Picture Patents, LLC. v. Aeropostale, Inc.

Filing 190

OPINION AND ORDER UNDER SEAL, that Picture Patents' motion for summary judgment is denied. The Infringement Defendants' motion to dismiss is granted. IBM's motion for summary judgment is granted except that its claim for declaratory judgment as to the ownership of any foreign or international patents and patent applications is denied without prejudice to renewal. The Fourth Amended Complaint is dismissed with prejudice. (Signed by Judge John G. Koeltl on 4/15/11) (pl)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
───────────────────────────────────
PICTURE PATENTS, LLC,
Plaintiff,
07 Civ. 5567 (JGK)
- against AEROPOSTALE, INC., ET AL.,
Defendants,

OPINION AND ORDER
UNDER SEAL

- and –
INTERNATIONAL BUSINESS MACHINES
CORPORATION,
Defendant/Counterclaimant,
- against –
PICTURE PATENTS, LLC and INTELLINET,
INC.,
Counterclaim Defendants.
───────────────────────────────────
JOHN G. KOELTL, District Judge:
This Order concerns the ownership of United States Patents
No. 6,278,455 ("the '455 Patent"), No. 5,715,416 ("the '416
Patent"), and No. 6,002,401 ("the '401 Patent"; collectively,
"the '455 Patent Family" or "the Patents"). The plaintiff,
Picture Patents, LLC ("Picture Patents"), sued Aeropostale,
Inc., Dick's Sporting Goods, Inc., Charlotte Russe, Inc., GSI
Commerce Solutions, Inc., the National Basketball Association,
NBA Properties, Inc., NBA Media Ventures, LLC, Major League
Baseball Properties, Inc., and MLB Advanced Media, L.P.
(collectively, "the Infringement Defendants"), along with other
parties not relevant to this Order, for patent infringement. The

Infringement Defendants moved to dismiss Picture Patents' claims
for lack of standing, arguing principally that the patents were
owned by International Business Machines Corp. ("IBM") rather
than Picture Patents. Picture Patents then filed the Fourth
Amended Complaint ("FAC"), which added IBM as a defendant and
sought declaratory judgment that Picture Patents owned the '455
Patent. IBM responded by bringing seven counterclaims against
Picture Patents, including requests for declaratory judgment
that IBM owns each of the patents in the '455 Patent Family. IBM
subsequently brought in Intellinet, Inc. ("Intellinet") as a
counterclaim defendant on the declaratory judgment claims.
Picture Patents and IBM cross-moved for partial summary judgment
on the claims for declaratory judgment.

I.
The following facts are undisputed, unless otherwise noted.

A.
Michelle Baker is the founder, managing member, and only
voting member of Picture Patents. (Pl.'s Rule 56.1 Stmt. ¶ 9;
IBM's Rule 56.1 Stmt. ¶¶ 199-200.) She is also the founder,
president, and only officer of Intellinet, Inc. ("Intellinet").
(Pl.'s Rule 56.1 Stmt. ¶ 8; IBM's Rule 56.1 Stmt. ¶¶ 196-97.)

2

On November 7, 1990, while a doctoral student at Columbia
University, Baker began work as a part-time employee at IBM.
(Pl.'s Rule 56.1 Stmt. ¶¶ 11-13; IBM's Rule 56.1 Stmt. ¶ 1.)
Baker worked in IBM's Software Performance Analysis Group, which
"evaluated existing software code to improve code performance."
(Pl.'s Rule 56.1 Stmt. ¶ 18.) The day she began working at IBM,
Baker signed an "Agreement Regarding Confidential Information
and Intellectual Property" ("the IP Agreement"). (Pl.'s Rule
56.1 Stmt. ¶ 14; IBM's Rule 56.1 Stmt. ¶ 2; Corrected Decl. of
Calvin Wingfield ("Wingfield Decl.") Ex. 10.) Paragraph 4 of the
IP Agreement stated, in pertinent part:
4. I hereby assign to IBM my entire right, title and
interest in any idea, invention, design of a useful
article
(whether
the
design
is
ornamental
or
otherwise),
computer
program
and
related
documentation, and other work of authorship (all
hereinafter called "Developments"), hereafter made or
conceived solely or jointly by me, or created wholly
or in part by me, whether or not such Developments are
patentable, copyrightable or susceptible to other
forms of protection, and [sic] the Developments: (a)
relate to the actual or anticipated business or
research or development of IBM or its subsidiaries, or
(b) are suggested by or result from any task assigned
to me or work performed by me for or on behalf of IBM
or its subsidiaries. . . .
The
above
provisions
concerning
assignment
of
Developments apply only while I am employed by IBM in
an
executive,
managerial,
product
or
technical
planning,
technical,
research,
programming
or
engineering capacity . . . .
(Wingfield Decl. Ex. 10.) Baker understood that the IP Agreement
applied regardless of where or when — whether at work or after
3

hours — she created the intellectual property. (Id. Ex. 96
("Baker Dep.") at 369:10-24.) 1
The IP Agreement allowed Baker to designate inventions that
were excluded from the scope of the assignment in two ways.
First, it provided that Paragraph 4 "[e]xcluded . . . any
Developments that [Baker] cannot assign to IBM because of prior
agreement with ___ which is effective until ___." (Id. Ex. 10)
In these blanks, Baker entered "Columbia University" and
"graduation," respectively. (Id.) The IP Agreement also allowed
Baker to identify any "Developments not assigned by Paragraph 4
in which [she has] any right, title or interest, and which were
previously made or conceived solely or jointly by [her], or
written wholly or in part by [her], but neither published nor
filed in any patent office." (Id.) Baker wrote in "none." (Id.)
In the summer of 1990, prior to receiving an offer to work
at IBM, Baker had "considered the problem of how to make
computer systems more accessible by using pictures." (Pl.'s Rule
56.1 Stmt. ¶ 11.) She "devised a solution to this problem"
"[w]hile driving to her father's home in South Carolina for the
Thanksgiving holiday in 1991." (Id. ¶ 12.) Specifically, Baker
conceived "a novel pictorial user interface that utilized data
1
The plaintiff disputes whether Baker understood the IP Agreement to apply to
inventions that were not "directly related to the tasks she was hired to
perform," but does not claim that the IP Agreement excluded inventions that
were created while on vacation or otherwise not at work or that Baker
understood it to contain such an exclusion. (Pl.'s Resp. to IBM's Rule 56.1
Stmt. ¶ 23; Hr'g Tr. Dec. 2, 2010 ("Hr'g Tr."), at 36.)

