established that, absent consideration of the forum selection clause, the traditional venue factors otherwise favor transferring the case to a different venue under 28 U.S.C. § 1404(a). In considering a § 1404(a) motion, “a district court should consider the private interests of the parties, including their convenience and the convenience of potential witnesses, as well as other public-interest concerns, such as systemic integrity and fairness, which come under the rubric of ‘interests of justice.’ ” Moore v. Rohm & Haas Co.,
Here, Anderson is a resident of Hendersonville, Tennessee, a city within this judicial district. TOL has not established that the burden on TOL of litigating in Tennessee would outweigh the burden on Anderson of litigating in California. Also, TOL has not established that the convenience of non-party witnesses, as opposed to employee witnesses, would be adversely affected by litigating the case in this court. TOL has identified only one potential material witness who is not currently employed by TOL. See Smith,
Based on these considerations, the court finds that TOL has not met its burden to justify transfer of the case under § 1404(a).
III. Standing
TOL argues that Anderson lacks standing to assert his state law claims and his federal patent infringement claims. As an initial matter, based on the existing record, the court has already found that Anderson did not convey ownership of the Patents to PhoenixArts. To the extent that TOL’s arguments are premised on the assumption that PhoenixArts — not Anderson — presently owns the Patents, the court rejects those arguments at this stage.
Under the Chapter 13 rules in effect when Anderson filed his petition, Anderson was required to file a schedule containing all of this assets and liabilities, including all of his legal or equitable interests in property (including intellectual property) at the commencement of the case. See 11 U.S.C. § 521(a)(1).
Here, TOL has a strong case that the right to recover unpaid royalties from Overbreak — i.e., Anderson’s right to profit from exploitation of the Patents, Patent Applications, and Foreign Patents during the time frame of the Bankruptcy Case— belonged to the bankruptcy estate. Had Anderson disclosed these assets, his plan would have been modified, and his creditors would have received more money through his Chapter 13 Plan. Indeed, by failing to disclose the royalty stream, Anderson may have defrauded his creditors.
However, the right to profit from exploitation of the Patents and Patent Applications during the pendency of the Bankruptcy Case is distinct from the ultimate legal ownership of those Patents. As discussed above, the existing record contains Patent Applications filed by Anderson and associated Patents issued to Anderson. There is no bankruptcy trustee at the moment and TOL has not established that PhoenixArts has a present claim of exclusive ownership over the Patents. Therefore, the court is not persuaded by TOL’s argument that Anderson lacks standing to enforce the Patents at this point. Thus, at least at this stage, the court is satisfied that Anderson owns the Patents and can sue to protect against their infringement.
IY. Motion for Preliminary Injunction
A. Standard of Review
Under Fed.R.Civ.P. 65, a plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest. Winter v. Nat’l Resources Def. Council, Inc.,
B. Application
1. Likelihood of Success on the Merits
Under 35 U.S.C. § 271, anyone who, “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” In its briefing, TOL argues that there are questions of fact as to whether Anderson owns the Patents, whether the Patents are valid, and whether the HoverDiscs in question constitute infringing devices. Under 35 U.S.C. § 282, an issued patent comes with a statutory presumption of validity at every stage in litigation. Tech. Licensing Corp. v. Videotek, Inc.,
As set forth above, the court has found that Anderson currently owns the Patents and can sue to protect against their infringement. Furthermore, based on the existing record, TOL has not presented a viable argument that the Patents are invalid. Also, TOL’s argument that manufacture and sale of HoverDiscs would not infringe the Patents strikes the court as disingenuous, given that TOL’s position is that it had a valid and exclusive license to exploit the Patents under the License Agreement in the first place. Instead, the existing record establishes that TOL does not, and did not, have a right to exploit the Patents, yet it utilized the Patents in the manufacture and sale of the HoverDisc toy from June 2007 forward, including current marketing efforts and a projected “relaunch” of the product in 2013. Thus, Anderson has demonstrated that he is reasonably likely to succeed on the merits of his claim that TOL was infringing the Patents.
2. Irreparable Harm
“[T]he irreparable harm inquiry seeks to measure harms that no damages payment, however great, could address.” Celsis In Vitro, Inc. v. CellzDirect, Inc.,
At the evidentiary hearing, Anderson offered persuasive testimony on all of these points. Anderson testified that he has been seeking to utilize his Patents for a re-launch of the HoverDisc or a similar toy with other toy manufacturers, but the inability to demonstrate that he can offer an exclusive license for the Patents is preventing him from entering into any deals. Anderson also testified that TOL recently has been producing Hover-Discs of poor quality, thereby diminishing
3. The Balance of Hardships
With respect to the balance of hardships, a district court “must balance the harm that will occur to the moving party from the denial of the preliminary injunction with the harm that the non-moving party will incur if the injunction is granted.” Hybritech Inc. v. Abbott Labs.,
Here, the balance of hardships favors Anderson. To the extent TOL incurs damages from ceasing its manufacturing and marketing efforts for the HoverDisc, that harm is self-inflicted and is the natural consequence of its infringing activity. TOL acted without a valid license to exploit the Patents and continued to press forward with its projected 2013 re-launch of the HoverDisc, even after Anderson appropriately challenged TOL’s right to exploit the Patents.
