Petition for Writ of Certiorari — Weres v. Weres

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IN THE

Supreme Court of the United States

OCTOBER TERM, 2001

OLEH WERES

Petitioner,

Vv.

NANCY WERES

Respondent.

Petition for Writ of Certiorari to the

California Court of Appeal, District 1

PETITION FOR WRIT OF CERTIORARI

HAROLD D. MESSNER LYNN S. YOUNG

1021 Nebraska Street Counsel of Record

Vallejo, CA 94590 NAPA LEGAL CLINIC

(707) 557-8709 812 Third Street

Napa, CA 94559

Counsel for Petitioner (707) 257-7333

Oleh Weres

November 9, 2001

BBS RR TEER ag i CRESTLINE ONE REL LEAL ELI ELE IODA DELILE LL LLL

QUESTIONS PRESENTED

The U.S. Court of Appeals, 5" Circuit has ruled that

copyrights acquired during marriage are separate property

owned and controlled by the artist-spouse, but the net

economic benefits therefrom are divisible community property

under Louisiana’s community property regime. Most cases on

point from several states accords with this decision in

application to patents as well as copyrights, commonly

apportioning more than half of future benefits to the

inventor/ author spouse in recognition of post-marital efforts

that may be needed to realize benefits.

California courts hold that the patents or copyrights

themselves, as well as the benefits flowing from them are

community property to be divided equally at dissolution of

marriage, giving the other spouse equal powers over the patent

or copyright as tenants-in-common and precisely half of the

postmarital economic benefits. This principle has been

affirmed in the case at bench.

Petitioner agrees that his former spouse should receive an

equitable portion of future benefits from the marital patents.

The questions presented, therefore, are:

1) Should the treatment of patents and copyrights in

marriage be uniform nationwide?

2) During marriage and after dissolution, should titular

ownership and control of the patent or copyright remain

entirely with the inventor/ author?

3) After dissolution, should the spouse receive exactly

one-half of the economic benefits flowing from the patent or

inventor/author to realize these benefits?

4) May a state court transfer an inventor's obligations

before his coinventors to inventor’s former spouse?

5) Should the same rules apply to patents and copyrights?

(1i)

PARTIES TO THE PROCEEDING

Oleh Weres, PhD, Petitioner. |

Nancy Henning Weres, MD, Respondent.

RE a em

(iii)

TABLE OF CONTENTS

Nee chi cae k as eee pan ess enede ee oases 1

ec cuecenveedens 1

CONSTITUTIONAL AND STATUTORY

a 8 8 | eR.» 1

SEIS GI BOUEE GPRS ccc ccc crecccuceessvesecs 3

i se a cen ga tesenessdvbes eee 3

2. Proceedings Below ................. np Oe APNE 5

3. Marriage of Worth and California Law ............ 6

4. Decisional Law of Other States .................. 8

iy) PE UTE EPUCEENOOED oc ccc weccccseccecccese 10

6. Federal Questions Presented Below ............. 12

7. Summary and Prayer for Relief ................ 14

REASONS FOR GRANTING THE WRIT .............. 16

I. Certiorari Should be Granted to Promote National

Uniformity Governing Ownership of Patents and

DG ccbs caReveee ences echsdneeeseecese 17

II Certiorari Should be Granted Because Worth and

Lorraine Cannot be Reconciled with Federal Statute

III Certiorari Should be Granted Because Worth Favors

Decisions that Damage the Value of the Patent

Monopoly ....... FOP ETYETETeT TES TY TILE eee 22

(iv)

IV Certiorari Should be Granted Because Worth Burdens

Pe GD hak ec wesereesnsveeecevs 24

V_ Certiorari Should be Granted Because Worth Works to

the Detriment of Third Parties ................. 27

CRE aoe 0-00-0005 cb0b4 0s oendee de eav erin ces 29

APPENDIX

DOCUMENT 1

[Petitioner’s] Settlement Offers regarding Intellectual

Property prepared July 1, 1999 ...........ccceecess 31

DOCUMENT 2

Notice of Tentative Decision ...............ceeeee 45

DOCUMENT 3

I ie I i ko 9 64s oevbeeckccsdsceseans 48

DOCUMENT 4

Further Judgement on Reserved Issues

Setee eae heesAweeeuNeue sees ewhes bo kn Ke wanbaNes 53

DOCUMENT 5

Petitioner's Opening Brief to California Court of Appeals:

Sections dealing with Federal Questions ........... 57

DOCUMENT 6 .

Decision of the California Court of Appeal ......... 67

DOCUMENT 7

Review Denied by California Supreme Court ....... 82

(v)

TABLE OF AUTHORITIES

United States Constitution

BAA EEEGD sccccdcccsccncscssceveneses 1, 12, 18, 24-26

PA ELEGGEGS cccccccvsvvcseveerceensss 1, 11-13, 18, 20, 23

po. erry errr rr ye ret ee 1, 12, 16, 22

Amend. XIV, § 1, c1.3 ......-cccceccecccceves L122

Federal Statutes

pygit tem > |! ere eesdeedeMeeueecsneuneey 10

17 USC. § DOU) ... cc cccccccevecvecccccvcccones 11, 21

28 U.S.C. § 1257 (a) .. 0... cece ccc ccce cece cccccccccccees 1

fil ia) a eererrrrrrerr rr Tr rer rer rs 2,18

EME ois ee 2

Federal Courts

Ager v. Murray, 105 U.S. 126 (1881) .....-.---+-+seees: 21

Barrows v. Jackson, 346 U.S. 249 (1953) ...----eseeeeeeee 27

Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989) ... 11,

17-19

(vi)

Brown-Forman Distillers Corp. v. New York State Liquor Authority,

PU EERE 660s ecccccvescrvevauessetesseeees 25

City or Burbank v. Lockheed Air Terminal Inc., 411 U.S. 624

SE ASKS is 00 4048 6000 600 000449606600055 00 C0NTT aR 18

Cooley v. Board of Wardens, 12 How. 299 (1851) .......... 18

Dean Milk Co. v. City of Madison, Wis., 340 U.S. 349 (1951)

eR eeeNR Sha ees 26646808) 6000 t4needevnees oeuave nes 26

Edgar v. MITE Corporation, 457 U.S. 624 (1982) .......... 25

Florida Prepaid Postsecondary Education Expense Board v. College

- Savings Bank, 527 U.S. 627 (1999) ....... cc ccc ceeecceeess 21

Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979) ......... 16, 17

Jewett v. Atwood Suspender Co., 100 F. 647 (D.Verm. 1900) ...

abate se ebwN +0 urws bu nye 000440495 09560000 0REsENserS 21

Pike v. Bruce Church, Inc., 137 U.S. 137 (1970) ............ 26

Rodrigue v. Rodrigue, 55 F.Supp.2d 534 (E.D.La. 1999)

Serre cere re 10-13, 16-19, 21

Rodrigue v. Rodrigue, 218 F.3d 432 (5" Cir. 2000) [“ Rodrigue-2”]

Pi eRa Rah aKe se Sexe deeqner end eesens 11-13, 17, 19, 26, 28

Sears, Roebuck & Co. v. Stiffel Company, 376 U.S. 225 (1964) ...

Rink bag S hb ons Keke ENS koh saw eee RRL en 17

nics aks Raveou as pee 21

ap atti teil

ee ee eS ee Nene as at eee Re

(vii)

State Statutes

California Family Code § 760 ....-----seseeeererrreees 2

California Family Code § 771, subd. (a) ...-.----+++++05 2

California Family Code § 852, subd. (a) ......----+-+- 2,21

California Family Code § 1100, subd. (d) .....------- 2, 28

State Courts

Dunn v. Dunn, 148 Utah Adv. Rep. 30, 802 P.2d 1314 (1990)

: a

es ce te Ed CESS POSSE POSE ELE ES OST OOO

Hazard v. Hazard, 833 S.W.2d 911 (Tenn.App. 1991) .. 10, 14

In re Marriage of Heinze, 257 Ill.App.3d 782, 631 N.E.2d 728

OE. cnc crinwesucendectacersacesnsereerestness 9,19

Kinchen, Wife of Howes v. Howes, 436 So.2d 689,

(Louis. App.1983) ...-.-++seeeereeeereee renee srteses: 10

Lorraine v. Lorraine, 8 Cal.App.2d 687 (1935) .. 7,8, 13, 16, 17,

McDougal v. McDougal, 38 USPQ 2d, 1842 (Mich. Sup. Ct. 1996)

oe 3k Kabra aud Ru NHR e REDE SORES WEEN E ORO 9

In re Marriage of Monslow, 259 Kan. 412, 912 P.2d 735 (1996)

9, 14, 19

In re Marriage of Worth, 195 Cal.App.3d 768 (1987) ... passim

- (viii)

Law Reviews and Treatises

McCahey et al.,Valuation and distribution of marital property,

ore oer e TTT OPEC ETT TT PeE PCE re 8

F.M. Nevins, Jr., When an Author's Marriage Dies: The Copyright-

Divorce Connection, 37 J. Copyright Soc. USA 382 (1990) .. 7

D. Nimmer, Copyright ownership by the marital community:

evaluating Worth , 36 UCLA L.Rev. 383 (1988) ...... 7,18, 22

Nimmer on Copyright, §6A.03[C] and n. 50 (1992) ......... 8

M.J. Perlstein, Copyright as Community Property: Questions About

Worth Are More Than Merely Trivial, No. 11 Enter. Law Rep. 3

SPUN cd tne van bere sedans Sedeeerneveeriunsvebleceters 7

D. Polachek, The ‘Un-Worth-y’ Decision: The Characterization of

of RARE eer rr rrr rT yr Terr er ree 8, 20

C.M. Roberts, Worthy of Rejection: Copyright as Community

Property, 100 Yale L.J. 1053 (1991) ................. 7, 23-25

Oleh Weres hereby petitions for a writ of certiorari to

review the judgement of the California Court of Appeal in this

case.

Q?iNIONS BELOW

The opinions beiow were not published. They are included

in the Appendix as Documents 2,3,4 and 6.

JURISDICTION

The California Court of Appeal affirmed the decision of the

Trial Court on April 23, 2001 in an unpublished decision. The

California Supreme Court denied certiorari August 15, 2001.

This Court has jurisdiction under 28 U.S.C. § 1257 (a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

Article 1, section 8, clause 3 of the Constitution provides:

“Congress shall have the power ... to regulate Commerce

with foreign Nations, and among the several States ...”

Article 1, section 8, clause 8 of the Constitution provides:

“Congress shall have the power ... to promote the Progress

of Science and the useful Arts, by securing for limited Times to

Authors and Inventors the exclusive Right to their Respective

Writings and Discoveries.”

Article 6, clause 2 of the Constitution provides:

“This Constitution, and the laws of the United States which

shall be made in pursuance thereof ... shall be the supreme

Law of the Land; and the Judges in every State shall be bound

thereby, any Thing in the Constitution or Laws of any State to

the Contrary notwithstanding.”

Amendment 14, sect. 1, cl. 3 of the Constitution provides:

a neiemeiammemaiiameaatn

“...nor shall any State deprive any person of life, liberty, or

property, without due process of law ...”

35 U.S.C. §101 provides:

“Whoever invents or discovers any new and useful

process, machine, manufacture, or composition of matter, or

any new and useful improvement thereof, may obtain a patent

therefor ...”

35 U.S.C. §261 provides:

“... [P]atents shall have the attributes of personal property

... Applications for patent, patents or any interest therein shall

be assignable in law by an instrument in writing.”

California Family Code §760 provides:

“Except as provided by statute, all property, real or

personal, wherever situated, acquired by a married person

during the marriage while domiciled in this state is community

property.”

California Family Code §771, subd. (a) provides:

“The earnings and accumulations of a spouse ... while

living separate and apart from the other spouse, are the

separate property of the spouse.”

California Family Code §852, subd. (a) provides:

“A transmutation [from separate to community] of real or

personal property is not valid unless made in writing by an

express declaration ... by the spouse whose interest in the

property is adversely affected.”

California Family Code §1100, subd. (d) provides:

“ .. [A] spouse who is operating or managing a business ...

that is all or substantially all community personal property has

the primary management and control of the business ...

Primary management and control means that the managing

spouse may act alone in all transactions ...”

_ WO Bier ica tthe Zo PO eee

we ee ees “

STATEMENT OF THE CASE

1. Facts of the Case. Oleh Weres, a chemist, and Nancy

Henning Weres, a pediatrician, were married in 1974 and

separated February 10, 1996. Respondent was in private

practice in Sonoma, California, while Petitioner was, nd

continues to be, owner of Sonoma Research Company, located

in Napa, California. The only matter tried (commencing July

8, 1999) was disposition of Petitioner’s part interest in certain

patents and patent applications. The tec hnology

represented by the marital patents was, and remains, neither

fully developed nor marketable. Since separation, Petitioner

has invested practically his entire efforts in trying to perfect the

technology described in the patents and make it economically

viable.

Evidence and expert testimony presented at the trial

indicated that at the date of separation and the date of trial, the

patents had no ascertainable pecuniary value. However,

Petitioner testified that he intends to keep working on these

technologies in the hope and expectation that eventually they

1 The three patents obtained during marriage relate to an electrochemical

rocess for purifying wastewater, primarily on Naval vessels and in machine

shops (RT 25:18-27:27; 101:2-6;256:22-257:6; CT 216-227). A fourth patent

resulted from an application filed just prior to separation; it describes a

method for increasing the power output of electric power plants (RT 105:3-

18). A minority community interest in a fifth patent filed two years after

separation is also involved (RT 12:9-17; 544:4-545:4). In all cases, Petitioner

owns a partial interest in the patents, together with co-inventors who rely on

Petitioner to advance and represent their interests as well as his own (RT

82:5-25; 109:2-23; 509:4-19).

2 _Unrefuted testimony at RT 31:10-33:4; 59-17-23; 61:1-5; 64:23-65:4; 74:12-

17; 93:3-20; 99:19-23; 105:19-106:7; 106:25-108:3; 265:22-25.

3 Unrefuted documentary evidence at CT 471-489; CT 490-493. Testimony

at RT 41:21-23; 51:16-52:3; 62:12-63:13; 275:4-10; 267:27-268:3.

will become commercially viable.‘

The parties agreed and the courts below found that the

technology described in the patents could become quite

valuable if perfected and successfully commercialized.

Petitioner received $373,613 in external funding (mostly from

US Government agencies) for research and development

related to the technologies before the date of separation, and an

additional $924,440 in funding and commitments between the

date of separation and date of trial. This funding support

documents the faith that expert third parties have placed in

Petitioner's abilities to perfect the technologies, and shows that

the specific issues in this case are neither moot nor

hypothetical.

The basic facts of the case summarized above were

undisputed. Such “factual” disagreements as there were

amounted to speculation about the future,’ imaginative

reading of the transcript,’ and simple misstatements of fact.”

* Unrefuted testimony at RT 59:24-60:1; 104:22-105:2; 265:26-266:1; 531:25-

532:10; 536:22-537:2.