4

structures to link files to pictures and regions within
pictures." (Id.) According to Baker, she "completed conception
of the invention" during the Thanksgiving holiday break. (Id. at
6.)
Baker discussed the pictorial user interface ("the PUI" or
"the Invention") with various IBM employees over the next year
and a half. (Id. ¶¶ 20-23, 27-38; IBM's Rule 56.1 Stmt. ¶¶ 75,
94-108, 119-31, 133-39, 147-48.) She refined the PUI during work
hours, using IBM's office equipment, as well as resources
including IBM's research library, databases, and confidential
documents. (Baker Dep. 218:20-219:21, 227:5-16, 593:12-594:19,
603:20-604:20; Wingfield Decl. Ex. 40, 49, 51-53.) According to
Baker, her communications with IBM employees and use of IBM
resources were part of an attempt "to negotiate a deal with IBM
whereby IBM would assist her in patenting and commercializing
her invention." The plaintiff contends that none of the IBM
employees with whom she discussed the PUI "contributed to the
conception of the invention or its reduction to practice" and
that "Ms. Baker's only use of IBM resources relating to her
invention was limited to preparing materials for use in
presenting and working out a deal with IBM." (Pl.'s Rule 56.1
Stmt. ¶ 20, 28.)

5

Baker's employment with IBM ended in June 1993. (Pl.'s Rule
56.1 Stmt. ¶ 49.) 2 Baker claims that she communicated to IBM that
she believed that she owned the Invention, and that she intended
to file a patent application for it. (Id. ¶¶ 50-51.) IBM denies
that Baker informed IBM that she intended to file a patent
application regarding the Invention. (IBM's Resp. to Pl.'s Rule
56.1 Stmt. ¶ 50.) On June 23, 1993, Baker's manager at IBM wrote
a memo, with copies to Baker and others, that stated:
Baker stated that she assumes IBM is not interested in
her invention of "Pictorial User Interface", and is
relinquishing all claims on said invention. This memo
is to document that her assumptions are wrong and that
IBM has not relinquished any claims to said invention
or any other inventions and/or copyrightable works
made or conceived by her during her employment with
IBM.
(Pl.'s Rule 56.1 Stmt. ¶ 52; Decl. of Srilakshmi Ravi ("Ravi
Decl.") Ex. 47.)

B.
After she left IBM, Baker continued to develop the PUI and
caused three patent applications to be filed between 1994 and
1999. (Pl.'s Rule 56.1 Stmt. ¶¶ 1, 58; Ravi Decl. Ex. 1, 3, 5.)
These patent applications resulted in the issuance of the '455
Patent Family. (Pl.'s Rule 56.1 Stmt. ¶ 1; Ravi Decl. Ex. 2, 4,
2

The parties dispute the circumstances of the end of Baker's employment with
IBM. Baker claims that she was "terminated because she was spending too much
time meeting with IBM managers about her invention" (Pl.'s Rule 56.1 Stmt. ¶
49), while IBM claims that Baker "left the employ of IBM based on written
mutual agreement" (IBM's Resp. to Pl.'s Rule 56.1 Stmt. ¶ 49.).

6

6.) At some point, Baker also filed foreign and international
patent applications based on the Invention. (IBM's Rule 56.1
Stmt. ¶ 6; Baker Dep. 171:23-176:16.)
On December 4, 2003, Baker signed a document ("the
Intellinet Assignment") assigning "the entire right, title and
interest" in the Patents to Intellinet. (Ravi Decl. Ex. 10.)
On May 9, 2006, Baker signed another document ("the Picture
Patents Assignment") identifying Baker as the assignor and
purporting to transfer "the entire right, title and interest" in
the Patents to Picture Patents. (Id. Ex. 12.) Intellinet is not
mentioned in any way in the Picture Patents Assignment. The
Picture Patents Assignment was accompanied by an Assumption of
Debt Agreement ("the Debt Agreement") entered into jointly by
Picture Patents, Intellinet, and Baker, in which Picture Patents
assumed over $50,000 in debt that Baker owed to Intellinet in
exchange for her agreement "to assign her interest in [the
Inventions] to [Picture Patents] pursuant to the Assignment
Agreement dated May 9, 2006." (Id.) The Debt Agreement stated
that Intellinet "consents to the assignment of the PROMISSORY
NOTES by [Baker] to [Picture Patents] and acknowledges that
[Baker] is hereby released from any and all obligations under
the PROMISSORY NOTES." (Id.)

7

II.
Picture Patents filed a patent infringement action against
the Infringement Defendants on June 11, 2007, alleging that each
had infringed the '455 Patent. The Infringement Defendants moved
to dismiss the complaint for lack of standing on the ground that
the '455 Patent was owned by IBM, rather than Picture Patents.
Picture Patents then filed the FAC, which added a claim for
declaratory judgment against IBM as to the ownership of the '455
Patent and as to Baker's sole inventorship of the '455 Patent.
IBM responded to the declaratory judgment claim by arguing,
among other things, that Picture Patents had failed to state a
claim upon which relief could be granted and that it had failed
to provide adequate evidence of ownership. IBM also filed seven
counterclaims, seeking declaratory judgment that it owned all
three of the patents in the '455 Patent Family and any foreign
patents and patent applications corresponding to the Patents or
the patent applications that led to their issuance, as well as
bringing claims for conversion, unjust enrichment, and breach of
contract. IBM subsequently amended its counterclaims to add
Intellinet as a defendant on the claims for declaratory
judgment.
Picture Patents and IBM cross-moved for summary judgment on
their claims for declaratory judgment. Additionally, the
Infringement Defendants renewed their motion to dismiss for lack
8

of standing, arguing that either IBM owned the Patents, by
virtue of the IP Agreement, or that Intellinet owned them, by
virtue of the Intellinet Assignment. 3

