July 18, 2016

Where’s My %$^&# Dollar?

By Bryan K. Wheelock, Principal

The issue of consideration in an assignment is always in the background, but only occasionally comes up.  In Memorylink Corp. v. Motorola Solutions, Inc., 773 F.3d 1266, 113 USPQ2d 1088 (Fed. Cir. 2014), the Federal Circuit had to resolve over the adequacy of consideration in a patent assignment.  Memorylink claimed that its assignment to Motorola was void for lack of consideration, since it was supported by Motorola assignment to Memorylink, which was illusory because Motorola had no rights because its employees were not inventors.

The Federal Circuit started with the axiom that consideration is a basic requirement of a contract, but nominal consideration will suffice.  Courts will not inquire into the adequacy of consideration.  The Assignment on its face stated:

 [f]or and in consideration of goods and valuable consideration of the sum of One Dollar to us in hand paid, and other good and valuable consideration, the receipt of which is hereby acknowledged . . .

The Federal Circuit agreed there was no issue of material fact because the assignment explicitly acknowledges consideration for the assignment.  The Federal Circuit said that discounting extrinsic evidence, the four corners of the agreement recited consideration.  Memorylink complained that this was merely boilerplate, but the Federal Circuit said that the use of boilerplate language does not make the stated consideration invalid or non-existent.

Other courts that have faced the issue reached a similar conclusion.  In Network Protection Sciences, LLC, v. Fortinet, Inc., 2013 WL 4479336 (N.D. Cal. 2013), the district court, applying Texas law, said that the recital “[f]or good and valuable consideration, the receipt of which is hereby acknowledged” was “conclusive: even if no actual consideration were paid.”

The lesson is that a recitation of consideration and acknowledgement of receipt is likely to be accepted by the Federal Circuit, and should be considered in every assignment.