5 See fn. 10 below.

For example, the California Court of Appeal accepted Respondent's

contention that “there is substantial evidence in the record that the marital

patents could become valuable by the technological advancements of

researchers other than Petitioner” (p. 76 in the Appendix). In fact, the

testimony cited establishes only that other companies probably are working

on different, competing water purification technologies (RT 99:19-100:7), and

that some years ago other companies patented distantly similar electrodes

that serve entirely different industrial applications (RT 270:19-271:5; 272:4-

16).

7 In her Answer to Petition for [California] Supreme Court Review at p. 27,

Respondent asserted she had supported Petitioner while he worked on the

patents. This assertion is totally untrue, and conflicts with the record; for

example, in 1995 (the last year before separation) Petitioner earned $98,753

(CT 380) while Respondent earned $64,299 (CT 373, 381).

In any event, the matters disputed are not dispositive of the

federal issues.

2. Proceedings Below. At trial in Napa County Superior

Court, Petitioner requested one of two decisions: (1) award the

patents to Petitioner and reimburse the community for

unreimbursed efforts and expenses invested in developing and

patenting the technology during the marriage ($84,482), or (2)

awerd the patents to Petitioner and award Respondent a

fraction of future benefits arising therefrom commensurate

with the community’s contribution to bringing the technology

in the patents to the point of realizing benefits. These offers

were set forth in detail in a document titled Settlement Offers

regarding Intellectual Property which the trial court accepted into

evidence and is included in the Appendix to this Petition as

Document 1.

Respondent asked the Court to divide ownership of the

patents and future benefits in kind, give her equal authority

over the patents, register her half-interest with the US Patent

Office, and leave allocation and distribution of future benefits

under the jurisdiction of the Court.

The Trial Court found the instant case to be one of first

impression where the issues are primarily legal, and the facts

little disputed:

“Each side has argued the applicable legal principles

articulately and the issue, oddly enough in today’s

high tech age, appears to be one of first impression.”

(Notice of Tentative Decision, p. 46 in the Appendix) ...

“Well, are the facts really in dispute here? The

impression is that the dispute is really more of a legal

dispute over how do you puta value on something that

is at this point somewhat intangible.” (RT 14:16-21) ... “I

don’t think anybody-is contending that it had any

market value. ... And that’s the problem. What do I do

with it in a marital dissolution?” (RT 52:22-27) ... “...

what I think is primarily a legal issue of how to divide

them up?” (RT 257:15-20)

On October 13, 1999 the Trial Court issued a Notice of

Tentative Decision (Appendix, Document 2), ruling entirely in

favor of Respondent. Respondent’s counsel prepared the

Statement of Decision (Appendix, Document 3) and the Further

Judgement on Reserved Issues (Appendix, Document 4) which

were filed January 18, 2000. Each spouse was awarded an

undivided half-interest in the patents-and future benefits as

tenants-in-common with all provisions as requested by

Respondent. Petitioner was given no credit for his post-

separation efforts, investments and hardship which continue

to be needed to bring the technology in the patents to the point

of realizing benefits. The Court reserved “jurisdiction over the

valuation and allocation issues until such time as the issue is

ripe for adjudication” (Appendix, p. 46).

On March 10, 2000, Petitioner filed notice appealing the

Court's Decision and Judgement on Reserved Issues. On April 23,

2001, the California Court of Appeal (1* Dist., Div. 1) affirmed

the judgement of the Trial Court in its entirety (Appendix,

Document 6). Subsequently, Petitioner petitioned the

California Supreme Court for certiorari. The California

Supreme Court extended the time for deciding the petition by

thirty days, but the petition was denied August 15, 2001

(Appendix, Document 7).

3. Marriage of Worth and California Law. In California and

the other community property states (Arizona, Idaho,

Louisiana, Nevada, New Mexico, Texas and Washington)

property acquired during marriage through the efforts of either

spouse belongs to the community. In most other states, it

becomes “marital property,” which is treated much the same

as community property at dissolution.

Few cases have dealt with patents or copyrights in relation

to marriage. The most influential case on point is In re

Marriage of Worth, 195 Cal.App.3d 768 (1987) which has been

cited by courts nationwide. In Worth, the California Court of

— ee ee 2

Appeal (1 Dist., Div.1, the same District and Division as

affirmed in the instant case) ruled that copyrights acquired

during marriage were community property and so remained

if not otherwise allocated in the property settlement. The post-

marital benefits issuing from community property copyrights,

including proceeds from infringement suits, were found also

to be divisible community property, to be divided equally

between the spouses. Marriage of Worth is silent regarding

control and management of the copyrights, implicitly referring

this question to the general principals that govern community

property in California; that is, the spouses have equal authority

over the copyrights. Earlier, the California Court of Appeal

had ruled in Lorraine v. Lorraine, 8 Cal.App.2d 687 (1935) that

the patents issuing from applications filed during the marriage

were presumed to be community property. Lorraine has also

been relied on by courts in other states. Post-separation efforts

of the inventor / author spouse were not an issue in either case.

The precedential value of both cases is, in fact, tenuous,

because the issues actually decided were much narrower than

the broad principles that these cases are cited for. In Worth, the

parties had agreed by stipulation to divide royalties received

for books written during marriage, and the court actually

divided only. the contingent proceeds (which never

materialized) from a copyright infringement suit. In Lorraine,

wife had invested separate property funds in husband's

inventive efforts and the parties had agreed to divide

contingent future benefits between them.

Marriage of Worth has been widely discussed and much

criticized in law reviews and treatises, for example: D.

Nimmer, Copyright ownership by the marital community:

evaluating Worth, 36 UCLA L.Rev. 383 (1988); MJ. Perlstein,

More Than Merely Trivial, No. 11 Enter. Law Rep. 3 (1988); F.M.

Nevins, Jr., When an Author's Marriage Dies: The Copyright-

Divorce Connection, 37 J. Copyright Soc. USA 382 (1990); C.M.

Roberts, Worthy of Rejection: Copyright as Community Property,

100 Yale L.J. 1053 (1991); Nimmer on Copyright, §6A.03[C] and

n. 50 (1992); D. Polachek, The ‘Un-Worth-y’ Decision: The

Characterization of Copyright as Community Property, 17 Hastings

Comm./Ent. LJ. 601 (1995); McCahey et al., Valuation and

distribution of marital property, §23.07 (2000).

Most of the criticisms are relevant to patents and Lorraine

as well as to copyrights and Worth. Petitioner has relied upon

and quoted several of the commentaries in his arguments set

forth below. Most of these commentators agree that the spouse

should receive an equitable share of the economic benefits of

a copyright obtained during marriage, but object to giving the

spouse equal control over the copyright, during marriage and

even more so after dissolution. Proposals for dividing the

community interest in the copyright at dissolution include:

(i) Award ownership and complete control of the copyright

to the author, and compensate the community for the value of

the copyright at date of separation, or

(ii) Award ownership and complete control of the

postmarital income from the copyright that fairly reflects the

extent to which effort needed to realize economic benefits was

invested during the existence of the marital community.

4. Decisional Law of Other States. The courts of other states

have generally agreed that a patent or copyright acquired

during marriage belongs to the marital community, and have

sometimes relied on Worth and Lorraine. However, most courts

outside of California have exercised their discretion in a

manner which compensates for Worth’s defects, which were

illustrated by the instant case.

All analogous cases from other states involving patents or

copyrights where the author/inventor spouse’s post-marital

efforts were needed to realize benefits were adjudicated

following the second approach suggested by the commentators

and set forth above: give the inventor/author ownership and

complete control of the patent/ copyright, but give the spouse

a fraction of the post-marital benefits commensurate with the

post-marital efforts that may be required of the

inventor / author to realize these benefits. Petitioner’s second

proposal to settle the patent issue accords with this approach

(Appendix, pp. 38-41).

In In re Marriage of Monslow, 259 Kan. 412, 912 P.2d 735

(1996) the Kansas Supreme Court affirmed giving inventor-

husband full ownership of patents and 60% of future proceeds

from selling or licensing the patents, to be divided after

reimbursing him for expenses related to further development,

marketing and defense of the patents, with a generous

imputed rate of return to compensate him for the large

financial risk involved (Id. at 741).

The inverse situation was adjudicated in McDougal v.

McDougal, 38 USPQ2d 1842 (Mich. Sup. Ct. 1996). When he

married, husband owned some patents that had no apparent

value. While married, husband, with wife’s help, pursued

- infringers, and these efforts resulted in highly beneficial

licensing agreements. The Michigan Supreme Court ordered

net royalties from the licenses concluded during marriage

divided between the parties, but refused to award wife any

part of the actual patents or proceeds from licenses that might

be concluded after dissolution.

In In re Marriage of Heinze, 257 Ill.App.3d 782, 631 N.E.2d

728 the Illinois Court of Appeal awarded husband 25% of net

royalty income from five books that wife had written during

marriage, and explicitly stated that royalties from a sixth book

written after the marriage were entirely separate property of

the author-wife. The award to husband was limited to 25% in

recognition of wife’s continuing efforts to promote sales of the

marital books.

In Gallo v. Gallo, 184 Conn. 36, 440 A.2d 782 (1981) the

Connecticut Supreme Court awarded the wife 20% of royalties

from husband's books written during marriage for a period of

five years following dissolution (Id. at 788).

Hazard v. Hazard, 833 S.W.2d 911 (Tenn.App. 1991)

provides the nearest precedent to the instant case. Inventor-

husband had licensed a medical device during marriage. The

device was successfully test marketed, but had been

withdrawn from market after a patient had died (Id. at 913).

The Tennessee Court of Appeal affirmed an award of 20% of

future royalties to wife. As in the instant case, the invention

needed further development to realize royalty income.

If the marital patent or copyright is already licensed and

generating royalties at date of separation with minimal further

effort required of spouse, this approach would give each

spouse 50% of net royalties. In Dunn v. Dunn, 148 Utah Adv.

Rep. 30, 802 P.2d 1314 (1990) the patents were already licensed.

The Utah Court of Appeal allowed husband to be compensated

for his postmarital efforts and awarded half of net royalties

remaining to wife.

The ruling in the instant case accords with one published

case only, with very different facts. In Kinchen, Wife of Howes

v. Howes, 436 So.2d 689 (Louis.App.1983) the husband had

attempted to conceal the existence of the patent from the wife

by fraudulent means and the Louisiana courts awarded wife

one-half undivided interest in the patents and future royalty

payments. In Howes the invention had been licensed shortly

after the dissolution and was already earning royalties.

5. The Rodrigue Decisions. In Marriage of Worth, supra 195

Cal.App.3d at 774 the California Court of Appeal recognized

that by action of the federal copyright statute (17 U.S.C.

§201(a)) a copyright initially vests in the author spouse, but

concluded that” ... the copyright is automatically transferred

to both spouses by operation of the California law of

community property.” [emphasis added]

In Rodrigue v. Rodrigue, 55 F.Supp.2d 534 (E.D.La. 1999) ©

(herein-after Rodrigue-1) the Federal District Court ruled that

copyrights obtained by the painter-husband during marriage

were his separate property. The District Court agreed with

husband’s arguments that federal statute preempts Louisiana's

community property law, and relied heavily on this Court's

holding in Bonito Boats v. Thunder Craft Boats, 489 U.S. 141

(1989) which emphasized national uniformity as one of the

fundamental purposes of the Patent and Copyright Clause

In Rodrigue-1 at 542-543 the District Court considered and

explicitly rejected the Worth court’s arguments, holding that 17

US.C. §201(e), which prohibits involuntary transfer of a

community. The Rodrigue-1 court at pp. 543-544 rejected the

argument that by living in a community property state the

author-spouse implied voluntary transfer of copyrights created

during marriage to the community. Finally, the court

suggested that Congress act to allow states to treat the

economic benefits from a copyright obtained in marriage as

divisible community property, while leaving the copyright

itself the property of the author spouse, and under his

management (Id. at 546-547).

Subsequently, Rodrigue-1 was modified in Rodrigue v.

Rodrigue, 218 F.3d 432 (5" Cir. 2000) [hereinafter Rodrigue-2]

wherein the U.S. Court of Appeal found a way to do just what

the District Court had suggested, ruling that copyrights

acquired during marriage in Louisiana are separate property

completely to be owned and controlled by painter-husband,

while the net economic benefits that flow from the copyrights

are divisible community property. The Circuit Court ordered

‘this one modification only, and the rest of the Rodrigue-1

decision remains good law.

The ruling in Rodrigue-2 accords with case law from several

states summarized above, excluding California and Louisiana.

The Rodrigue courts did not address the issue of post-marital

efforts. The copyrights were already commercially successful

at date of separation, and wife had asked the state court to

award her 30% of gross proceeds from the marital copyrights,

suggesting recognition that husband’s post-marital efforts

would be needed to realize benefits."

The painter/husband subsequently petitioned this Court

for a certiorari review of Rodrigue-2, but his petition was denied

(00-1059).

6. Federal Questions Presented Below. Petitioner's arguments

at trial relied on California state law grounds only. At that

time, Rodrigue-1 was under appeal, and could not be used.

Rodrigue-2 issued when the instant case was already under

appeal, However, the proposals offered by Petitioner at trial

accord with case law from other states and with Rodrigue-2.

Arguments based on the Rodrigue decisions, on the Patent

and Copyright Clause, on the Supremacy Clause, on the patent

statute, and on case law of other states were presented to the

California Court of Appeal, and subsequently in Petitioner’s

Petition for [California] Supreme Court Review. The Commerce

Clause and Due Process Clause were not relied on below, but

are implicit in certain arguments that were presented on state

law grounds (quoted in the Appendix, pp. 57-60).

Those sections of Petitioner’s Appellant’s Opening Brief in

the California Court of Appeal which deal with Federal

questions are included in the Appendix as Document 5. Most

of the cases from other states reviewed above were reviewed

in Petitioner’s Appellant’s Opening Brief. The same arguments

were presented in Petitioner’s Petition for [California] Supreme

Court Review. Thus, the California Court of Appeal and the

California Supreme Court were well aware of the federal

questions involved and the decisional law of other states, and

had ample opportunity to address them. Indeed, Petitioner

° Federal District Court, E.D. Louisiana, Case No. 95-2862 (Rodrigue-/),

[Plaintiffs' Original] Complaint, filed August 30, 1995, para. 27 on p. 7.

explicitly recommended the instant case to the California

courts as an appropriate vehicle to reconcile California

decisional law (as set forth in Lorraine v. Lorraine and Marriage

of Worth) with the Rodrigue decisions.

The California Court of Appeal acknowledged the

scholarly critiques of Worth and briefly noted Petitioner's

arguments based on the U.S. Constitution, Federal statute, and

the Rodrigue decisions, but rejected them, affirming Worth:

Finally, Husband invokes federal patent law. He

contends that the trial court’s award of one-half interest

in the marital patents to Wife violates federal law -

specifically, the patents and copyrights clause [sic] ...

and the federal patent statutes ...

But in the analogous area of community property

ownership interests in copyrights, we have previously

held that federal law does not preempt California

community property law. (In re Marriage of Worth,

supra, 195 Cal.App.3d at pp. 776-778.) ...

We are persuaded that despite scholarly criticism,

Marriage of Worth controls. Federal law does not

preempt California community property law regarding

the ownership of community property patents under

the facts of this case, and a family law court may award

an equal, undivided interest in a community property

patent to the spouse who did not perfect the patent.