III.
The motions at issue in this Order concern two sets of
questions. The first set comprises two contractual matters:
First, did IBM obtain ownership of the Patents by operation of
the IP Agreement, or was the Invention outside its scope and
thus retained by Baker? Second, assuming that Baker validly
owned the Patents that she assigned to Intellinet, did the
Picture Patents Assignment effectively assign Intellinet's
rights to Picture Patents?
If either of these questions is decided against Picture
Patents, then Picture Patents lacks standing to sue the
Infringement Defendants, as Picture Patents conceded at
argument. (Hr'g Tr. Dec. 2, 2010 ("Hr'g Tr.") at 7.) "In general
. . . only the owner of a patent has standing to sue for
infringement of the patent." Imatec, Ltd. v. Apple Computer,
Inc., 81 F. Supp. 2d 471, 481 (S.D.N.Y. 2000); see also Lujan v.
Defenders of Wildlife, 504 U.S. 555, 561 (1992) ("The party
invoking federal jurisdiction bears the burden of establishing

3

No party moved for summary judgment on IBM's counterclaims for conversion,
unjust enrichment, and breach of contract. Those claims are not at issue in
this Opinion.

9

[standing]."). If that is the case, the Court must dismiss the
case for lack of jurisdiction. See Imatec, 81 F. Supp. 2d at
480.
The second set of questions concerns IBM's ability to
assert its ownership under the IP Agreement, if the Court
concludes that the IP Agreement assigned the Invention to IBM.
Picture Patents argues that the New York statute of limitations
bars IBM from relying on the IP Agreement to interpose an
ownership-based defense against its declaratory judgment claims
or to bring counterclaims for declaratory judgment. It also
argues that IBM cannot avail itself of its rights under the IP
Agreement due to the equitable doctrines of laches and equitable
estoppel, as well as due to IBM's purported waiver or mutual
modification of the IP Agreement.
The Court will deal with each set of questions in turn.

A.
The standards that apply to a motion to dismiss for lack of
standing are similar to the standards applicable to a motion for
summary judgment. In defending a motion to dismiss for lack of
subject matter jurisdiction, the plaintiff bears the burden of
proving the Court's jurisdiction by a preponderance of the
evidence. Makarova v. United States, 201 F.3d 110, 113 (2d Cir.
2000). In considering such a motion, the Court generally must
10

accept the material factual allegations in the complaint as
true. See J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107,
110 (2d Cir. 2004). The Court does not, however, draw all
reasonable inferences in the plaintiff's favor. Id.; see also
Graubart v. Jazz Images, Inc., No. 02 Civ. 4645, 2006 WL
1140724, at *2 (S.D.N.Y. Apr. 27, 2006). Indeed, where
jurisdictional facts are disputed, the Court has the power and
the obligation to consider matters outside the pleadings, such
as affidavits, documents, and testimony, to determine whether
jurisdiction exists. See Filetech S.A. v. France Telecom S.A.,
157 F.3d 922, 932 (2d Cir. 1998); Kamen v. Am. Tel. & Tel. Co.,
791 F.2d 1006, 1011 (2d Cir.1986). In so doing, the Court is
guided by that body of decisional law that has developed under
Federal Rule of Civil Procedure 56. Kamen, 791 F.2d at 1011; see
also S.E.C. v. Rorech, 673 F. Supp. 2d 217, 220-21 (S.D.N.Y.
2009).
In deciding a Rule 56 motion, "the trial court's task . . .
is carefully limited to discerning whether there are genuine
issues of material fact to be tried, not to deciding them. Its
duty, in short, is confined at this point to issue-finding; it
does not extend to issue-resolution.” Gallo v. Prudential
Residential Servs. Ltd. P'ship, 22 F.3d 1219, 1224 (2d Cir.
1994). "The court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact
11

and the movant is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). In determining whether summary judgment is
appropriate, a court must resolve all ambiguities and draw all
reasonable inferences against the moving party. See Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986). Summary judgment is improper if there is any evidence in
the record from any source from which a reasonable inference
could be drawn in favor of the non-moving party. See Chambers v.
TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994). The nonmoving party must produce evidence in the record and "may not
rely simply on conclusory statements or on contentions that the
affidavits supporting the motion are not credible." Ying Jing
Gan v. City of N.Y., 996 F.2d 522, 532 (2d Cir. 1993).

B.
1.
Picture Patents first argues that the IP Agreement did not
apply to the Invention and that Baker therefore owned the
Invention and the corresponding Patents until she assigned those
rights to Intellinet.
The question of who owns a patent "typically is a question
exclusively for state courts." Bd. of Trustees of the Leland
Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d
12

832, 841 (Fed. Cir. 2009), cert. granted, 131 S. Ct. 502 (2010)
(No. 09-1159) (internal quotation marks omitted). The parties
agree that New York law applies to the IP Agreement. However,
"the question of whether contractual language effects a present
assignment of patent rights, or an agreement to assign rights in
the future, is resolved by Federal Circuit law." Id.
"The present assignment of a future invention divests the
inventor-assignor of ownership of the invention and
automatically vests ownership of the invention, when invented,
in the assignee." Imatec, 81 F. Supp. 2d at 481; see also
FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1573 (Fed.
Cir. 1991) (where contract grants rights in any future
inventions to assignee, "[o]rdinarily, no further act would be
required once an invention came into being" because "the
transfer of title would occur by operation of law"). Under
Federal Circuit precedent, the words "'do hereby assign'
effect[] a present assignment of . . . future inventions."
Roche, 583 F.3d at 842. The assignee of a present assignment of
future inventions "immediately gain[s] equitable title" to
assigned inventions; "once an invention [comes] into being[,]
the transfer of title [occurs] by operation of law." Id.
(internal quotation marks omitted).
Paragraph 4 of the IP Agreement reads, in relevant part: "I
hereby assign to IBM my entire right, title and interest in any
13