4. Public Interest
The patent statute, 35 U.S.C. § 261, which exercised power granted to Congress by the United States Constitution, Art. I § 8, cl. 8, reflects a strong public policy interest in “promot[ing] the progress of the useful arts.” Smith,
5. Conclusion
Anderson has justified the issuance of a preliminary injunction against TOL to restrain it from infringing his Patents.
Y. Motion for Leave to File Motion for Partial Summary Judgment
Anderson seeks leave to file a motion for partial summary judgment on the following three issues: (1) the License Agreement was terminated; (2) TOL has no rights under the License Agreement; and (3) TOL infringed the Patents. In response, TOL argues that the motion is premature, because there are substantial disputes concerning these and other material facts that will require discovery. TOL argues, inter alia, that the facts will show that Anderson lacks standing to bring some or all of his claims, that Anderson will not be able to demonstrate that TOL actually infringed the Patents, and that the Patents may be invalid in light of KSR Int'l Co. v. Teleflex Inc.,
As an initial matter, the court’s findings herein have been made under the Rule 65 standard, which does not preclude the parties from addressing those issues at a later stage in the case upon a complete evidentiary record. Furthermore, this case presents a myriad of factual and legal issues that require discovery and/or further consideration by the parties.
CONCLUSION
For the reasons stated herein, Anderson’s Motion for Preliminary Injunction was granted, TOL’s Motion to Dismiss or Transfer will be denied without prejudice, and Anderson’s Motion for Leave to
An appropriate order will enter.
Notes
. The parties presented witnesses and introduced documents into evidence at the PI Hearing. (See Docket Nos. 37 (list of witnesses and exhibits) and 39 (PI Hearing transcript)). The parties have also introduced various other sworn materials, including: (1) Anderson’s Verified Complaint (Docket No. 1) (with associated attachments); (2) a declaration from Dayne Sieling in support of TOL’s Motion to Dismiss or Transfer (Docket No. 18, Attachment 1) ("Sieling Decl. I”); (3) a declaration from Anderson in support of his request for a preliminary injunction (Docket No. 19) ("Anderson Decl.”); (4) declarations from Sieling and Sean D. O'Brien in support of TOL's Response in opposition to Anderson’s request for preliminary injunctive relief (Docket No 23, Exs. 1 ("Sieling Decl. II”) and 2 ("O’Brien Decl. I”)); and (5) a declaration from O'Brien in support of TOL's
. TOL filed a copy of the bankruptcy court docket and certain entries contained therein as an exhibit to the Second O’Brien Declaration. {See O'Brien Decl. II, Ex. 2.) The court takes judicial notice of these materials.
. The Sieling Declarations do not specify the time period in which Anderson received these royalty payments, but, for purposes of this Memorandum, the court will assume that Sieling is referring to the time period from the date of the License Agreement through the last royalty payment that Overbreak made to Anderson in 2006.
. TOL now contends that, under a so-styled "Nunc Pro Tunc Agreement of Succession,” executed after this lawsuit was filed, it actually succeeded to all of the rights and liabilities of Overbreak on June 15, 2007, expressly including all of Overbreak's rights and obligations under the License Agreement. (Sieling Decl. II, Ex. 2 (1/29/13 Nunc Pro Tunc Agreement); PI Hearing Transcript 23:23-24:11.) As explained herein, TOL has not established that this document has any retroactive legal effect for purposes of this lawsuit, and it does not comply with the License Agreement assignment provisions, in any case. (See also Docket No. 26, Anderson's Response in opposition to TOL's Motion to Dismiss or Transfer, at p. 6 n. 6.)
. Anderson also asserts a separate count for a declaratory judgment.
. The injunction was conditioned on the posting of a bond by Anderson, which Anderson accordingly posted on February 14, 2013. (Docket No. 38.)
. TOL urges the court to find that the Nunc Pro Tunc Agreement — purportedly signed by
. Whether TOL could be liable for the debts of Overbreak — if any claims against Over-break by Anderson remain actionable — under an alter ego or successor liability theory may present a distinct legal question, with respect to which the court expresses no opinion.