Under the unique facts of this case where the value of

the patents is unknown, community property interests

can coexist with federal patent law under the retained

jurisdiction of the trial court. This case does not

present a direct and irreconcilable clash between state

and federal law warranting preemption. The trial

court’s decision does not place stumbling blocks in the

way of fostering creative inventiveness. (Appendix, pp.

79-81).

The California Court of Appeal discounted case law on

point from other, common law, states:

In its discretion, the trial court in Monslow awarded

complete ownership in the patents to the spouse who

perfected them, and awarded the other spouse a share

in future income. As we read Monslow, this

discretionary division was not an inevitable result of

the court’s conclusion that patents could be divided

without determination of present value. (Appendix, p.

76, fn. 5)

Husband's considerable reliance on Hazard v. Hazard ...

is misplaced. ... In affirming, the Court of Appeals of

Tennessee ... found the device a marital asset subject to

division, and concluded that the 20 percent share of

future income was “an equitable method of making a

division of this particular asset.” ... [I]t is not even clear

from the opinion whether Tennessee is a community

property state. As far as we know, it is not. ... In any

event, the Tennessee appellate court's terse affirmance

of a particular division as “equitable” does not dictate

a reversal of the California trial court in the case before

us. (Appendix, p. 77, fn. 6)

7. Summary and Prayer for Relief. The decision below

comprises five logical elements, all of which were explicitly or

implicitly present in Marriage of Worth:

1. Respondent will share in the future benefits from the

patents that Petitioner received during the existence of the

marital community;

2. Respondent will receive exactly one-half of future |

economic benefits from these patents, regardless of how )

much post-marital effort is required of Petitioner to perfect

the technologies in them and realize the benefits;

3. Respondent is awarded an undivided half-interest in the |

patents as tenant-in-common in perpetuity, and her

interest is to be registered with the US Patent and

Trademark Office;

4. Respondent and Petitioner are given precisely equal

authority over the patents, and Respondent has veto power

over anything that Petitioner may wish to do with the

patents or the technologies protected by them; and

5. The Trial Court reserves jurisdiction “to allocate and divide

any and all benefits that may be received as a result of the

... patents ... or the technologies described therein and/or

protected thereby between the parties” (Further Judgement

on Reserved Issues, Appendix, p. 56).

Petitioner has no quarrel with the first provision which is

fair and solidly grounded in state law. However, the other

four provisions are extraordinary measures rarely applied to

other kinds of assets. The second provision conflicts with Cal.

Fam. Code §771, subd.(a) because it credits the community

with accumulations resulting from Petitioner’s post-separation

efforts. The last three provisions conflict with public policy

favoring a clean break when a marriage is dissolved.

The juxtaposition of these four unusual provisions amounts

to promulgation of a state rule specific to patents and

copyrights, which damages several Federal interests.

Petitioner prays that this Court direct the courts below to

revise the instant judgement to accord with the Fifth Circuit's

decision in Rodrigue-2 and the several decisions of other state

courts cited above: award Petitioner ownership and full control

of the patents, and award Respondent a fraction of future

benefits commensurate with the community's contribution to

realizing these benefits.

Or, in the alternative, let Petitioner reimburse the

community estate for community efforts and investments sunk

in the patents, and be done with it.

ae a ae See

__—__________

REASONS FOR GRANTING THE WRIT

Lorraine v. Lorraine and Marriage of Worth define the status

of patents and copyrights in marriage under California's

community property regime. In Rodrigue-2 the Fifth Circuit

U.S. Court of Appeal ruled that the net economic benefits of a

property, but let stand the District Court's decision in Rodrigue-

1 that, for important federal reasons, ownership and

management of the copyright must remain with the painter

spouse. Petitioner has consistently asked the California courts

for a decision that accords with Rodrigue-2 and cases on point

from several other states, but the state courts below have

affirmed the trial court’s decision, which conflicts with the

Rodrigue decisions. Therefore, certiorari should be granted

under Rule 10 (b) of this Court.

Because patents and copyrights are creatures of the U.S.

Constitution and federal statute, laws that govern their

ownership are important matters of public policy, and should

be uniform throughout the land. This Court has not previously

ruled on how patents and copyrights should be treated in

marriage and at dissolution, and the conflicting rulings below

indicate the need for guidance by this Court. Therefore,

certiorari should be granted under Rule 10 (c) of this Court.

Petitioner respectfully notes this Court's rule set forth in

Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979) wherein California

community property law was held preempted by the Railroad

Retirement Act:

State family and family-property law must do major

damage to clear and substantial federal interests before

the Supremacy Clause will demand that state law be

overridden. (Id. at 581)

Specifically in application to patent law, this Court earlier

held:

These laws, like cther laws of the United States enacted

pursuant to constitutional authority, are the supreme

law of the land. ... When state law touches upon the

area of these federal statutes, it is familiar doctrine that

the federal policy may not be set to naught, or its

benefits denied by state law. ... This is true, of course,

even if the state law is enacted in the exercise of

otherwise undoubted state power. (Sears, Roebuck &

Co. v. Stiffel Company, 376 USS. 225 (1964) at 229).

In Rodrigue-1, supra, 55 F Supp.2d at 538 the District Court

applied the rule set forth in Hisquierdo and concluded that

Louisiana community property law conflicts with the federal

federal interest in providing exclusive rights to authors,”

thereby warranting preemption (Id. at 541). °

Petitioner respectfully submits that Worth and Lorraine,

insofar as they divide ownership and management, also do

major damage to federal interests related to patents as well as

copyrights, warranting preemption and override by this Court.

Application of this Court’s well-established balancing tests

reinforces the conclusion that Worth should be overridden,

because there is, in fact, a less damaging approach available to

the state courts below: implement rules that accord with the

Rodrigue decisions and cases on point from several other states.

I. Certiorari Should be Granted to Promote National

Uniformity Governing Ownership of Patents and

Copyrights.

In Bonito Boats v. Thunder Craft Boats, supra, 489 US. 141 at

162 this Court stressed the need for national uniformity in

° The Rodrigue-2 court rejected George Rodrigue’s claim that dividing net

benefits of the copyrights would cause “major damage” for purposes of the

Hisquierdo test (218 F.3d at 440). However, the Rodrigue-2 court did not

criticize and let stand the District Court’s ruling that ownership and

management of the copyrights should remain with George.

regards to patents:

One of the fundamental purposes behind the Patent

and Copyright Clause of the Constitution was to

promote national uniformity in the realm of intellectual

property.

Because the monopoly confirmed by ‘patents and

copyrights is coextensive with the United States, they are

inherently objects of interstate commerce. Marriage of Worth

effectively established a set of rules that apply only to

copyrights and patents. This Court has long held:

Whatever subjects of this power [to regulate commerce]

are in their nature national, or admit only of one

uniform system, or plan or regulation, may justly be

said to be of such a nature as to require exclusive

legislation of Congress. (City or Burbank v. Lockheed Air

Terminal Inc., 411 U.S. 624 (1973) at 625, quoting Cooley

v. Board of Wardens, 12 How. 299 (1851).)

Petitioner submits that the rules governing patents as

property “are in their nature national,” whereby Worth and

Lorraine should be preempted by a literal construction of 35

U.S.C. 101, at least in regard to titular ownership and

management of patents obtained in marriage.

Nimmer, supra, 36 UCLA L.R. at 396-397 and other

commentators have correctly noted that California’s

establishment of rules of ownership (set forth in Marriage of

Worth) which apply in one state only threatens “ Balkanization”

of the law. A prospective licensee from another state trying to

license a copyright or patent from an author/inventor in

California would not be sure, for example, if the

author/inventor’s spouse need also approve the license.

In Rodrigue-1 the Federal District Court quoted Bonito Boats

and relied on Nimmer’s arguments in support of its ruling

overriding Worth:

To deem copyrights to be community property would

risk inflicting major damage on the goals of

predictability and certainty of copyright ownership,

national uniformity, and avoidance of the practical

difficulties of determining and enforcing an author’s

rights under the differing laws of the various states.

(Rodrigue-1 at 546)

The California Court of Appeal’s observation that

California is a community property state is immaterial to this

case. The Fifth Circuit encompasses two community property

states, and the Rodrigue decisions explicitly preempted

Louisiana’s community property regime. The decisions from

common law states cited above all set out from the assumption

that a copyright or patent acquired during existence of the

marital community is part of the marital estate which is to be

divided in the marital property settlement. In Marriage of

Heinze, supra, 631 N.E.2d at 730-731 the Illinois Court of Appeal

explicitly relied on Marriage of Worth as valid precedent, noting

that equal division of “marital property” at dissolution is

much the same as division of “community property.” In

Marriage of Monslow, supra, 912 P.2d at 744 the Kansas Supreme

Court relied on Lorraine v. Lorraine. The distinction between

“community property” and “marital property” is immaterial

to the questions presented here, and should not stand in the

way of national uniformity.

II Certiorari Should be Granted Because Worth and

Lorraine Cannot be Reconciled with Federal Statute

In Bonito Boats v. Thunder Craft Boats, supra, 489 U.S. 141 this

Court overruled a Florida statute which granted boat-makers

a degree of patent-like protection for their designs, because:

[The Florida law] thus enters a field of regulation

which the patent laws have reserved to Congress. The

patent statute’s careful balance between public right

and private monopoly to promote certain creative

activity isa scheme of Federal regulation so pervasive

as to make reasonable the inference that Congress left

no room for the states to supplement it. (Id. at 167)

[internal quotes and ellipses deleted]

Polacheck, supra, 17 Hastings Comm/Ent L.J. at 620-621,

fn. 115 correctly concluded:

Applying the reasoning in Bonito Boats to the facts of

Worth, preemption of stat@community property law is

necessary since fundamental goals of the Constitution,

those of fostering incentive for authors to create and

enabling national uniformity, are frustrated. California

community property law protects the property right of

the non-author spouse by vesting both spouses with

co-ownership of the copyright. This directly conflicts

with Federal law, which states that the author of a

work has certain exclusive rights for a period of time.

The patent statute provides for transfer- of patent

applications and patents, but ordinarily transfer occurs in a

manner which upholds the fundamental goals of fostering

creativity and promoting effective exploitation of the

technology. Commonly, a patent right is transferred by

assignment or license for monetary consideration or under the

terms of an employment agreement or research contract if the

invention is a work for hire. In all cases, the assignee or

licensee gains his rights by rewarding the inventor, and the

patent right ends up with someone willing and able to exploit

the technology.

In the instant case, the courts below have relied on Worth

to award Respondent one-half of the patent right, whereby

equal control and veto power over the patents have passed to

a person who is neither able to exploit the technology nor to

develop it further. Instead of furthering invention, the courts

below have placed an anchor on the inventor's ability to

advance the technology and commercialize it. This result is

directly contrary to the public policy expressed and embodied

in the patent statute and the Patent and Copyright Clause of

the Constitution.

The Federal District Court in Rodrigue-1 rejected the Worth

court’s theory of automatic transfer to the marital community,

relying on 17 U.S.C. §201(e) to conclude that ownership of

analogous argument applies to patents.

Federal courts have consistently held that “since a patent

is a creature of federal statutory law, it may be transferred only

in the manner provided by such law” (University Patents, Inc.

v. Kligman, 762 F.Supp. 1212 (E.D.Pa. 1991) at 1219) “... which

the state statutes cannot affect” (Jewett v. Atwood Suspender Co.,

100 F. 647 (D.Verm. 1900) at 648). 35 US Code §261 specifies

that “applications for patent, patents or any interest therein,

shall be assignable in law by an instrument in writing.”

California Family Code §852, subd. (a) specifies that a transfer

of separate property to the community “... is not valid unless

made in writing by an express declaration ...”._ Thus, both

Federal and California law bar the “automatic” transfer of a

patent to the marital community unsupported by a written

instrument executed by the inventor or his legal representative.

As with copyrights, a patent obtained in marriage remains

separate property of the inventor.

This Court long ago concluded that a patent or copyright

could be transferred by court order in personam but not in rem,

because the patent right is coextensive with the United States

and thereby not entirely within the jurisdiction of any court

(save this Court) (Ager v. Murray, 105 U.S. 126 (1881) at 130-

131). Because the California community property statute acts

in rem (it defines the nature of property obtained in marriage),

it cannot affect the automatic transmutation into community

property posited in Worth.

In Florida Prepaid Postsecondary Education Expense Board v.

College Savings Bank, 527 U.S. 627 (1999) at 642 this Court

recently affirmed the principle that

A patent for an invention is as much property as a

patent for land. As such, they are surely included

within the “property” of which no person may be

deprived by a State without due process of law.

In principle, a patent might be assigned to the community

by signature of an officer of the court acting pursuant to a court

order in personam, but it is difficult to see how such a court

order might arise without violating Fourteenth Amendment

due process.

III Certiorari Should be Granted Because Worth Favors

Decisions that Damage the Value of the Patent Monopoly

The advantages of the patent monopoly are both public

and private: the public benefits because the progress of science

and the useful arts is promoted, and the inventor benefits by

receiving potentially valuable property; that is, a patent.

Nimmer, supra, 36 UCLA L.Rev. at 412 asked the state

legislature and the courts to develop a legal framework that

respects this principle governing copyrights as a species of

community property:

[T]he goal must be to preserve the rights of authors’

spouses while not impinging on the authors’ ability

effectively to exploit their copyrights. Any scheme that

lessens the possibility of such exploitation not only

harms both the author and the nonauthor-spouse, but

also undermines Congress’ purpose in enacting the

militates once again towards [Federal] preemption.

Testimony at trial indicated that the a decision following

Marriage of Worth will (1) impair the value of the patents,

thereby impairing the private benefit of the patents, and (2)

may hinder commercial exploitation of the technology in them,

thereby obstructing realization of the public benefit.’° By

favoring decisions that damage both the public and the private

advantages of the patent monopoly, Worth frustrates the intent

of the patent statute and the Constitution.

Roberts, supra, 100 Yale L.J. at 1062 correctly noted that

Worth acts as a disincentive to further creativity by denying

authors full control over how to best exploit their works. The

instant case illustrates the problem, because the decision below

has given Respondent veto power over Petitioner’s

exploitation of the technologies protected by the marital

patents, which is the focus of his business and his work.

Roberts also noted that the divided authority over marital

copyrights favored under Worth can seriously hurt the value of

the artist’s post-separation works, and limit his post-separation

earnings; basically, the spouse can be expected to maximize her

benefits from the marital copyrights, even if it hurts the value

of future, separate property copyrights that may follow (Id. at

1064).