. . . invention . . . hereafter made or conceived solely or
jointly by me, or created wholly or in part by me . . . [if] the
[invention]: (a) relate[s] to the actual or anticipated business
or research or development of IBM or its subsidiaries, or (b)
[is] suggested by or result[s] from any task assigned to me or
work performed by me for or on behalf of IBM or its
subsidiaries." (Wingfield Decl. Ex. 10.) The words "I hereby
assign" indicate a present assignment of a future invention.
Roche, 583 F.3d at 842. Therefore, if the Invention fell within
the IP Agreement, IBM held title to it from the moment it came
into being, id., and Baker had nothing to assign to Intellinet
or Picture Patents.
The IP Agreement clearly applies to the Invention and the
corresponding Patents. An invention fell within the IP Agreement
if it (a) was "made or conceived solely or jointly by" Baker;
(b) was made or conceived while she was employed by IBM "in an
executive, managerial, product or technical planning, technical,
research, programming or engineering capacity"; (c) was not
excluded by reason of prior assignment to Columbia University;
and (d) was "relate[d] to the actual or anticipated business or
research or development of IBM or its subsidiaries" or was
"suggested by or result from any task assigned to [Baker] or
work performed by [Baker] for or on behalf of IBM or its
subsidiaries." (Wingfield Decl. Ex. 10.)
14

Picture Patents concedes that the first three elements are
satisfied. First, it argues at length that Baker "made or
conceived" the Invention herself. Second, it acknowledges that
Baker was employed by IBM for purposes of the IP Agreement
during the Thanksgiving holiday, when she initially conceived of
the Invention. (Hr'g Tr. at 36.) Baker herself has testified
that she understood the IP Agreement to apply "regardless of
when" an invention was conceived (Baker Dep. at 369:19-21), thus
including inventions created during a holiday spent away from
work. Third, Picture Patents concedes that Columbia University
had no claim to the Invention and that Baker's listing of
Columbia on the IP Agreement did not preclude her from assigning
the Invention to IBM. (Hr'g Tr. at 33-34.)
The fourth element is also plainly satisfied. While Picture
Patents argues at great length in its papers that the Invention
was not related to Baker's work at IBM, it does not and cannot
seriously contest that the Invention "relate[s] to the actual or
anticipated business or research or development of IBM." (See
Picture Patents' Opp'n to IBM's Mot. for Summ. Jud. ("Picture
Patents Opp'n") 23 ("Picture Patents does not dispute that . . .
any invention remotely related to computers may somehow directly
or indirectly relate to IBM's business.").) But the IP
Agreement, by its plain terms, applies to all such inventions,
even if they do not relate to Baker's actual assigned work.
15

Accordingly, there is no factual dispute as to whether the IP
Agreement applied to the Invention; it plainly did. Therefore,
IBM owned the Patents ab initio and Baker had no interest to
assign to Intellinet or Picture Patents. 4

2.
The fact that IBM owned the Patents would be sufficient to
deprive Picture Patents of standing. The Infringement Defendants
also argue that Picture Patents lacks standing to sue because,
assuming that Baker owned the Invention as against IBM, she
assigned all interest in the Patents to Intellinet prior to the
Picture Patents Assignment and therefore could not assign them
to Picture Patents. Picture Patents concedes that the Intellinet
assignment was valid, and that Baker herself had no rights in
the Patents to transfer to Picture Patents. (Hr'g Tr. at 85-87.)
Cf. FilmTec, 939 F.2d at 1572 (where an assignor previously
assigned his patent rights, the assignor "had nothing to give to
[the second assignee] and his purported assignment to [the

4
Picture Patents argues strenuously that Baker did not understand the IP
Agreement to apply to the Invention and that she was the sole inventor of the
PUI. Neither of these arguments is relevant. One party's subjective
understanding of a contract does not alter its unambiguous terms. See, e.g.,
W.W.W. Assocs., Inc. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990)
("[W]hen parties set down their agreement in a clear, complete document,
their writing should as a rule be enforced according to its terms. Evidence
outside the four corners of the document as to what was really intended but
unstated or misstated is generally inadmissible to add to or vary the
writing."). Nor is the question of inventorship material to the operation of
the present assignment in the IP Agreement. Indeed, the fact that Baker
conceived of the Invention brings it squarely within the IP Agreement.

16

second assignee] is a nullity"). But Picture Patents argues that
the Picture Patents Assignment validly assigned the Patents to
Picture Patents nonetheless, because it constituted an
assignment by Intellinet of Intellinet's interest in the
Patents.
Patent ownership cannot be assigned without a "written
instrument documenting the transfer of proprietary rights in the
patents." Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250
(Fed. Cir. 2000); see also 35 U.S.C. § 261. Accordingly, if the
Picture Patents Assignment did not transfer Intellinet's rights
in writing to Picture Patents, Picture Patents has no rights in
the Patents and no standing to sue.
The parties assert that Delaware law applies to the Picture
Patents Assignment, because the Debt Agreement that accompanied
the Picture Patents Assignment includes a choice of law
provision specifying Delaware law as the governing law. (Ravi
Decl. Ex. 12.) Under Delaware law, an unambiguous contract will
be construed according to its terms. See Citadel Holding Corp.
v. Roven, 603 A.2d 818, 822 (Del. 1992) ("It is an elementary
canon of contract construction that the intent of the parties
must be ascertained from the language of the contract. Only when
there are ambiguities may a court look to collateral
circumstances." (internal citations omitted)). Accordingly, if