On a separate note, ¶ 5 of the License Agreement provided that it would not renew if, upon a renewal date, the Licensee was in material breach of the agreement. As of the second renewal date, Overbreak (and/or TOL) had let the Foreign Patents expire without notice to Anderson, in plain violation of ¶ 11(c), and had failed to cure the royalty payment deficiencies identified by Anderson, which may have constituted a violation of ¶ 6. Also, Overbreak and TOL had not furnished royalties or provided royalty statements to Anderson from Q4 2006 forward, in violation of ¶ 2(c). If ¶ 5 was self-executing and one or more of these breaches constituted a material breach' — which appears to be the case — the agreement would have expired by its own terms on December 31, 2009, even if it had otherwise remained effective after June 2007.
. Until TOL filed its Reply, the court was not aware of the corporate history of PhoenixArts, including that it was administratively dissolved in September 2004, reinstated in October 2004, and administratively dissolved a second and final time in August 2005. The courts also notes that the parties have not drawn any distinction between the legal effect of the first dissolution and the legal effect of the second dissolution.
. To the extent TOL’s argument concerning the effect of the Bankruptcy Case on Anderson’s rights can be construed as a challenge to his ownership of the Patents, the court addresses that issue in a later section.
. Here, Anderson seems to be attempting to "have his cake and eat it too’’: he seeks to enforce certain provisions of the License Agreement against TOL, yet argues that the
. Federal courts have expressed some uncertainty as to whether Rule 12(b)(1), Rule 12(b)(3), Rule 12(b)(6), or § 1406 provides the appropriate vehicle for considering whether to enforce a forum selection clause. In an abundance of precaution, TOL has moved under each of these provisions. Because the court finds that TOL has no right to assert the forum selection clause in the License Agreement in the first place, the court need not address which rule(s) or statute would provide an appropriate means for its enforcement.
. In April 2005, Congress amended § 521 to add certain provisions, see PL 109-8, 2005 § 256 (2005), but those amendments did not obviate Anderson’s general obligation to disclose property that constituted "property of the estate.”
. Under Chapter 13, a debtor remains in possession of all properly of the bankruptcy estate and can exercise the rights and powers of the trustee under certain circumstances. Id. § 1306(b) and § 1303. Here, the parties have not addressed whether the purported license to PhoenixArts was enforceable in the absence of notice to the Chapter 13 Trustee.
. On February 5, 2003 — one year after filing for Chapter 13 bankruptcy — Anderson filed the Articles of Organization for PhoenixArts with the Tennessee Secretary of State. On February 14, 2003, Anderson filed the first Patent Application in his own name, after which PhoenixArts claimed sole ownership of the Patents and associated Applications in the License Agreement on February 22, 2003. Anderson then collected over a million dollars in royalties from Overbreak based on exploitation of the Patents, Patent Applications, and/or Foreign Patents in his name, but he does not appear to have disclosed that income in the Bankruptcy Case. Furthermore, even after the alleged license to PhoenixArts purportedly "reverted” to Anderson when PhoenixArts was administratively dissolved, Anderson did not disclose the Patents, pending Patent Applications, Foreign Patents, and/or the associated royalty income stream in the Bankruptcy Case. Anderson now claims that he always owned these assets. Given this chain of events, if there is a reasonable explanation for Anderson's failure to disclose these
. Even if Anderson has standing to assert claims for unpaid royalties by Overbreak, this case could present circumstances justifying an exercise of judicial estoppel to bar the contract claims. For example, courts have often found that, where a debtor unreasonably fails to declare a viable cause of action as a contingent asset in Chapter 13 proceedings, that debtor may be judicially estopped from asserting that cause of action following the close of a bankruptcy case. See, e.g., Richardson v. United Parcel Service,
. It may be that, if the bankruptcy court were to reopen the Bankruptcy Case, Anderson's interests in the Patents could be subject to those proceedings and the bankruptcy trustee could seek to intervene in this case as the real party in interest. Nevertheless, the Bankruptcy Case was closed several years ago, and the record here contains three patents applied for and issued in Anderson's name.
. The preliminary injunction is premised on TOL's infringing activity only. Therefore, for purposes of Rule 65, the court does not address the likelihood that Anderson will succeed on the merits of his claims other than the patent infringement claims.
. In Reebok Int’l, Ltd. v. J. Baker, Inc.,
. In oral argument, TOL characterized Anderson's claims of irreparable harm as “laughable” and emphasized that Anderson stood to earn a lot of money if TOL proceeded with its early 2013 re-launch of the Hover-Disc. (See, e.g., PI Hearing Transcript at 29:8-9 and 131:21-132:15.) However, even if Anderson could profit from doing business with TOL, that fact would not obviate the irreparable harm caused by infringement of his Patent rights.
. Indeed, based on the existing record, it appears that TOL initially recognized that it did not have a valid license to the Patents. Only after Anderson backed out of the proposed licensing deal did TOL claim to have possessed a license all along. At any rate,
. For instance, both parties appear to have played fast and loose with the rights and obligations of their previous related companies — PhoenixArts vis-a-vis Anderson and Overbreak vis-a-vis TOL — leading to disputes about the legal effect of certain past acts and omissions.