This possibility is especially dire in relation to patents, as

the instant case shows. Petitioner’s ongoing research is likely

to generate additional, cumulative patents (RT 63:24-64:5) as

usually happens when new technology is being developed. In

order to license his future separate property patents, Petitioner

will need Respendent’s agreement to license the marital

patents as well (RT 64:6-22). Thereby, the decision below has

granted Respondent power over Petitioner’s future efforts

related to the marital patents until they expire: in 2012 and

2016. In order to maximize her benefits from the marital

A patent attorney/expert witness testified that the reaction of a

potential licensee to joint ownership of the patents by Petitioner and

Respondent would be negative (RT 82:26-83:12). Petitioner agreed, noting

that having Respondent's name on title to the patents registered with the US-

PTO would raise questions and complicate negotiations (RT 541:5-11). This

evidence was uncontroverted.

patents, Respondent may choose to exercise her veto power in

a way that decreases Petitioner's earnings from his future

separate property patents, effectively transferring post-

separation earnings from the separate estate to the community

estate. Continuing disputes between Petitioner and

Respondent are likely to interfere with commercial exploitation

of the technologies protected. This unhappy result is entirely

in keeping with Worth.”

IV Certiorari Should be Granted Because Worth Burdens

Interstate Commerce

Roberts, supra, 100 Yale L.J. at 1066-1072 noted that Worth

effectively regulates and interferes with the orderly transfer of

copyrights in interstate commerce:

By declaring a community property interest in

states [who have licensed or acquired copyrights from

California residents], doing business with other non-

California residents, to alter their method of doing

business at substantial cost in order to protect

'!' The courts below recognized the potential problems outlined above,

but gave them little credence:

Moreover, there is no reasonable basis to assume deadlock. As the

trial court observed, Husband’s assumption of Wife’s

obstructionism “is the one weak leak in the argument, . . . that you

are attributing to her a motive to veto or cause problems . . . There

is no common sense or evidence, nor would there be any motive

that I can see, why she would want to do anything to interfere with

the commercial viability. To the contrary, I would think she would

want to do everything to make it a success. That is the whole point

of this.” (California Court of Appeal quoting the Trial Judge,

Appendix at p.75).

This rosy prediction is based on the unrealistic assumption that former

spouses will be able to function amicably as business partners.

themselves from the regulatory effect of the statute as

interpreted in Worth. The community property statute

also burdens non-California citizens who have co-

authored works with California residents and wish to

do business involving their works with other non-

California residents. Moreover, buyers dealing with

Californians may have to pay more to secure the

nonauthor spouse’s approval; therefore, California

essentially makes buyers pay a premium to California

nonauthor spouses. When one state treats copyright

ownership as community property, those whose

business includes the transfer of copyrights must take

precautions in drafting their contracts to try to avoid

the potential problems created by that treatment.

The community property law of California discriminates

against interstate commerce because married inventors and

authors will find it easier to deal with potential licensees

domiciled in California to avoid the conflict of laws. The fact

that California is the largest state in population and economy,

relatively isolated geographically, and pre-eminent in

technology as well as entertainment creates a predisposition to

disregard the other states, compromising the internal political

checks which might otherwise incline California courts to pay

more heed to persuasive authority from other states and the

Fifth Circuit.

In Edgar v. MITE Corporation, 457 U.S. 624, 640 (1982) and

again in Brown-Forman Distillers Corp. v. New York State Liquor

Authority, 476 U.S. 573, 579 (1986) this Court has ruled that a

state cannot directly regulate interstate commerce. Roberts,

supra, argues that this corollary of the Commerce Clause must

preempt Worth, just as it preempted certain laws of Illinois and

New York in Edgar and Brown-Forman, because Worth “reaches

out” and forces persons outside of California to conduct their

business affairs in a certain way, if a copyright or patent

created by a married citizen of California is involved.

If the regulatory impact of Worth upon interstate commerce

is considered merely incidental, the balancing test set forth by

this Court in Pike v. Bruce Church, Inc., 137 U.S. 137 (1970)

properly applies:

Where the statute regulates evenhandedly to effectuate

a legitimate local public interest, and its effects on

interstate commerce are only incidental, it will be

upheld unless the burden imposed on such commerce

is clearly excessive in relation to the putative local

benefits ... [T]he extent of the burden that will be

tolerated will of course depend on the nature of the

local interest involved, and on whether it could be

promoted as well with a lesser impact on interstate

activities. (Id. at 142)

In Dean Milk Co. v. City of Madison, Wis., 340 U.S. 349 (1951)

this Court formulated this principle in a manner most directly

applicable to the instant case. This Court ruled that, even in

the exercise of an unquestioned state power [to protect public

health], a state cannot discriminate against interstate commerce

or burden it, “if reasonable nondiscriminatory alternatives,

adequate to conserve legitimate local interests, are available.”

(Id. at 354).

In relation to a patent or copyright obtained in marriage,

the legitimate state interest is to ensure that the marital

community is equitably reimbursed for its efforts and

investments related thereto. This legitimate interest can surely

be satisfied by a reasonable alternative with a lesser impact on

interstate commerce: the general approach that is set forth in

Rodrigue-2 and generally followed by the courts of other states.

For this reason, the onerous provisions of the decisions below,

which follow Marriage of Worth, should be overridden.

///

V_ Certiorari Should be Granted Because Worth Works to

the Detriment of Third Parties

The instant case illustrates how Marriage of Worth can work

to the detriment of third parties. Under the agreements with

his coinventors (Exhibit 22/V, RT 105:6-18, RT 109:2-23)

Petitioner is responsible for managing the patents for mutual

benefit of all of the inventors. Petitioner’s relatively large

ownership share of the four patents and one patent application

under the terms of these agreements (80:20, 80:20, 80:20,

34:22:22:22 and 55:20:20:5) was fixed on the assumption that he

would bear the primary responsibility for promoting and

commercializing the technologies protected. Petitioner's

coinventors retain a large stake in the future success of the

marital patents; if Petitioner’s ability to exploit the patents is

-hindered, they will suffer as well. This question is especially

acute in relation to Petitioner’s coinventors on the power plant

patents, because they are citizens and residents of Ukraine and

thereby totally dependent upon Petitioner to manage these US

patents for their benefit as well as his own (RT 105:3-25).

By giving Respondent equal authority and veto power in

all matters related to the patents, the courts below have

effectively assigned part of Petitioner’s obligations before his

coinventors to Respondent. As there is no evidence nor reason

to believe that Respondent (a pediatrician) can fulfill any part

of Petitioner’s obligations toward his coinventors, this action

is to their detriment. In light of Respondent's equal authority

and veto power over the patents, Petitioner’s coinventors

cannot be assured of Petitioner's effective management of the

patents on their behalf which they bargained for.

Certainly, the courts have the power under equity to

reform a contract between private parties, but the legality of

such court order presupposes Fourteenth Amendment

procedural due process. In the instant case, Petitioner's

coinventors were deprived of what they bargained for without

due process. In Barrows v. Jackson, 346 U.S. 249 (1953) this

Court set forth the conditions that would permit a party

appearing before this Court to plead violation of the

Constitutional rights of a third person (Id. at 255-257), and

these conditions are satisfied in the instant case:

1. The decision of the courts below was to the detriment of

Petitioner as well as to the detriment of his coinventors,

and

2. It would have been difficult if not impossible for

Petitioner’s coinventors to assert their case before the Trial

Court, which was, after all, adjudicating a division of

community property that procedurally and logically

involved Petitioner and Respondent alone.

During marriage, problems of this sort are largely avoided

by virtue of Cal. Family Code §1100, subd. (d) which grants a

spouse operating a community property business effectively

complete control of the business and its assets. The same

statutory provision interacts perversely with Marriage of Worth

to create just such problems when the marriage is dissolved.

There is no question that Petitioner had full authority to

conclude the agreements with his coinventors, and had a free

hand to fulfill his responsibilities thereunder without

interference from Respondent while married. But following

dissolution of the marriage, the courts below relied on Worth

to grant equal authority and veto power over the patents to

Respondent, compromising Petitioner's ability to perform

under the agreements to the detriment of his coinventors.

This Court can correct this problem by setting forth rules

governing patents and copyrights in marriage which accord

with Rodrigue and the decisional law of the other states,

whereby the inventor/ author spouse will have unclouded title

and full authority to manage the marital patents/ copyrights

after dissolution as well as during marriage, while sharing the

benefits of the patent/ copyright with ex-spouse in an equitable

manner.

522 RLS DRS NIN ANE ata fee =

CONCLUSION

In addition to the several Federal questions and

Constitutional issues argued above, there is an entirely

practical reason why certiorari should be granted in this case.

Congress recognized that the law of copyrights and patents

is a complex field properly entrusted to specialists. Federal

District Courts have original jurisdiction over cases under the

restricted to the Federal Circuit and this Court. Patent

attorneys must be specially trained, tested and registered with

the Patent and Trademark Office.

However, any member of the state bar, and any Family

Court judge can litigate and adjudicate the disposition of

copyrights and patents ina marital dissolution. While the state

bar and state bench are highly skilled and experienced in

relation to their accustomed subject matter, most of them have

no training in intellectual property law, don’t own a book on

the subject, and encounter a case that deals with copyrights or

patents once in a decade, if that often. In the instant case, the

Trial Judge plainly expressed his expectation of appellate

review and his desire to facilitate the work of the appellate

court.”

Petitioner respectfully asks this Court to provide the state

courts with the guidance they need regarding patents and

copyrights in marriage. The instant case provides this Court

with a vehicle to build upon the work of the Fifth Circuit, and

to institute a sensible and Constitutionally correct rule,

2 “.,, to be perfect honest, I’m sort of looking upward in this case because

it’s acase that’s somewhat unusual. I won’t say it’s completely novel, but it’s

unusual and I could well see whatever part[y] is dissatisfied with the Court’s

ruling wanting to have the appellate court have a good report is important

and I think probably at this point oral argument might be appropriate. I

think it would be more helpful for the reviewing court to get your thoughts

...” (RT 551:3-17) Also see the quotations on pp. 5-6.

uniform throughout the land.

Respectfully submitted,

HAROLD D. MESSNER

1021 Nebraska Street

Vallejo, CA 94590

(707) 557-8709

LYNN S. YOUNG

Counsel of Record

NAPA LEGAL CLINIC

812 Third Street

Napa, CA 94559

(707) 257-7333

A ndi H

DOCUMENT 1

[Petitioner's] Settlement Offers regarding Intellectual

Property prepared July 1, 1999

(Explanatory Note: This document was admitted into evidence at the

trial, and was appended to Petitioners “Appellant's Opening Brief”

to the California Court of Appeal. Throughout this document, the

designations “Respondent” and “Petitioner” have been reversed to

make the usage consistent with the Petition.)

Introduction

Petitioner is joint owner of record with others of the US

Patents and US patent applications identified in Table 1.

Table 1. US Patents partly owned by Petitioner

Patent No. Filing | Issue |Expiration See

Date Date Date Note (a)

Electrochemical

5,364,508 3-16-94 |11-15-94 |11-12-12 100

5,419,824 2-10-94 {5-30-94 11-12-12 100

5,439,577 11-10-94 |8-8-95 |11-12-12 100

Power plant

5,735,125 1-22-96 |4-7-98 {1-22-16 100

US Pat.Appl. |3-10-98 |pending |1-22-16 25

09/037,902

(a) Percent of Petitioner's Interest Belonging to Community

when filed

The number of hours of Research & Development (R&D)

effort that Petitioner has invested in the development of these

patents are set forth in Table 2. Table 2 also sets forth the best

estimates of additional R&D effort that will need to be invested

by Petitioner in order to bring the technologies to the point of

delivering benefits, as defined below.

Table 2. Summary of R&D Effort by Petitioner (man-hours)

invested in the technologies needed to bring them to the

point of delivering benefits

Electro- | Power | Aggre-

chemical | Plant gate

Preseparation

Pr tion ] 2,707 149 2,856

(32%) 1 (30%)

Postseparation

Date of Separation (2-10-96) {3,050 365 3,415

to 5-31-99

Additional R&D effort 1,652 288 1,940

reliably budgeted

Estimate of further effort [1,042 288 1,330

needed to bring

technologies to the point

of delivering benefits

Postseparation totals 2,744 1941 6,685

Total hours of R&D effort {8,451 1,090 9,541

required of Petitioner

The numbers in Table 2 are based on the most complete

and accurate time card records, financial records, and c contract

files in Petitioner’s possession.

Settlement Offer No. 1

Petitioner estimates that the aggregate value of

community monies and unreimbursed efforts invested prior to

February 10, 1996 in developing and obtaining the patents and

patent application identified in Table 1 and any related

intellectual property totaled approximately $84,482. In

consideration of the community’s investment in developing

this intellectual property, Petitioner offers to transfer to

Respondent Independent Retirement Account monies in the

amount of $42,241, and Respondent shall therefor drop any

and all claims to ownership of these patents and any related

intellectual property that may be owned by Petitioner and to

any benefits related to said patents or related intellectual

property that may accrue to Petitioner.

This settlement offer is consistent with the Court's ruling

in In re Marriage of Zaentz (1990) 218 CA 3 154 which had to

do with the community’s interest in a successful film (Amadeus)

which the husband had produced. At the time of separation,

the film project was approaching completion. Husband had

spent two years working on the film, and in addition to having

served as producer, had put community assets up as collateral

to secure a $6,000,000 bank loan, and had served as

“completion bonder”; that is, the person responsible for

finding financing needed to complete the project. Husband

had been compensated $300,000 for his efforts plus per diem.

At the time of trial approximately two years after

separation, the movie had grossed $50,000,000 and the net

profit was variously estimated at between $8,000,000 and

$14,000,000. Evidence had been presented in trial court to the

effect that the husband’s stock in his company had gained

substantial value as a result of the movie by the time of trial.

Husband’s nephew who performed legal and tax work for

husband’s company estimated that husband’s company would

realize a profit of nearly $2.6 million from its share of

“Amadeus”, and would also received some $3.2 million in

interest and deferred rental fees.

Expert witnesses testified that the husband’s fee for

producing the movie was well below industry standards, and

that just his role as “completion bonder” warranted an

additional consideration of $500,000. The Appeals Court

affirmed the trial court’s decision that the community was

entitled to additional compensation for the husband's efforts

and the risks borne by the community in making the movie,

stating:

“ ... the [trial] court found ... that the community was

entitled to be reimbursed for husband’s production

duties and financing contribution in the amount of

$600,000 over and above the $300,000 and per diem

paid to husband.

Whether or not the movie was completed and receiving

income at the time of separation, the time and artistic

energies expended occurred in some appreciable

degree during the marriage. Husband devoted the

better part of two years during the marriage working

only on the production of ‘Amadeus’. Thus, the

community would be entitled to at least an equitable

portion of the income generated as a result thereof. ...

The evidence showed that all of the filming and nearly

one-third of the editing, and execution of some of the

distribution agreements, were completed by November

1983. Accordingly, the amount of profits aggregating

through 1985 was an appropriate circumstance for the

trial court to consider in arriving at its factual

determination.”

In Zaentz the court did not try to prorate husband’s gains

from the film according to his efforts before and after

separation; in fact, the trial court supported the wife’s demand

that the community receive adequate compensation for

husband's efforts during the marriage. While the trial court

failed to document it’s calculation supporting award of

$600,000 additional compensation to the community, the

Appeals Court judged this award reasonable, and, in fact, this

amount was consistent with expert witness testimony which

held that husband’s declared compensation of $300,000 was

low by industry standards, and that just his role as

“completion bonder” would warrant compensation of in the

amount of $500,000. The fact of large profits generated by the

movie after separation and before trial was considered by the

Appeals Court only to the extent of deciding that an award of

additional $600,000 to the community was reasonable, and

that, in fact, husband had the money to share with his ex-wife.