17

the Picture Patents Assignment is unambiguous, there is no need
to look beyond it to expressions of the parties' intent.
The Picture Patents Assignment unambiguously assigns
Baker's rights, rather than Intellinet's rights. The assignment
itself makes no mention whatsoever of Intellinet, but rather
specifies Baker as the "assignor." (Ravi Decl. Ex. 12.) The
accompanying Debt Agreement, too, unmistakably states that Baker
is assigning her rights, title, and interest in the Patents, and
contains no suggestion whatsoever that Intellinet owns or is
transferring any interest in them. Instead, Intellinet's only
role in the contract is as a third-party beneficiary agreeing to
the assignment of debt owed to it by Baker, and releasing Baker
from her obligations on that debt. (Id.) Neither the Debt
Agreement nor the Picture Patents Assignment is susceptible of
any other reading.
Picture Patents proffered a "clarification" signed by
Baker, Intellinet, and Picture Patents, as of October 28, 2009,
that states that "Intellinet did assign, transfer, and convey to
Picture Patents all of the rights, title and interest in and to
the Inventions effective May 9, 2006." (Ravi Decl. Ex. 13.) This
clarification, however, does not rescue the assignment. Picture
Patents acknowledges that the clarification does not alter the
Picture Patents Assignment or independently convey Intellinet's
rights to Picture Patents. (Hr'g Tr. at 37.) Instead, Picture
18

Patents argues that it proves the intent of the contracting
parties. However, if a contract is "clear and unambiguous on its
face," the Court cannot "consider parol evidence to interpret it
or search for the parties' intent." Pellaton v. Bank of N.Y.,
592 A.2d 473, 478 (Del. 1991) (internal quotation marks
omitted). Accordingly, the "clarification" cannot contradict the
unambiguous terms of the Picture Patents Assignment, which
assign only the (nonexistent) rights in the Patents that Baker
had subsequent to the Intellinet Assignment.

3.
Because Picture Patents has never owned the Patents, it
lacks standing to sue the Infringement Defendants for patent
infringement. As the Court of Appeals for the Federal Circuit
recently made clear, a plaintiff cannot sue if it cannot
establish ownership of a patent, even if a statute of
limitations would bar the defendant (or some other party) from
suing the plaintiff. See Roche, 583 F.3d at 848-49. As discussed
above, Baker assigned the Invention later embodied in the '455
Patent to IBM in the IP Agreement, and therefore had nothing to
assign to Picture Patents. The statute of limitations cannot
cure this defect. Even if that were not so, the Picture Patents
Assignment would still have been a nullity and Intellinet,
rather than Picture Patents, would be the current owner of the
19

Patents. Accordingly, Picture Patents lacks standing to sue for
infringement of the '455 Patent, and its claims against the
Infringement Defendants must be dismissed for lack of standing.
See Imatec, 81 F. Supp. 2d at 481, 483 n.5.

C.
Having found that Baker assigned the Invention to IBM in
the IP Agreement, the question remains whether IBM can rely on
the IP Agreement, and for what purposes. Picture Patents argues
that IBM cannot avail itself of its ownership rights under the
IP Agreement due to (1) the expiration of the statute of
limitations, (2) the equitable doctrines of laches and equitable
estoppel, and (3) waiver or mutual modification of the IP
Agreement. Picture Patents maintains that these defects prevent
IBM from either defending against Picture Patents' claim for
declaratory judgment on the grounds of IBM's ownership or
obtaining a declaratory judgment in its favor.

1.
a.
Under New York law, contract claims are generally subject
to a six-year statute of limitations. See N.Y. C.P.L.R. §
213(2); Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 76

20

(2d Cir. 1998). 5 IBM does not dispute, and the Court will assume
for the purposes of this motion, that this statute of
limitations has expired and that IBM's claim to ownership of the
Patents would therefore be barred if the statute of limitations
applies. In the posture of this case, however, the statute of
limitations does not bar IBM from raising IBM's ownership of the
Patents as a defense against Pictures Patents' claims or in
counterclaims for declaratory judgment.
The Federal Circuit recently dealt with the applicability
of statutes of limitations to defenses and counterclaims in
suits concerning patent infringement and ownership in Roche. 6 In
that case, Stanford University had sued Roche for infringement
of patents assigned to Stanford by a researcher. Roche, 583 F.3d

5

IBM argues that contracts creating an automatic assignment of a property
interest are exempt from the six-year statute of limitations and are not
subject to any statute of limitations. The sole case that IBM cites for this
supposed rule, Yager Pontiac, Inc. v. Fred A. Danker & Sons, Inc., 330
N.Y.S.2d 409 (Sup. 1972), aff'd, 343 N.Y.S.2d 209 (App. Div. 1973), aff'd,
313 N.E.2d 340 (N.Y. 1974), does not support its argument. Yager Pontiac held
that a contract granting "a present interest in real property . . . is not
governed by the six-year Statute of Limitations." Id. at 415. The operative
fact in this holding is clearly that the case concerned a present interest in
real property, not that it concerned a contract granting a present interest.
Under New York law, claims based on ownership interests in real property are
governed by separate statutes of limitations. See, e.g., N.Y. C.P.L.R. §
212(a); N.Y. R.P.A.P.L. § 2001. IBM provides no authority, and the Court is
aware of none, for the proposition that the generally applicable six-year
statute of limitations for contract actions excludes contracts granting
present interests in personal or intangible property.
6
In addition to its discussion of statute of limitations issues, Roche
concerned the construction of the Bayh-Dole Act, 35 U.S.C. §§ 200 et seq. See
Roche, 583 F.3d at 844-45. The Supreme Court granted certiorari to consider
this portion of the decision in Roche. See 131 S. Ct. 502. A review of the
petition for certiorari and the opposition thereto suggests that the Supreme
Court's consideration of the case is unlikely to disturb any aspect of Roche
that is relevant to the present case, and neither party has suggested that
this case should be stayed pending the resolution of Roche.

21

at 838. Prior to the assignment to Stanford, the researcher had
assigned the patents to a company later purchased by Roche; this
assignment occurred outside the applicable four-year statute of
limitations. Id. at 841-42, 846. Roche asserted its ownership of
the patents at issue "as a declaratory judgment counterclaim, an
affirmative defense, and a challenge to Stanford's standing to
sue for infringement." Id. at 838. As to Roche's declaratory
judgment counterclaim and its affirmative defense, the Federal
Circuit applied California law to determine whether the relevant
statute of limitations applied, and concluded that California
law would apply the statute of limitations to bar Roche's
declaratory judgment counterclaim but would not apply the
statute of limitations to its affirmative defense. Id. at 83941, 846-48. It also determined that, while Roche could not
obtain a judgment of ownership in its favor, Stanford
nevertheless lacked standing to sue for patent infringement
because it could not carry its burden of establishing ownership,
due to the invalidity of the researcher's assignment of the
patents to Stanford. Id. at 841-42, 848-49.
Roche thus establishes that state law determines whether
statutes of limitations apply to defenses and counterclaims
based on patent ownership. See Roche at 839-41, 846-48. Picture
Patents argues that Roche is distinguishable as to IBM because
Roche was both defending against an infringement claim and
22

asserting its ownership, whereas the Infringement Defendants and
IBM are unrelated entities. Picture Patents argues that because
IBM (unlike Roche) is solely defending against a declaratory
judgment and is not charged with patent infringement, its
defenses and counterclaims for ownership are the equivalent of
offensive actions for the purposes of statutes of limitations.
However, Picture Patents provides no reason to treat this
distinction as one of consequence.
Similarly, Picture Patents argues that Roche spoke only of
affirmative defenses, and not other types of defenses; because
IBM's claim is in the form of a general denial or a motion to
dismiss for failure to state a claim upon which relief may be
granted, Picture Patents maintains, it is outside the scope of
Roche. As with Picture Patents' previous attempt to distinguish
Roche, this reasoning is meritless. Nothing in Roche suggests
that one rule governs the pleading of ownership as an
affirmative defense to a claim of infringement while another
rule governs the pleading of ownership as a defense that the
plaintiff failed to state a claim upon which relief can be
granted or does not own the patents at issue. Even if such a
distinction could be read into Roche, it would be unreasonable
to hold that the Court should look to a state's statute of
limitations, but not the rules determining when that statute of

23

limitations should apply, in considering whether a defense may
be brought.

b.
The question, then, is whether New York law allows a party
to assert an otherwise time-barred claim as a defense or
counterclaim. New York law provides for the assertion of an
otherwise time-barred defense or counterclaim if it "arose from
the transactions, occurrences, or series of transactions or
occurrences, upon which a claim asserted in the complaint
depends, . . . to the extent of the demand in the complaint."
N.Y. C.P.L.R. § 203(d); see also Bloomfield v. Bloomfield, 764
N.E.2d 950, 952 (N.Y. 2001) ("It is axiomatic that claims and
defenses that arise out of the same transaction as a claim
asserted in the complaint are not barred by the Statute of
Limitations, even though an independent action by the defendant
might have been time-barred at the time the action was
commenced."). Section 203(d) functions "only as a shield for
recoupment purposes, and does not permit the defendant to obtain
affirmative relief." DeMille v. DeMille, 774 N.Y.S.2d 156, 158
(App. Div. 2004); see also Int'l Fid. Ins. Co. v. Cnty. of
Rockland, 98 F. Supp. 2d 400, 410 n.2 (S.D.N.Y. 2000).
Picture Patents does not dispute that IBM's defenses based
on its ownership of the Invention and its declaratory judgment
24

counterclaims "arose from the same transactions, occurrences, or
series of transactions or occurrences." (Hr'g Tr. at 26.)
Instead, Picture Patents argues that IBM's defenses and
counterclaims are barred because § 203(d) is limited to
traditional claims of recoupment. (Picture Patents Reply to
IBM's Opp'n to Picture Patents' Mot. for Summ Jud. 1-2.) This
argument is drawn from the statement in some cases that "[i]n
order to fall within § 203(d), 'the counterclaim must "seek a
recovery-back predicated on some act or fact growing out of the
matter constituting the cause or ground of the action
brought."'" Estate of Mantle v. Rothgeb, 537 F. Supp. 2d 533,
544 (S.D.N.Y. 2008) (quoting First Fid. Bank N.A. N.J. v.
Companhia de Navegacao Maritima Netumar, 637 F. Supp. 1182, 1185
(S.D.N.Y. 1986) (quoting SCM Corp. v. Fisher Park Lane Co., 358
N.E.2d 1024, 1027 (N.Y. 1976))). This language, however, comes
from cases distinguishing true recoupments from set-offs — that
is, cases in which it is disputed whether the putative
counterclaim truly arises "from the same transactions,
occurrences, or series of transactions or occurrences." See,
e.g., Mantle, 537 F. Supp. 2d at 544-46; First Fid., 637 F.
Supp. at 1184-85; SCM, 358 N.E.2d at 1027. Picture Patents has
not provided any authority for recasting this limitation as a
requirement that a defense or counterclaim be limited to
recoupment, and the Court has found no cases treating it as
25

such. In this case, Picture Patents has sought a declaratory
judgment as to the ownership of the patent.
This disposes of Picture Patents' argument that IBM cannot
oppose Picture Patents' claim for declaratory judgment based on
the IP Agreement. As a defense to Picture Patents' claim, IBM's
reliance on its otherwise time-barred claim does no more than
negative Picture Patents' claim for relief, and thus does not
exceed "the extent of the demand in the complaint." N.Y.
C.P.L.R. § 203(d). IBM therefore may assert Baker's lack of
ownership under the IP Agreement as a defense to Picture
Patents' claim for declaratory judgment. As discussed above,
IBM's interpretation of the IP Agreement is correct, and leaves
no genuine dispute of material fact as to whether Picture
Patents owns the '455 Patent. Therefore, IBM is entitled to
summary judgment dismissing Picture Patents' claim for
declaratory judgment as to the ownership of the '455 Patent.
That Picture Patents cannot obtain a declaratory judgment
in its favor, however, does not necessarily mean that IBM can
obtain a judgment on its counterclaims for declaratory judgment.
As Roche demonstrates, a defendant that has a valid defense
against a claim of infringement must still be able to bring a
counterclaim under the applicable state law in order to obtain a
declaratory judgment as to ownership. There is a plausible
argument that a declaratory judgment in IBM's favor would
26