In Van Camp vs. Van Camp (1921) 53 CA 17 the court came

to a conclusion similar to the Zaentz court's regarding the

community’s share of husband’s income and capital

appreciation from a company that had been a successful,

ongoing concern since before the marriage. The Appeals Court

ruled that an executive salary that might have been paid to

another doing husband’s job in his place was adequate

compensation to the community. (Adams & Sevitch interpret

Zaentz and Van Camp similarly in § G.83 and suggest factors to

be documented and considered to establish equitable

compensation.)

Petitioner's case is, of course, very distinct from Zaentz in

that the economic success of his technologies is nowhere near

assured near to time of trial, and income from the patents is $0,

not $50,000,000.

It is not contested that during the marriage and prior to

separation Petitioner expended effort to finance, develop, and

attempt to market the technologies described in the patents

with the expectation of future returns. Most of this effort was

compensated to the community as an equitable salary paid to

Petitioner directly and indirectly from assorted government

grants, but some $84,482 of effort and expenses were not

compensated to the community. If it is assumed that

eventually these long-term endeavors on Petitioner’s part bear

fruit, Zaentz suggests that the community should be

compensated in the same amount. Such compensation to the

community would also accord with the Van Camp approach.

If, on the other hand, Petitioner’s efforts ultimately come

to naught, it might be proper for the community to be

compensated for efforts and resources “imprudently invested

and lost” - again $84,482. In contrast to the husband in Zaentz,

prior to separation Petitioner did not guarantee large loans

with community funds or take any extraordinary risks which

would warrant compensation to the community above and

beyond and equitable salary and actual uncompensated cash

outlays.

Definitions related to Settlement Offers 2 and 3 below.

It is recognized that since the Date of Separation (February

10, 1996) Petitioner has had continuing out-of-pocket expenses

related to the patents and patent applications identified in

Table 1, including various US Patent Office fees (for example,

filing fees, issue fees and maintenance fees), international filing

fees, and legal fees related to obtaining these patents and

protecting against infringement or misappropriation. It is also

recognized that Petitioner has obligations to pay third parties

a portion of royalties or other benefits that he may receive in

the event that the patents are licensed or exchanged for stock.

In case royalties or other benefits are received by Petitioner

related to these patents and patent applications, the out-of-

pocket expenses shall first be reimbursed to Petitioner and the

monies paid as royalties or otherwise to third parties shall be

subtracted, and then a part of the net royalties or other benefits

remaining shall be transferred to Respondent as set forth in

Settlement Offers 2 and 3 presented below. In all cases,

percentage of royalties or other benefits offered to Respondent

are percentages of net royalties or net other benefits that are

received by Petitioner after out-of-pocket expenses and

royalties due to third parties have been subtracted.

The patents identified in Table 1 related to one or the other

technology (electrochemical or power plant) shall be deemed

to have reached the point of “delivering benefits” when one of

the following conditions has been satisfied: (a) At least one of

the patents related to the given technology has been sold, (b)

at least one of the patents related to the given technology has

been licensed and royalties of at least ten thousand dollars

have been received by the inventors, or (c) at least one of the

patents related to the given technology has been exchanged for

publically traded stock. The two technologies are to be

considered separately for the purposes of this paragraph; for

example, if the electrochemical patents are licensed and at least

ten thousand dollars has been received in royalties, the

electrochemical technology shall be deemed to have reached

the point of delivering benefits, but no such determination

shall apply to the power platted technology in this case.

By “related patents or other related intellectual property”

we mean any patent or other intellectual property developed

by Petitioner or otherwise coming into his possession after

February 10, 1996 which is protected by at least one claim of at

least one of the patents or the patent pending identified in

Table 1.

///

Settlement Offer No. 2

Settlement Offer No. 2 recognizes that the ultimate future

value of the patents identified in Table 1 will be the result of

Petitioner's efforts begun prior to the Date of Separation, and

continuing long beyond the Date of Separation. Therefore,

benefits ultimately received by Petitioner might reasonably be

apportioned according to the amount of effort invested before

versus after the Date of Separation. The hours of R & D effort

devoted by Petitioner to developing the two technologies are

summarized in Table 2. Two other apportioning rules were

considered (uncompensated efforts and expenses invested;

total investments, including grants and contracts as well as

unreimbursed efforts and investments); apportionment by

hours of R & D effort gives the result most favorable to

Respondent.

(1) In recognition of the fact that 32% (thirty-two percent)

of Petitioner’s R&D effort needed to bring the electrochemical

technology described in US Patents 5,364,508 and 5,419,824 and

5,439,577 to the point of delivering benefits was invested prior

to the Date of Separation (February 10, 1996), Petitioner agrees

to transfer to Respondent 16% (sixteen percent) of net royalty

payments received by Petitioner for licensing these patents

and/or 16% (sixteen percent) of net money received by

Petitioner for selling or assigning them, if that should occur.

If the patents are exchanged for publically traded stock,

Respondent shall receive 16% (sixteen percent) of stock

received by Petitioner. Respondent shall be responsible for

related income and/or capital gains taxes. The same terms

shall apply to net royalty payments or proceeds from selling

the Japanese patent pending which is derived from US Patent

5,364,508. Petitioner’s obligations under this paragraph shall

end when these three US Patents expire on November 12, 2012.

For example,

0.50 Fraction of Community’s share due to

Respondent

x 32% Percentage of value of these three patents at

point of delivering benefits due to preseparation

efforts of Petitioner

16% Percentage of net benefits received by Petitioner

being offered to Respondent

(2) In recognition of the fact that 14% (fourteen percent) of

Petitioner's R&D effort needed to bring the power plant

technology disclosed in US Patent 5,735,125 to the point of

delivering benefits was invested prior to the Date of Separation

(February 10, 1996), Petitioner agrees to transfer to Respondent

7% (seven percent) of net royalty payments received by

Petitioner for licensing this patent and/or 7% (seven percent)

of net money received by Petitioner for selling or assigning it,

if that should occur. If this patent is exchanged for publically

traded stock, Respondent shall receive 7% (seven percent) of

stock received by Petitioner. Respondent shall be responsible

for related income and/or capital gains taxes. The same terms

shall apply to net royalty payments or proceeds from selling

the Russian patent pending which is derived from US Patent

5,735,125. Petitioner's obligations under this paragraph shall

end when this US Patent expires on January 22, 2016. For

example,

0.50 Fraction of Community’s share due to

Respondent

x14% Percentage of value of this patent at point of

delivering benefits due to preseparation efforts

of Petitioner

7% Percentage of net benefits received by Petitioner

being offered to Respondent

(3) In recognition of the facts that (a) 14% (fourteen

percent) of Petitioner’s R&D effort needed to bring the power

plant technology disclosed in US Patent Application

09/037,902 to the point of delivering benefits was invested

prior to the Date of Separation (February 10, 1996), and (b) the

Community’s interest in said US Patent Application comprises

25% of Petitioner’s total interest in it, Petitioner agrees to

transfer to Respondent 1.75% (one and three-quarter percent)

of net royalty payments received by Petitioner for licensing the

patent expected to issue from this Patent Application and/or

1.75% (one and three-quarter percent) of net money received

by Petitioner for selling or assigning it, if that should occur. If

this patent is exchanged for publically traded stock,

Respondent shall receive 1.75% (one and three-quarter percent)

of stock received by Petitioner. Respondent shall be

responsible for related income and/or capital gains taxes.

Petitioner’s obligations under this paragraph shall end when

the patent expected to issue from this US Patent Application

expires on January 22, 2016. For example,

0.50 Fraction of Community’s share due to

Respondent

0.25 Community’s interest in this patent application

x14% Percentage of value of this patent application at

point of delivering benefits due to preseparation

efforts of Petitioner

1.75% Percentage of net benefits received by Petitioner

being offered to Respondent

(4) Ownership of the patents shall remain with Petitioner

and Petitioner’s coinventors under the terms and conditions set

forth in the Joint Owners’ Agreements between them.

Consistent with the community’s relatively small interest in

the patents set forth in Table 2, Petitioner and Petitioner’s

heat POLST AE LA GAOL LER IDS SNL ALE PAT

coinventors shall have the right to sell or license the patents as

they see fit, without prior approval of Respondent. However,

Petitioner shall inform Respondent of any such transaction

within ten days of its execution, and shall remit to Respondent

her portion of monies received within ten days of receiving

them. Petitioner acknowledges a fiduciary responsibility to

Respondent to negotiate and execute any such transactions in

the same manner and on the same terms as though

Respondent were not in the picture, and Petitioner’s net

benefits were entirely his own.

(5) This agreement applies only to division of future

royalties and/or sales proceeds that Petitioner may receive

which are derived from US Patents 5,364,508 and 5,419,824 and

5,439,577 and _ 5,735,125, US Patent Application 09/037,902,

and the related Japanese and Russian patents pending that are

identified above.

(6) The products and benefits of all Research and

Development efforts expended after February 10, 1996 are

acknowledged to be the separate property of Petitioner.

Settlement Offer No. 3

Settlement Offer No. 3 is a variation of Settlement Offer

No. 2 which addresses Respondent's concern that if Petitioner

licenses or sells the patents in a bundle with other related

patents or related intellectual property, he may arrange the

deal to undervalue the original patents in which the

Community has an interest in order to deny Respondent her

fair share. In this settlement offer, Respondent is granted a

smaller percentage of benefits from the entire bundle which

includes the original patents together with related patents and

other related intellectual property developed after the Date of

Separation.

(1) Petitioner anticipates that the electrochemical patents

shall be licensed or sold in a bundle together with additional

related patents and other intellectual property developed after

the Date of Separation which are therefore Petitioner’s separate

property. Petitioner estimates that the value of the original

three electrochemical patents (US Patents 5,364,508 and

5,419,824 and 5,439,577) will represent no more than 25% of the

value of the entire bundle.

(2) Petitioner agrees to transfer to Respondent 4% (four

percent) of net royalty payments received by Petitioner for

licensing any bundle including one or more of US Patents

5,364,508 and 5,419,824 and 5,439,577 and/or 4% (four percent)

of net money received by Petitioner for selling or assigning

such a bundle, if that should occur. Ifa bundle of technology

including at least one of these patents is exchanged for

publically traded stock, Respondent shall receive 4% (four

percent) of stock received by Petitioner. Respondent shall be

responsible for related income and/or capital gains taxes. The

same terms shall apply to net royalty payments or proceeds

from selling the Japanese patent pending which is derived

from US Patent 5,364,508. Petitioner’s obligations under this

paragraph shall end when these three US Patents expire on

November 12, 2012. For example,

0.50 Fraction of Community’s share due to

Respondent

0.25 Fraction of the value of the entire bundle

licensed, sold or exchanged corresponding to the

original three patents

x 32% Percentage of value of original three patents at

point of delivering benefits that is due to

preseparation efforts of Petitioner

4% Percentage of net benefits received by Petitioner

being offered to Respondent

Rotate aE tee

(3) Petitioner anticipates that the power plant patents shall

be licensed or sold in a bundle together with additional related

patents and other intellectual property developed after the

Date of Separation which are therefore Petitioner’s separate

property. Petitioner estimates that the value of the original

power plant patent and the community’s share of the patent

application pending (US Patent 5,735,125 and US Patent

Application 09/037,902) will represent no more than 40% of

the value of the entire bundle.

(4) Petitioner agrees to transfer to Respondent 2.8% (two

and eight tenths percent) of net royalty payments received by

Petitioner for licensing any bundle including US Patent

5,735,125 or the patent which issues from US Patent

Application 09/037,902 and/or 2.8% (two and eight tenths

percent) of net money received by Petitioner for selling or

assigning these patents, if that should occur. If these patents

are exchanged for publically traded stock, Respondent shall

receive 2.8% (two and eight tenths percent) of stock received

by Petitioner. Respondent shall be responsible for related

income and/or capital gains taxes. The same terms shall apply

to net royalty payments or proceeds from selling the Russian

patent pending which is derived from US Patent 5,735,125.

Petitioner's obligations under this paragraph shall end when

these US Patents expire on January 22, 2016. For example,

///

Fraction of Community's share due to

Respondent

0.40 Fraction of the value of the entire bundle

licensed, sold or exchanged corresponding to the

original patent plus the Community’s 25%

interest in the patent application pending

x14% Percentage of value of the original patent plus

Community’s share of the application at point of

delivering benefits that is due to preseparation

efforts of Petitioner

Percentage of net benefits received by Petitioner

2.8% being offered to Respondent

(5) Ownership of the patents identified in Table 2 and any

related patents or other related intellectual property shall

remain with Petitioner and Petitioner’s coinventors under the

terms and conditions set forth in the Joint Owners’ Agreements

between them. Consistent with the community’s relatively

small interest in the patents set forth in Table 2, Petitioner and

Petitioner’s coinventors shall have the right-to sell or license

the patents as they see fit, without prior approval of

Respondent. However, Petitioner shall inform Respondent of

any such transaction within ten days of its execution, and shall

remit to Respondent her portion of monies received within ten

days of receiving them. Petitioner acknowledges a fiduciary

responsibility to Respondent to negotiate and execute any such

transactions in the same manner and on the same terms as

though Respondent were not in the picture, and Petitioner’s

net benefits were entirely his own.

(6) The products and benefits of Research and

Development efforts expended after February 10, 1996 which

are not related to the patents identified in Table 1 are

acknowledged to be the separate property of Petitioner.

DOCUMENT 2

Notice of Tentative Decision

ENDORSED

Filed 10-13-99

Jose O. Guillen

Court Executive Office

M. OELLIEN

Deputy

IN THE SUPERIOR COURT OF THE STATE OF

CALIFORNIA IN AND FOR THE COUNTY OF NAPA

In Re the Marriage of:

Petitioner: NANCY WERES

and No. 76505

Respondent: OLEH WERES

NOTI F TENTA ISION

This matter initially came before the court for trial

commencing July 8, 1999 and concluding July 26, 1999. The

matter was deemed submitted as of that date. The sole

contested issue submitted to the court for decision is the

proper method of dividing the community interest in certain

patents which respondent perfected during the marriage. The

patents involve a unique process for treating wastewater (in

the case of the electrochemical patents) and for obtaining extra

energy out of steam from power plants (in the case of the

power plant patent). None are currently commercially viable

yét all could have huge value if future research and technology

lead to a commercially viable application of the process they

embody. The difficulty in dividing and valuing is that these

assets have little or no market value at the time of trial and will

require post separation research and development on the part

of respondent (or others) to ever have significant value.

Respondent contends that the court should either find

pursuant to Family Code section 2552(a) that the patents have

no value at the time of trial or alternatively that the court apply

the reasoning of In re Marriage of Zaentz, 218 CA 3% 154 and

compensate the community for efforts expended by the

respondent during the marriage. Valuation according to this

approach would range between a low of “0” and a high of

approximately $80,000. Respondent has extensively analyzed

the valuation issue in various settlement proposals which were

introduced into evidence at trial. Petitioner on the other hand

would like to share in the future potential value of these

patents rather than “cash out”. She argues that In Re Marriage

of Biddle, 52 CA 4" 396 and Zaentz, supra, as she construes the

case, strongly suggest that the court should divide these assets

“in kind”. Each side has argued the applicable legal princip'es

articulately and the issue, oddly enough in today’s hie’ <ch

age, appears to be one of first impression.