constitute "affirmative relief" that is beyond the scope of a §
203(d) counterclaim. See DeMille, 774 N.Y.S.2d at 158. The Court
of Appeals for the Second Circuit has held that, at least in
cases where the party seeking a declaratory judgment is the
"aggressor" in a course of litigation, § 203(d) does not permit
use of a time-barred defense to initiate an action for a
declaratory judgment. See 118 E. 60th Owners, Inc. v. Bonner
Props., Inc., 677 F.2d 200, 204 (2d Cir. 1982). However, the
Court of Appeals carefully limited its holding to plaintiffs
that are "attempting to employ [§ 203(d)] in other than a
defensive fashion," id., leaving open the question of whether
otherwise time-barred declaratory judgments are ever permissible
as counterclaims under § 203(d).
The discussion of the policy concerns underlying § 203(d)
in 118 E. 60th Owners — chiefly, "the prevention of stale
litigation and the protection of repose" — strongly suggests
that a declaratory judgment counterclaim should be permitted in
a case such as this. Id. at 203. In 118 E. 60th Owners, the
plaintiff had sued on a decade-old contract claim, arguing that
it was entitled to a declaratory judgment that the defendant's
alleged wrongs afforded it a setoff to and a defense against
hypothetical claims that the defendant might one day bring. Id.
at 202. Thus, it was the plaintiff who "haled the defendants
into court and disturbed the equilibrium between the parties";
27

as far as the opinion reveals, the defendant had done nothing to
bring the moribund dispute into the judicial system. Id. at 204.
In such a situation, plainly, the availability of a declaratory
judgment would defeat the purposes of the statute of limitations
and encourage stale litigation.
In this case, by contrast, Picture Patents is plainly the
"aggressor," and IBM has been haled into court only at Picture
Patents' insistence. Picture Patents sued IBM to obtain a
declaratory judgment that would aid it in its suit against the
Infringement Defendants, waiting to do so until years after the
relevant events and the expiration of the applicable statute of
limitations. It is thus Picture Patents that seeks "to place a
question before a court and then prevent the opposing party from
disputing issues lying at the foundation of the claim." 118 E.
60th Owners, 677 F.2d at 203. To bar IBM from asserting a
counterclaim to prove ownership where another claimant has
already done so "would provide an incentive to delay bringing
some claims until a [counterclaim] would be time-barred." Id. at
203.
In this posture, allowing IBM to obtain a declaratory
judgment would advance the purposes of New York's statute of
limitations. The Court has already held that Picture Patents has
no claim to ownership of the Patents, and that IBM obtained
title by virtue of the IP Agreement; rejecting IBM's declaratory
28

judgment counterclaims would needlessly cloud title to the
Patents and invite duplicative litigation should IBM seek to
enforce any of its rights as owner of the Patents. Declaratory
judgment in IBM's favor does not "distur[b] the equilibrium
between the parties," id. at 204, but merely confirms a legal
fact that existed prior to the initiation of the lawsuit. 7 It is
thus within the scope of § 203(d).
Accordingly, IBM's counterclaims for ownership of the '455
Patent Family are not time-barred. As previously discussed, IBM
obtained title to the Invention by operation of the IP
Agreement, and therefore it is entitled to a declaratory
judgment regarding the ownership of the resulting Patents.
IBM's counterclaims include not only the '455 Patent but
also the '416 and '401 Patents and several foreign or
international patents and patent applications. Picture Patents
does not argue that IBM's counterclaims should be limited to the
'455 Patent or that its claims to any other patents go beyond
"the extent of the demand in the complaint." Moreover, the '455
Patent is based on a patent application that was a continuation
of the applications that resulted in the issuance of the '416
and '401 Patents (Ravi Decl. Ex. 6 at 1), hence ownership of the

7

It is important to emphasize that IBM's other counterclaims — for
conversion, unjust enrichment, and breach of contract — are not at issue in
this motion, and that they may be barred under § 203(d) even if IBM's
declaratory judgment counterclaims are permitted.

29

'455 Patent necessarily entails ownership of the '416 and '401
Patents.
With regard to the foreign and international patents and
patent applications, however, there is insufficient evidence in
the record to grant summary judgment to IBM at this time. The
only description of these patents and patent applications
appears to be Baker's deposition testimony. (Baker Dep. 171:23176:16.) The Court cannot determine from this bare
identification of patents that they are within the scope of the
Invention assigned in the IP Agreement. Because IBM has failed
to proffer facts that establish its entitlement to declaratory
judgment regarding the foreign and international patents and
patent applications, its motion for summary judgment on that
counterclaim is denied with leave to renew.

2.
Picture Patents next argues that IBM's counterclaims for a
declaratory judgment of ownership are barred by laches or
equitable estoppel. Neither of these arguments is meritorious.
Laches is "an equitable bar, based on a lengthy neglect or
omission to assert a right and the resulting prejudice to an
adverse party." Saratoga Cnty. Chamber of Commerce, Inc. v.
Pataki, 798 N.E.2d 1047, 1055 (N.Y. 2003). "To establish laches,
a party must show: (1) conduct by an offending party giving rise
30

to the situation complained of, (2) delay by the complainant in
asserting his or her claim for relief despite the opportunity to
do so, (3) lack of knowledge or notice on the part of the
offending party that the complainant would assert his or her
claim for relief, and (4) injury or prejudice to the offending
party in the event that relief is accorded the complainant."
Cohen v. Krantz, 643 N.Y.S.2d 612, 614 (App. Div. 1996); accord
Newbro v. Freed, 409 F. Supp. 2d 386, 399 (S.D.N.Y. 2006),
aff'd, No. 06-1722, 2007 WL 642941 (2d Cir. Feb. 27, 2007)
(summary order).
Picture Patents has not established that it is entitled to
relief based on the doctrine of laches. The delay between
Baker's departure from IBM and IBM's filing of a claim for
declaratory judgment, without more, is insufficient to require
application of laches. See Saratoga Cnty., 798 N.E.2d at 1055
("The mere lapse of time, without a showing of prejudice, will
not sustain a defense of laches.") Picture Patents has shown
neither inequitable conduct on IBM's part nor prejudice to its
interests. Most importantly, IBM expressed unequivocally to
Baker (the founder of both Picture Patents and Intellinet) at
the time of her departure that Baker was "wrong" to "assum[e]
IBM is not interested in her invention of 'Pictorial User
Interface', and is relinquishing all claims on said invention."
(Ravi Decl. Ex. 47.) Baker and Picture Patents therefore cannot
31

claim that they lacked "knowledge or notice," Cohen, 643
N.Y.S.2d at 614, that IBM maintained a claim to ownership of the
Invention. Picture Patents argues that IBM was required to do
more to assert or protect its ownership, but provides no
authority for such a requirement. Nor can Picture Patents,
Baker, or Intellinet argue that they began incurring expenses
only after IBM had allowed its claims to grow stale, given that
Baker filed the first patent application based on the Invention
just 15 months after IBM notified Baker of its position. (Ravi
Decl. Ex. 1 at 1.) Any expenses incurred in the pursuit of the
patent applications or the infringement actions are the result
of their own willful decision to proceed in the face of IBM's
clear assertion of its ownership rights, rather than the product
of IBM's neglect or omission.
Similarly, Picture Patents has not made out a claim of
equitable estoppel. "Under New York law, the elements of
equitable estoppel are with respect to the party estopped: (1)
conduct which amounts to a false representation or concealment
of material facts; (2) intention that such conduct will be acted
upon by the other party; and (3) knowledge of the real facts."
In re Vebeliunas, 332 F.3d 85, 93-94 (2d Cir. 2003). Picture
Patents has provided no evidence of "conduct which amounts to a
false representation or concealment of material facts" and has
therefore failed to raise a genuine dispute as to whether IBM
32

should be estopped from claiming ownership. Picture Patents
points to communications between IBM and Baker prior to her
termination that, it argues, gave the impression that it
accepted Baker's claims of ownership. But the record does not
contain any representations by IBM that Baker owned the
Invention, and IBM adequately resolved any ambiguity those
discussions may have created with its unequivocal assertion of
ownership upon Baker's departure.

3.
Picture Patents also argues that IBM waived its ownership
rights under the IP Agreement or that the parties modified that
contract. These arguments fail as well.
Under New York law, "for conduct to amount to a waiver . .
. , it 'must not otherwise be compatible with the agreement as
written;' rather, 'the conduct of the parties must evidence an
indisputable mutual departure from the written agreement.'"
Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 783 (2d
Cir. 2003) (quoting Rose v. Spa Realty Assocs., 366 N.E.2d 1279,
1283 (1977) (brackets omitted)). Picture Patents argues that IBM
waived its claim under the IP Agreement in an email in which an
IBM employee explained what could happen if Baker owned the
patent and in subsequent conversations about forming a joint
venture to develop the PUI. (Picture Patents Opp'n to IBM's Mot.
33

for Summ. Jud. 22-23.) However, the email in question makes
clear that the sender was not sure "what [Baker] actually
signed" and so could not state who owned the Invention. (Ravi
Decl. Ex. 31.) It also points out: "If your invention belongs to
IBM, then IBM decides whether or not to file, and you have no
rights." (Id.) Nothing in the record suggests that any of IBM's
subsequent communications stated or even assumed that Baker
owned the Invention; rather, they are entirely consistent with
IBM maintaining ownership of the Invention and contemplating
working with Baker to develop it. Thus, none of the conduct
alleged by Picture Patents is incompatible with the IP
Agreement.
Similarly, conduct that is "wholly consistent with" a
contract is insufficient to demonstrate modification of that
contract. Dallas Aerospace, 352 F.3d at 783. Accordingly, there
is no basis for finding the IP Agreement modified to grant Baker
ownership over the Invention.

D.
The foregoing discussion disposes of all claims in the
current motions save one: Picture Patents' motion for summary
judgment on its claim for a declaratory judgment that Baker is
the sole inventor of the PUI. To establish an actual controversy
giving a court jurisdiction to grant declaratory judgment over
34

inventorship, a plaintiff must aver at least that it holds a
recognized interest in a patent that could be adversely affected
by another claim of inventorship." Fina Oil Chem. Co. v. Ewen,
123 F.3d 1466, 1471 (Fed. Cir. 1997). Recognized interests
include an ownership interest, see id., or "a concrete financial
interest in the patent," Chou v. Univ. of Chicago, 254 F.3d
1347, 1359 (Fed. Cir. 2001).
Given the resolution of its other claims, Picture Patents
cannot bring this claim. It lacks any ownership interest, as
discussed above, and has not identified any other cognizable
concrete financial interest in the patent. Cf. Chou, 254 F.3d at
1359 (finding a concrete financial interest where an inventor
who had assigned her ownership rights claimed that the assignee
was obligated to pay royalties to her as an inventor).
Therefore, Picture Patents' claim for a declaratory judgment
with respect to inventorship is dismissed.

CONCLUSION
Picture Patents' motion for summary judgment is denied. The
Infringement Defendants' motion to dismiss is granted. IBM's
motion for summary judgment is granted except that its claim for
declaratory judgment as to the ownership of any foreign or
international patents and patent applications is denied without

35

prejudice to renewal. The Fourth Amended Complaint is dismissed
with prejudice.
SO ORDERED.
Dated:

New York, New York
April
, 2011
____________________________
John G. Koeltl
United States District Judge

36

prejudice to renewal. The Fourth Amended Complaint is dismissed

with prejudice.

SO ORDERED.

Dated:

New York, New York
April)'-' 2011

A~~'
\j
~

John G. Koeltl

ed States District Judge

36