Having considered the evidence and the legal authorities

cited, the court has concluded that the line of cases represented

by Marriage of Biddle, supra and Marriage of Kilbourne, 232 CA 3”

1518 are persuasive. Considering the equities in this matter

and the enormous potential value that these patents may

represent at some point during the remaining twelve years of

their legal life, the court believes that an “in kind” division is

the most appropriate method of division. Accordingly each

party is awarded fifty percent in the community valued [sic]

the patents and the court will reserve jurisdiction over the

valuation and allocation issues until such time as the issue is

ripe for adjudication. Counsel for petitioner shall prepare a

statement of decision if requested and a judgment consistent

herewith.

Dated: October 13, 1999

/s/

Phillip A. Champlin, Judge

Napa Superior Court

DOCUMENT 3

Statement of Decision

LAW OFFICES OF

FERSHKO, LEWIS & BLEVANS

ATTORNEYS AT LAW

1005 COOMBS STREET

NAPA, CALIFORNIA

(707) 226-9928

FACSIMILE (707) 226-1805

ROBERT E. BLEVANS, CSBN: 75853

Attorney for Petitioner, NANCY WERES

Filed JAN 18 2000

JOSE O. GUILLEN

COURT EXECUTIVE OFFICER

BY _/s/ J. Flohr

DEPUTY

SUPERIOR COURT OF CALIFORNIA

COUNTY OF NAPA

CASE NO. 76505

In Re Marriage of :

Petitioner: NANCY WERES

and

Respondent: OLEH WERES

_— Si

STATEMENT OF DECISION

This matter came to trial commencing July 8, 1999, and

concluded and was submitted for decision on July 26, 1999.

The Court having filed its Notice of Tentative Decision on

October 13, 1999, now issues the following Statement of

Decision:

The sole contested issue submitted to the Court for

decision was the proper method for dividing the community

interest in certain patents which were perfected during the

marriage, and an interest in one (1) patent application where

a substantial amount of the work was performed by the

Respondent during the marriage. In the case of the

electrochemical patents, the patents involve a unique process

for treating waste water. Those patents are as follows:

Patent _ Filing Issue Exp. Respondent's

No. Date Date Date Ownership Int.

5,364,508 03/16/94 11/15/94 11/12/12 100%*

5,419,824 02/02/94 05/30/94 11/12/12 100%*

5,439,577 11/10/94 08/08/95 11/12/12 100%*

While the patents list as the coinventors the Respondent

and a Michael R. Hoffman, according to Petitioner’s Exhibit 9,

Mr. Hoffman and the Respondent entered into an agreement

under which the Respondent is entitled to have all of the

ownership interest in the patents assigned to him, subject to

the obligation to pay a portion of certain revenues to Mr.

Hoffman that are obtained from the commercialization of the

technology reflected in the patents.

In the case of the power plant technology, the following

patents or technologies embodied in a patent application are as

follows:

Patent Filing Issue Exp. Respondent's

No. Date Date Date Ownership

Int.

5,735,125 01/22/96 04/07/98 01/22/16 34%

09/037,902* 03/10/98 Pending 01/22/16 55%

*US Patent Application

As to the pending patent application, only a portion of the

protected claims relates to technology and research done

during the marriage. The parties’ right to receive benefits from

the power plant technology is subject to certain agreements to

divide benefits and royalties, as was testified to by the

Respondent and is set forth in the Exhibits admitted into

evidence.

It appears from the evidence that none of the technology

embodied in the foregoing patents and patent applications is

currently commercially viable. However, it is equally clear

from the evidence that technology may have a tremendous

value if future research and technology lead to a commercially

viable application of the processes that the patents and patent

applications embody.

Respondent contends that the Court should either find

pursuant to Family Code Section 2552(a) that the patents have

no value at the time of trial, or, alternatively, that the court

apply the Respondent's view of the reasoning in Jn Re:

Marriage of Zaentz (1990) 218 Cal.App. 3d 154, and compensate

the community for efforts expended by the Respondent during

the marriage. Valuation using this approach would range

between a low of “zero” and a high of approximately $80,000

The Respondent has extensively analyzed the valuation issue

in various settlement proposals, which were introduced into

evidence at trial. The Court finds that the approach to

valuation used by the Respondent does not reflect the true fair

Sea ee ee ee ee

EM ALEC

market value of the community property patent rights, as it

does not take into account the possibility of the technology

having significantly greater value if other or future technology

causes the existing technology to be commercially viable.

While the additional technological advances may be, and most

likely will be, the result of the efforts of the Respondent, it is

also possible that such technology may be developed by others

as well.

Petitioner, on the other hand, has requested that the

ownership interest in the patents be divided in-kind so that she

may share in the future potential value of these patents.

Having considered the evidence and legal authorities cited

by the parties, the Court has concluded that the line of cases

represented by In Re: Marriage of Biddle (1997) 52 Cal.App.4th

396, and In Re: Marriage of Kilbourne (1991) 232 Cal.App.3d

1518, are persuasive. The Court determines that based upon

the evidence presented, the Court cannot make a present

determination of the value of the community patent rights, and

that merely reimbursing the community for time expended

and monies invested during the marriage does not necessarily

reflect the asset’s fair market value.

Considering the equities in this matter and the enormous

potential value that these patents may represent at some point

during the remaining twelve (12) years of their legal life, the

court believes that an in-kind division is the most appropriate

method of dividing these interests. Accordingly, each party

should be awarded a fifty percent (50%) interest in the

community interests in the patents, and the Court should

reserve jurisdiction over the allocation and distribution of any

benefits that may be received as a result of those patent rights

and make such Orders as are appropriate to ensure that each

party receives their one-half (2) share for any such benefits

that result from the community patent rights.

The issue of attorneys fees and costs having been

bifurcated, the court reserved jurisdiction over those issues.

DATED: 1/13/2000

/s/

PHILIP A. CHAMPLIN

Judge of the Superior Court

DOCUMENT 4

Further Judgement on Reserved Issues

LAW OFFICES OF

FERSHKO, LEWIS & BLEVANS

ATTORNEYS AT LAW

1005 COOMBS STREET

NAPA, CALIFORNIA

(707) 226-9928

FACSIMILE (707) 226-1805

ROBERT E. BLEVANS, CSBN: 75853

Attorney for Petitioner, NANCY WERES

Filed JAN 18 2000

JOSE O. GUILLEN

COURT EXECUTIVE OFFICER

BY _/s/ J. Flohr

DEPUTY

SUPERIOR COURT OF CALIFORNIA

COUNTY OF NAPA

CASE NO. 76505

In Re Marriage of : )

Petitioner: NANCY WERES )

and )

Respondent: OLEH WERES )

)

LR RRS ERT LE MIE REE RON A ae Oy

R NT _ ON R

The issue of the division of patent rights developed during

the parties’ marriage came before the Court for trial

commencing July 8, 1999, and concluding July 26, 1999.

Petitioner was present and represented by counsel, Fershko,

Lewis & Blevans, by Robert E. Blevans. Respondent was

present and represented by counsel, Lynn Young. The court

issued its Notice of Tentative Decision on October 13, 1999, and

has issued a statement of decision. The issue of attorneys fees

and costs having been bifurcated, the Court reserves

jurisdiction over that issue.

Based upon the evidence, both oral and documentary,

presented at the trial, the Court makes the following Orders:

1. Petitioner is hereby awarded an undivided one-half

(2) interest as tenant-in-common in any and all rights, title and

interest that either party is entitled to with respect to the

following patents:

C. With respect to electrochemical technology:

Patent No. Filing Date — Issue Date

5,364,508 03/16/94 11/15/94

5,419,824 02/02/94 05/30/94

5,439,577 11/10/94 08/08/95

d. With respect to power plant technology:

Patent No. Filing Date Issue Date

5,735,125 01/22/96 04/07/98

2. Petitioner is hereby awarded an undivided one-half

(2) interest as tenant-in-common in any rights or benefits that

may result from that portion of patent application 09/037,902

resulting from work performed during the parties marriage.

3. Respondent is hereby awarded an undivided one-half

(34) interest as tenant-in-common in any and all rights, title and

interest that either party is entitled to with respect to the

following patents:

a. With respect to electrochemical technology:

Patent No. Filing Date _—Issue Date

5,364,508 03/16/94 11/15/94

5,419,824 02/02/94 05/30/94

5,439,577 11/10/94 08/08/95

b. With respect to power plant technology:

Patent No. Filing Date _—Issue Date

5,735,125 01/22/96 04/07/98

4. Respondent is hereby awarded an undivided one half

(4) interest as tenant-in-common in any rights or benefits that

may result from that portion of patent application 09/037,902

resulting from work performed during the parties marriage.

5. For the purposes of determining what rights were

created and/or existed during the parties’ marriage, the date

of marriage is determined to be September 1, 1974, and the

date of separation is determined to be February 10, 1996.

6. Each party is hereby restrained and enjoined from

licensing, transferring, hypothecating, disposing of, or

otherwise transferring any interest in the above-referenced

patents or the community portion of any rights resulting from

the above-referenced patent application without the express

written consent of the other party or an Order of Court first

obtained.

7. Each party is restrained and enjoined from

transferring, disposing of, or disbursing any consideration,

payment, or other benefit received resulting from the rights

protected under the above-referenced patents or resulting from

any patent resulting from the above-referenced patent

application without the express written consent of the other

party or an Order of Court first obtained.

8. Each party shall keep the other informed and, as

applicable, shall provide the other party with copies of any

document relating to any offer to purchase, license or pay any

consideration or provide any benefit to either party relating in

whole or in part to the rights protected under the above-

referenced patents or relating to the technology identified in

the above-referenced patent application. Such information

shall be provided by the recipient to the other party within five

(5) days of receipt.

9. Each party shall sign any and all documents necessary

or convenient to register the ownership interests in the patents

and any ownership interests resulting from the patent

application referred to above with the United States Patent

Office. Should either party fail to sign any such document

within ten (10) days of its presentation, the court may

authorize and order the County Clerk, or other appropriate

person, to sign such document in place of the refusing party.

10. The Court specifically retains jurisdiction to allocate

and divide any and all benefits that may be received as a result

of the above-described patents or the above-described patent

application, or the technologies described therein and/or

protected thereby between the parties. The Court further

retains jurisdiction to make any and all Orders necessary

and/or convenient to carry out and enforce the terms and

provisions of this judgment.

DATED: 1/13/2000 /s/

PHILIP A. CHAMPLIN

Judge of the Superior Court

ARS DBN LS CATRIONA TPN EIN

ARE NT AER Neg ov atgn He

ee a i ie

PRONG GER # EPSP ORE EA:

DOCUMENT 5

Petitioner's Opening Brief to California Court of Appeals:

Sections dealing with Federal Questions

(Most footnotes have been deleted for brevity.)

8. The Trial Court its abused its discretion by limiting

Husband’s authority over his business.

Husband testified that perfecting and promoting the

technologies protected by the patents has been the primary

focus of his business since the date of separation, and his

income depends on this work (RT 104:22-105:2, 104:11-21,

538:24-539:2). By giving Wife equal authority over the patents,

the Trial Court has created a situation whereby the Parties are

no longer married and Husband’s business (save the patents)

has been allocated to him as his separate property. However,

he now has less authority to operate his business than he did

prior to separation. The Trial Court has abused its discretion

by unreasonably burdening Husband's ability to manage his

business and make a living.

8.1. Judgement jeopardizes benefits due Husband’s

coinventors.

Pursuant to his agreements with M.R. Hoffmann (Exhibit

22/V, RT 109:2-23) and the Ukrainians (RT 105:6-18) Husband

is responsible for managing the patents for mutual benefit of

all the inventors.

Expert witness H.D. Messner testified that the reaction of

a potential licensee to joint ownership by Husband and ex-

Wife would be negative (RT 82:26-83:12). Husband agreed,

noting that having Wife’s name on title to the patents

registered with the US-PTO would raise questions and

complicate negotiations (RT 541:5-11), thereby jeopardizing

future benefits due to Husband's coinventors. This evidence

was uncontroverted. Wife presented no evidence as to her

intentions or good faith. If Wife and Husband were still

married, Fam. Code §1101, subd. (c)(3) and §1101, subd. (c)(4)

separately would have barred a court order forcing Husband

to register Wife’s interest in the patents with the US-PTO even

if Husband had failed in his fiduciary responsibility to Wife (of

which there is no evidence).

8.2. Trial Court abused discretion by partially assigning to

Wife Husband’s obligations to coinventors.

By giving Wife equal authority and veto power in all

matters related to the patents, the Trial Court has effectively

assigned part of the obligations that Husband has towards his

coinventors to Wife. California case law recognizes limits to

the general rule of freely transferable contractual rights and

obligations. In Farmland Irrigation Co. v. Dopplmaier (1957) 48

Cal.2d 208,222 the Supreme Court stated:

“... the duties imposed upon one party may be of

such a personal nature that their performance by

someone else would in effect deprive the other

party of that for which he bargained. The duties in

such a situation cannot be delegated. (See La Rue

v. Groezinger (1890) 84 Cal. 281,283-285 ... ) Rights

likewise cannot be assigned if the assignment

would materially impair the nonassigning party's

chance of obtaining the performance he expected.”

As there is no evidence that Wife can fulfill any part of

Husband's obligations toward his coinventors, the Trial Court

abused its discretion by giving Wife equal authority over the

patents.

8.3. Husband should be given full authority to manage the

patents.

D. Nimmer, Copyright ownership by the marital community:

evaluating Worth (1988) 36 UCLA L.Rev. 383 expressed concern

that the equal powers inherently granted to the author's

spouse under the doctrine of community property could

impair the value of a copyright by diluting the author’s ability

to manage this marital asset. Nimmer’s advice to the courts

was to develop

“a vehicle similar to [Cal. Fam. Code §1100, subd.

(d)], but one that confers absolute rather than

primary responsibility upon the author-spouse...”

(Id. at 413)

“In particular, without too much violence to the

institution of marriage, the courts should presume

that the author-spouse’s consent to sharing author

status is contingent on the nonauthor-spouse’s

consent to ceding full authority over the

disposition of the copyright to the author-spouse.”

(Id. at 414)

The intent of Family Code §1100, subd. (d) is to give a

married business operator a free hand to manage a community

property business for the benefit of both spouses. Family Code

§1101, subd. (c)(3) is intended to avoid problems inherent in

messy ownership situations, while Family Code §1101, subd.

(c)(4) protects third parties from collateral harm. Husband

prays that the judgement be reversed and remanded to give

him at least as much authority to manage the patents and his

business as he would have if still married pursuant to §1100,

subd. (d) and §1101, subd. (c). Husband willingly accepts his

responsibility to notify Wife prior to licensing or selling the

patents and account for the benefits received.

Throughout marriage and after dissolution, a pension plan

remains in the name of the employee spouse only. In Marriage

of Brown, supra, 15 Cal.3d at 849-850 the Supreme Court

emphasized that the employee spouse is free to “define ... the

nature of the retirement benefits owned by the community” by

changing or terminating employment, changing a contribution

level, etc.. While the ex-spouse has claim to part of future

pension benefits, she has no say over employee spouse's

retirement planning, and no veto power. This rule was

recently affirmed and quoted by the Supreme Court in

Marriage of Lehman, supra, 18 Cal.4th at 179.

Husband respectfully submits that the same rule should

be applied to the patents. Husband is willing to give Wife a

part of future benefits calculated as set forth in §4.2, but he

prays that the judgement be reversed and remanded to grant

him complete authority to manage the patents, and that Wife’s

name not be added to title thereof.

9. The Trial Court frustrated the intent of the US

Constitution by impairing the value of the patents and

impeding commercialization

Article I, Section 8, Clause 8 of the U.S. Constitution

authorizes the United States Congress to establish patents and

copyrights:

“Congress shall have power ... To promote the

Progress of Science and useful Arts, by securing

for limited Times to Authors and Inventors the

exclusive Right to their respective Writings and

Discoveries ...”

Patents and copyrights are the only species of property

provided for directly by the United States Constitution.

Federal courts have jurisdiction over cases arising under the

patent law (that is, US Code Title 35 - Patents, hereinafter “35

US Code”), while state courts have jurisdiction over cases

arising from incidents of ownership of patents (60 Am Jur 2d,

Patents, §§1183-1184, pp. 832-833). However, in exercising

their authority over patents, state courts are required by the

Federal Supremacy Clause of the U.S. Constitution, Article VI

to respect Constitutional intent and Federal Law. The United

States Supreme Court has stated that federal policy related to

patents “may not be set to naught, or its benefits denied” by

state law (Sears, Roebuck & Co. v. Stiffel Company (1964) 376 U.S.

225 [84 S.Ct. 784, 787]).

In Farmland Irrigation Co. v. Dopplmaier, supra, 48 Cal.2d at

220 the California Supreme Court defined the limits of state

power over patents:

“The purpose in granting a patent monopoly is to

promote progress in science and the useful arts by

stimulating invention and encouraging disclosure.

l law n

advantages of the monopoly, it respects the federal

purpose, and there is no reason why it should not

govern, as with any other property, the incidents

attached to the ownership of the patent.”

[emphasis added]

The “advantages of the monopoly” are both public and

private: the public benefits because the progress of science and

the useful arts is promoted, and the inventor benefits by

receiving potentially valuable property; that is, a patent. In his

law review article Nimmer, supra, 36 UCLA L.Rev. at 412 asked

the California State Legislature and the California courts to

develop a legal framework consistent with this principle

governing copyrights as a species of community property:

“... the goal must be to preserve the rights of

authors’ spouses while not impinging on the

authors’ ability effectively to exploit their

copyrights. Any scheme that lessens the

possibility of such exploitation not only harms

both the author and the nonauthor-spouse, but

also undermines Congress’ purpose in enacting

the copyright laws: to encourage authorship. This

factor militates once again towards [Federal]

preemption.”

The testimony has established that the Trial Court's

judgement will (1) impair the value of the patents, thereby

impairing the private benefit of the patents, and (2) may hinder

commercial expioitation of the technology in them, thereby

hindering realization of the public benefit. By handing down

a decision that damages both the public and the private

advantages of the patent monopoly, the Trial Court has abused

its discretion by frustrating the intent of the United States

Constitution.

10. Recent Federal court decisions defining application of

community property laws to copyrights apply to patents as

well.

For thirteen years In re Marriage of Worth (1987) 195

Cal.App.3d 768 has been accepted throughout the United

States as defining the status of copyrights and patents in

marriage. In Marriage of Worth the Appeals Court (1" Dist.,

Div. 1) recognized that by action of the federal copyright

statute (17 US Code §201(a)) a copyright initially vests in the

author spouse, but concluded that “ ... the copyright is

automatically transferred to both spouses by operation of the

California law of community property.” [emphasis added]

(Marriage of Worth, supra, at 774).

In Rodrigue v. Rodrigue (E.D.La. 1999) 55 F.Supp.2d 534

(herein-after Rodrigue-1) the painter-husband asked a Federal

District Court to grant a summary judgement declaring him

sole owner of several copyrights obtained by him during

marriage (retecting commercially successful images of a blue

dog) ars? Suture derivative works (additional images of the

same blue dog). The court ruled in favor of husband, accepting

his argument that Federal Statute preempts Louisiana's

community property law. The constitutional and public policy

arguments used by the court in Rodrigue-1 are equally

applicable to patents:

“One of the fundamental purposes behind the

Patent and Copyright Clauses of the Constitution

was to promote national uniformity in the realm of

intellectual property” (Rodrigue-1, 540, quoting

Bonito Boats v. Thunder Craft Boats (1989) 489 U.S.

141 [109 S.Ct. 971, 983] and Federalist Paper 43).

“To deem copyrights to be community property

would risk inflicting major damage on the goals of

predictability and certainty of copyright

ownership, national uniformity, and avoidance of

the practical difficulties of determining and

enforcing an author's rights under the differing

laws of the various states.” (Rodrigue-1 at 546)

In Rodrigue-1 at 542-543 the court explicitly refuted Worth

court’s conclusion, holding that 17 US Code §201(e), which

prohibits involuntary transfer of a copyright, precludes

“automatic” transfer of a copyright to the community. The

Rodrigue-1 court at 543 also rejected the argument that by living

in a community property state the author spouse implied

voluntary transfer of copyrights created during marriage to the

community. The Rodrigue-1 court (fn.2 on p.537) borrowed

arguments from Nimmer, op. cit. and cited several other law

reviews that repudiated Worth.

Very recently, Rodrigue-1 was modified in Rodrigue v.

Rodrigue No. 99-30334 (5th Cir. 07/07/2000) [hereinafter

Rodrigue-2]. The Rodrigue-2 court confirmed that “Copyright

... vests initially in the author ...” (17 US Code §201(a)), but

noted that §106 defines “copyright” as a finite bundle of but

five fundamental exclusive rights of reproduction, adaptation,

publication, performance and display. Because the statutory

definition of copyright does not mention the exclusive right to

economic fruits of the copyright, the Rodrigue-2 court affirmed

that legal title and complete control over the copyrights

belonged to the author-Husband, but held that the net

economic fruits of the copyrights are divisible community

property.

US Code Title 35 - Patents states that:

“The true and original inventor must be named in

the application for a patent and absent some

effective transfer or obligation to assign the patent

rights, the original inventor owns the rights to the

invention.” (University Patents, Inc. v. Kligman

(E.D.Pa. 1991) 762 F.Supp.1212, 1218-1219)

Federal courts have consistently held that “since a patent

is a creature of federal statutory law, it may be transferred only

in the manner provided by such law” (University Patents v.

Kligman supra, 1219) “... which the state statutes cannot affect”

(Jewett v. Atwood Suspender Co. (D.Verm. 1900) 100 F. 647,648).

35 US Code §261 specifies that “applications for patent, patents

or any interest therein, shall be assignable in law by an

instrument in writing” by “the applicant, patentee, or his

assigns or legal representatives ...”._ A court may order an

inventor to assign his patent to enforce a contractual obligation

or by decree which

“... Must come from some proceeding akin to a

creditor's bill or a petition seeking the aid of the

equity side of the court to enforce a judgement at

law, through the appointment of a__legal

representative” (McClaskey v. Harbison-Walker

Refractories Co. (3" Cir. 1943) 138 Fed.2d 493,495.

[emphasis added]

Finally, California Family Code §852, subd. (a) specifies

that a transfer of separate property to the community “... is not

valid unless made in writing by an express declaration ...”.

Thus, both Federal and California law bar the “automatic”

transfer of a patent to the marital community unsupported by

a written instrument executed by the inventor or his legal

representative. As with copyrights, a patent obtained in

marriage remains separate property of the inventor.

While the direct effect of Rodrigue-2 upon copyrights and

its logical extension to patents would appear to preempt

California community property law, in fact Rodrigue-2 leads to

the same practical remedy that Husband has proposed in §4.2

based on California law, and accords with directly relevant

case law from other states reviewed in §5. The application of

Rodrigue-2 to the case at bar would give Husband ownership

and complete control of the patents, with the obligation to give

Wife a portion of future benefits calculated using an

appropriate apportioning formula.

In distinction from copyrights, the wording of the patent

statute suggests that the economic benefits from a patent

remain separate property as well. 35 US Code §101 allows the

inventor to receive a patent, §154 defines what a patent is, and

§261 states without qualification “... patents shall have the

attributes of personal property.” Since a patent is “ personal

property,” ownership of the patent initially given to the

inventor must include the economic fruits thereof. Therefore,

the reasoning in Rodrigue-2 does not carry over to patents, and

patents are governed by Rodrigue-1. This argument supports

the conclusion that a patent obtained by a spouse in a

community property state remains his separate property,

including the economic benefits thereof.

If the Appeals Court agrees with Husband that the more

radical holding in Rodrigue-1 applies to patents, the practical

effect can likewise be easily reconciled with California law.

Husband would receive complete, unencumbered ownership

of the patents and the future benefits thereof, but would be

required to compensate Wife for one-half of the community’s

effort and expenses invested in the patents. This remedy

accords precisely with the reimbursement approach that was

developed by the California Appeals Court (1" Dist., Div. 1) in

Marriage of Zaentz, supra, 218 Cal.App.3d 154 and proposed in

§4.1 of this brief.

This Court of Appeals has the power to interpret de novo

Fam. Code §760 in application to patents and copyrights.

Statements by Husband’s trial counsel characterizing the

patents as community property merely restated the

interpretation of that statute by the Worth court and in no way

should Husband be estopped to have this Court establish his

separate property rights in the patents. Husband requests that

the Appeals Court ignore his earlier references to the patents

as community property”, and fully consider the argument set

forth in this Section. Such consideration will not violate the

rule of excluding on appeal grounds not raised at Trial. Comity

suggests that the Appeals Court should look to Federal law in

this matter. In this case, the Parties, their respective trial

counsels, and the Trial Court did not have the benefit of the

new Federal case law. Rodrigue-1, published just two months

before the instant case was tried, was pending appeal.

Rodrigue-2 was not decided until July 7, 2000, long after the

trial on this matter.

% “The Court is now being asked to apply the law, as it currently exists

in California, to effect a allocation of the community property interests in

these acknowledged community property patents.” (Final Argument, p.2;CT

118:18-19) Similar statement in Husband’s Trial Brief, p.3 (CT 89:18-19).

These statements cannot be construed as an “express declaration ... in

writing” effecting transfer of the patents to the community; at that time

Husband did not know that the patents were his separate pro-perty, and he

certainly would not have conceded such a fundamental point.

DOCUMENT 6

Decision of the California Court of Appeal

T EP DI IALR

IN THE COURT OF APPEAL OF

THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

FILED

Court of Appeal - First App. District

APR 23 2001

RON D. BARROW, CLERK

DEPUTY

In Re the Marriage of NANCY WERES and OLEH WERES

NANCY WERES )

Respondent )

v. )

OLEH WERES )

Appellant )

)

A090448

(Napa County

Super. Ct. No. 76505)

In this action for dissolution of marriage, Dr. Oleh Weres

(Husband) appeals from a judgment on reserved issues which

awarded respondent, Dr. Nancy Weres (Wife), an undivided

one-half interest in four community property patents which

were perfected by Husband during the marriage but which

lack ascertainable present value. Husband contends that the

trial court should have awarded him sole ownership of the

patents, with some kind of compensatory cash payment to

Wife. We disagree and affirm.

I. FACTS

Husband is a research chemist and Wife is a pediatrician.

They were married on September 1, 1974, and separated on

February 10, 1996. In 1988, Husband started a small research

and development laboratory known as Sonoma Research

Company. As the owner and operator of his own research lab,

and deriving his income from research grants, Husband

developed technology which resulted in his perfecting four

patents prior to the date of separation. Three patents involved

an electrochemical process for improved purification of certain

types of waste waters. The fourth involved a process to

improve the output of power plants.

Husband has a 100 percent ownership interest in the three

electrochemical patents, and a 34 percent ownership interest in

the power plant patent. Husband conceded below that his

ownership interest in the four patents is community property.

The electrochemical patents expire in 2012; the power plant

patent expires in 2016.

The parties stipulated to the division of all community

property assets except for the patents. The matter went to trial

on the reserved issue of the division of the ownership interest

in the patents.’ In her trial brief, Wife contended that the trial

court should divide the patents in-kind and give her 50 percent

ownership of the community property interest in the patents

’ The trial also concerned attorney's fees, costs, and spousal support,

matters which are not pertinent to this appeal.

and whatever benefits flow therefrom.

In his trial brief, Husband argued the patents “ha[d] no

commercial value,” and claimed he needed to continue to

“develop ‘his’ technology to commercial viability”: “The only

way that these four patents have any value, or will have any

value, is if [Husband's] efforts and research continue to bear

fruit and eventually result ina commercial product.” Husband

contended that joint ownership of the patents with Wife would

interfere with his ability to market the technology, and that he

should be awarded sole ownership with “an equalizing

payment to Wife from the parties[’] various retirement funds.”

Husband submitted detailed alternatives for the

computation of this equalizing payment, which boiled down

to (1) reimbursing Wife for one-half of the community's

unreimbursed time and effort in developing the patents, which

Husband computed as a payment to Wife of $42,241; or (2)

allocating to Wife a percentage share of future income from the

patents reflecting Husband’s preseparation efforts in

technological development, or a share reflecting both pre-and

postseparation efforts. Husband presented these alternatives

ina nine-page document called “Settlement Offers [Rlegarding

Intellectual Property” (Settlement Offers) attached to his trial

brief.

At trial, two of Husband's expert witnesses — consulting

chemist Spencer Sharp and patent attorney Harold Messner —

testified that the electrochemical patents had no commercial

value. Sharp testified that the electrochemical patents were for

very specialized uses — purification of oily machine shop

waste waters and the bilge waters of military ships. The

patents worked in principle but Husband's technology “still .

.. has a ways to go before it’s going to be commercially viable.”

Messner testified that he was familiar with Husband's

technology and there was “no value” to the electrochemical

patents; the technology needed work “in order to become

theoretically valuable in the future.” Messner also testified

that the power plant patent had no present value.

According to Messner, further development of Husband’s

technology would lead to new patents. Should the technology

eventually become commercially viable, the original

community property patents and the new patents would be

packaged together for possible licensing.

Messner agreed that two people could jointly own a

patent, either as joint tenants or tenants in common, and the

joint ownership could be registered at the United States Patent

Office. But joint patent ownership would result in one party

having a veto over the other's ability to license or sell the

technology. In Messner’s opinion, it was important for only

one person to have control over a patent because a prospective

licensee would want to “look at one person to be able to make

all the decisions.” A potential licensee would have a

“negative” reaction to a patent jointly owned by a husband

and wife.’

Husband testified that the patents currently had little

value, and would command only a token sales price: “[I]f I

were able to find a buyer for them, . . . 1 wouldn’t get very

much for them, I'll say that.” He did state that the marital

patents had some value as ‘background patents,” because they

kept “other people from . . . doing similar research which

might result in useful technology.”

Husband described the development of his technology as

his “life’s work for the foreseeable future.” Husband noted

that Thomas Alva Edison’s original patent on the incandescent

2 The trial court described this point as “obvious”: “[When] you have a

few people that have control over something, [and] they can’t agree, it’s

going to make it more difficult in dealing with [a] third party.” Wife's

attorney then observed, “I think Shakespeare once said, while two men can

own a horse, they have to agree who is going to [ride] in front.” The exact

quote is “an two men ride of a horse, one must ride behind.” (Shakespeare,

Much Ado About Nothing, act III, scene 5, lines 40-41.)

light bulb “was totally abandoned . . . [as] totally impractical,”

and that it wasn’t until several years and several patents later

that Edison made a commercial venture from his original

concept.

Husband's “Settlement Offers” document was accepted

into evidence as an offer of proof of his testimony regarding

his methods of calculating the equalizing payment to Wife

should he be awarded sole ownership interest in the patent.

Husband testified he wanted the sole ability to negotiate and

control the sale of his patents, and that Wife could be

compensated by his sole ownership by either compensation for

her share of the community — i.e. Husband’s —

unreimbursed efforts in developing the technology prior to

separation, or a percentage of the benefits realized from the

original patents proportional to Husband’s work developing

the technology prior to separation.

Husband confirmed Messner’s testimony that any

improvement or perfection of the original (i.e., marital) patents

would result in new patents. Husband further testified that

any new patents would not alter or expand the claims

protected under the marital patents as of the date of

separation.

The trial court found that the marital patents had some

value, but their value was difficult to presently define. The

court further found that none of the technology behind the

four patents was “currently commercially viable, “ but “may

have a tremendous value if future research and technology

lead to a commercially viable application of the processes .. .”

patented by Husband. But the court found that Husband's

suggested methods to compensate the community — and

therefore Wife — for his preseparation work on the patents

“does not reflect the true fair market value of the community

property patent rights, ae it @oes not take into account the

possibility of the technology having:significantly greater value

if other or future technology causes the existing technology to

be commercially viable.”

The court concluded that it could not make a “present

determination of the value of the community patent rights, and

that merely reimbursing the community for time expended

and monies invested during the marriage does not necessarily

reflect the asset’s fair market value. [4] Considering the

equities in this matter and the enormous potential value that

these patents may represent at some point during the

remaining twelve (12) years of their legal life, the Court

believes that an in-kind division is the most appropriate

method of dividing these interests.” Accordingly, the court

awarded Husband and Wife an undivided one-half interest as

tenant-in common in the community property interests in the

patents.° The court retained jurisdiction to allocate and divide

any and all benefits that might be received as a result of the

patents and their underlying technologies.

II. DISCUSSION

Patents obtained during the life of the marital community

are community property. (Lorraine v. Lorraine (1935) 8

Cal.App.2d 687, 692, 701; cf. In re Marriage of Worth (1987) 195

Cal.App.3d 768, 773 [copyright obtained during marriage is

community property].) Family Code section 2550 provides

that in an action for dissolution of marriage, and absent an

agreement between the parties to the contrary, the trial court

“shall ... divide the community estate of the parties equally.”

The statute “was intended to, and does, vest in the court

considerable discretion in the division of community property

in order to assure that an equitable settlement is reached.” In

re Marriage of Connolly (1979) 23 Cal.3d 590, 603; see In re

* The court also awarded each party a similar interest in any rights or

benefits that may result from a pending application for a fifth patent, filed

after the date of separation, to the extent that those rights or benefits result

from work performed during the marriage.

Marriage of Cream (1993) 13 Cal.App.4th 81, 88.)*

Equal division of community property recognizes the

California view of the marriage as a partnership, with each

spouse contributing equally to the acquisition of property

without regard to which spouse actually worked to earn or

acquire the property. (In re Marriage of Brigden (1978) 80

Cal.App.3d 380, 389.) Thus, equal division, or in-kind division,

is the norm in dividing community property. (Ibid.) Methods

of division other than in-kind division, such as the methods

urged by Husband in this case, are permitted only under

narrow economic circumstances where an asset cannot be

divided without impairment. (Fam. Code, § 2601; In re Marriage

of Brigden, supra, 80 Cal.App.3d at pp 390-392.)

Equal division of community property recognized the

California view of the marriage as a partnership, with each

spouse contributing equally to the acquisition of property

without regard to which spouse actually worked to earn or

acquire the property. (In re Marriage of Brigden (1978) 80

Cal.App.3d 380, 389.) Thus, equal division, or in-kind division,

is the norm in dividing community property. (Ibid.) Methods

of division other than in-kind division, such as the methods

urged by Husband in this case, are permitted only under

narrow economic circumstances where an asset cannot be

divided without impairment. (Fam. Code, § 2601; In re Marriage

of Brigden, supra, 80 Cal.Apn.3d at pp. 390-392.)

Here the trial court exercised its considerable discretion

and followed the established norm of in-kind division of the

patents, to protect Wife’s interests in any future value the

community assets may one day have. In his opening brief,

Husband raises nine arguments, most with several

subarguments, to support his proposition that the trial court

. At the time Connolly and Cream were decided, Family Code section

2250 was a portion of Civil Code section 4800, subdivision (a). (Cal. Law

Revision Com. Com., 29D West's Ann. Fam. Code (1994 ed.) foll. §2550, p. 4.)

erred. We condense Husband’s arguments for purposes of

discussion. Specific points or subarguments not mentioned in

this opinion have not been overlooked, but have simply been

deemed not dispositive of the case.

First, Husband argues that the trial court abused its

discretion by the in-kind division of an asset which can only

attain value because of Husband’s postseparation efforts.

Husband equates this division with an award of “a one-half

interest in the fruits of Husband's postseparation efforts, which

are legally his separate accumulations.” The equation is not

valid. The trial court awarded Wife a one-half interest in only

the community property interests of the marital patents, not

any postseparation property interest of Husband. While the

future value of the marital patents may be contingent on

postseparation technological development, that development

will lead to new patents separate and distinct from those now

at issue, which will be ‘dusband’s separate property and will

be licensed in a package with the marital patents. Simply put,

Wife has been awarded only her one-half community share in

the community property patents, and not in Husband's

separate property or any patents arising from his continued

postseparation efforts.

Husband also contends the court abused its discretion by

relying on In re Marriage of Biddle (1997) 52 Cal.App.4th 396;

and In re Marriage of Kilbourne (1991) 232 Cal.App.3d 1518.

Biddle held that a spouse’s entitlement to a cash recovery ina

qui tam action is a contingent future interest and therefore

divisible community property. (In re Marriage of Biddle,

supra,52 Cal.App.4th at pp. 399-400.) Kilbourne held that the

trial court did not abuse its discretion by reserving jurisdiction -

to divide the unpaid fees of the husband’s law practice. (In re

Marriage of Kilbourne, supra, 232 Cal.App.3d at pp 1524-1525.)

A lengthy discussion of these decisions is not necessary: they

either support, or are not inconsistent with, the trial court’s

ruling.

Next, Husband contends that Family Code section 2601

and the reasoning of Marriage of Brigden,as well as the general

principles of Marriage of Brigden, as well as the general

principles of Marriage of Connolly, would have supported

awarding him the patents outright. Husband argues the in-

kind division “is tantamount to dividing Husband's business”

and will inevitably lead to “ deadlock” because of Wife’s “equal

authority and veto power.” But Husband's research company

has not been divided; rather, the company was awarded to

Husband per stipulation of the parties. Wife has only been

awarded her one-half share of the marital patents, an award

which is well within the trial court’s discretion. If wife’s

interest in the patents were to interfere somehow in the

commercial development of the patents, the court has the

power to act to modify its decision.

Moreover, there is no reasonable basis to assume

deadlock. As the trial court observed, Husband's assumption

of Wife’s obstructionism “is the one weak leak in the

argument, . . . that you are attributing to her a motive to veto

or cause problems . . . [{]] There is no common sense or

evidence, nor would there be any motive that I can see, why

she would want to do anything to interfere with the

commercial viability. To the contrary, I would think she would

want to do everything to make it a success. That is the whole

point of this.”

Husband also argues the trial court erred by relying on the

“speculative future value” of the patents to justify the in-kind

division. He contends the trial court did not rely on evidence

of present value — which showed the patents were worth little

or nothing — but instead speculated that Husband's

postseparation efforts would endow the patents with value

that they presently lack. But the court did not speculate: it

merely awarded Wife her one-half share in any future value the

patents may realize. Appellant presented evidence of an

imprecise value ranging from $0 to $42,241, with no one able

to estimate truly the value. While commercial value may

depend upon Husband’s perfecting the technology and

obtaining additional patents, the marital patents would

presumably be the foundation of that future work, and Wife

cannot be denied her one-half share for the community effort

in developing the marital patents. We observe that such

commercial value may not depend on Husband’s future work

at all: there is substantial evidence in the record that the

marital patents could become valuable by the technological

advancements of researchers other than Husband. The trial

court properly made a division of the ownership interests of

the patents and retained jurisdiction to a time when their

unrealized value can be reasonably ascertained.

Moreover, courts can divide community assets in-kind

without a determination of present value. (See In re Marriage

of Brown (1976) 15 Cal.3d 838, 848; In re Marriage of Bergman

(1985) 168 Cal.App.3d 742, 758.) Indeed, in a case cited by

Husband, a Kansas court has held that patents may be divided

without a determination of present value. (Matter of Marriage

of Monslow (Kan. 1996) 912 P.2d 735, 746-747.)°

Husband briefly argues that the patents are not property

interests based on future contingencies, but are mere

expectancies and thus are not divisible community property.

(See In re Marriage of Brown, supra, 15 Cal.3d at pp. 844-845.)

This argument is inconsistent with Husband’s concessions

below that the patents are community property. This

argument is also inconsistent with the law of California and of

other states that patents, even without present value, are

divisible — albeit intangible — assets of the marital

> In its discretion, the trial court in Monslow awarded complete

ownership in the patents to the spouse who perfected them, and awarded the

other spouse a share in future income. As we read Monslow, this

discretionary division was not an inevitable result of the court’s conclusion

that patents could be divided without a determination of present value.

community. (See Lorraine v. Lorraine, supra, 8 Cal.App.2d at p.

701; Matter of Marriage of Monslow, supra, 912 P.2d at pp. 744-

747, and cases cited therein; cf.. In re Marriage of Worth, supra,

195 Cal.App.3d at pp 774-775 [copyright obtained during

marriage is intangible community property asset].)

Husband contends at some length that the trial court

should have used one of the methods of computing an

equalizing payment to Wife that Husband outlined in his

“Settlement Offers” document. But the court acted well within

its discretion and was not obligated to use any particular form

of division proffered by Husband. Moreover, the authorities

cited by Husband to support his argument are based on unique

facts (see, e.g., In re Marriage of Zaentz (1990) 218 Cal.App.3d

154), involve methods of valuation of community assets not

pertinent to the present case, or are otherwise not substantially

instructive. No case cited by Husband shows the trial court in

this case abused its discretion.°

? Husband's considerable reliance on Hazard v. Hazard (Tenn.App. 1991)

833 S.W.2d 911, is misplaced. In that case the husband, a medical doctor, had

“designed and developed” a medical device which had been taken off the

market due to a patient death, and whose “future economic value . . .[was]}

not at present ascertainable.” (833 S.W.2d at p. 913.) The trial court awarded

the wife 20 percent of the royalties, licenses and sales of the device. (Ibid.)

In affirming, the Court of Appeals of Tennessee — in a very brief discussion

— found the device a marital asset subject to division, and concluded that

the 20 percent share of future income was “an equitable method of making

a division of this particular asset.” (833 S.W.2d at P. 916.)

It is not clear from the opinion whether the husband had obtained a

patent on the device. Furthermore, although the trial court divided the value

of the husband's medical practice in half, it is not even clear from the opinion

whether Tennessee is a community property state. As far as we know, it is

not. (See Rodrigue v. Rodrigue (5" Cir. 2000) 218 F.3u 432, 441 &. fn. 42

[identifying eight states — Arizona, California, Idaho, Louisiana, Nevada,

New Mexico, Texas, and Washington — as“ presently hav[ing] some version

of [community] property regimes”].) In any event, the Tennessee appellate

court's terse affirmance of a particular division as “equitable” does not

dictate a reversal of the California trial court in the case before us.

Next, Husband makes three related arguments. He

complains the trial court improperly reserved jurisdiction for

an indefinite period; that the court failed “to make a clean

break between the parties”; and that the court has unduly

limited Husband's “authority over his business.”

While a court may not reserve open-ended jurisdiction to

divide a community asset at some later date (see In re Marriage

of Bergman, supra, 168 Cal.App.3d at pp. 755-757, 755 fn. 10; see

also In re Marriage of Kilbourne, supra, 232 Cal.App.3d at p.

1525), that is not what the trial court did in this case. The court

divided the community assets of the four patents, and reserved

jurisdiction only to divide the benefits of those interests — i.e.,

income from the patents should commercial viability be

achieved — at a future date. This procedure is appropriate.

(See In re Marriage of Bergman, supra,168 Cal.App.3d at p. 755,

fn.. 10, 758.)

By the same token the court’s proper reservation of

jurisdiction cannot be assailed as a failure “to make a clean

break” among the parties. Husband apparently objects to

boilerplate provisions in the trial court’s ruling which prevent

either party from, inter alia, transferring or disposing of any

interest in the marital patents, and which require the parties to

exchange certain information regarding any licensing of the

patents, and to cooperate to sign the appropriate documents to

Patents Office. These provisions are standard, proper and well

within the trial court's discretion. If respondent were to

impede the development of these community assets, the court

has the power to take appropriate action.

The trial court has not interfered with the operation of

Husband's business. As we have noted, the award to Wife of

the one-half share of the community patents in no way affects

the present operation or management of Husband’s research

lab. There is no indication the Wife’s co-ownership affects

Husband’s relationship with other inventors who are working

with him on the patents — if only for the reason that

Husband’s current work, by definition, is leading to new

technology which will result in new patents, and which will by

Husband’s own testimony not alter or affect the rights

protected by the marital patents.’

Finally, Husband invokes federal patent law. He contends

that the trial court’s award of one-half interest in the marital

patents to Wife violates federal law — specifically, the patents

and copyrights clause (U.S. Const., art. I, § 8, cl. 8) and the

federal patent statutes (35 U.S.C. § 1 et seq.). The premise of

Husband's argument is that under federal patent law he would

be regarded as the sole owner of the community property

patents.

But in the analogous area of community property

ownership interests in copyrights, we have previously held

that federal law does not preempt California community

property law. (In re Marriage of Worth, supra, 195 Cal.App.3d at

pp. 776-778.) While seemingly acknowledging the validity of

the Worth holding Husband claims that the trial court's ruling

has “destroy[ed] the advantages of the monopoly” created by

the patents and thus fallen afoul of federal patent law. (See

Farmland Irrigation Co. v. Dopplmaier (1957) 48 Cal.2d 208, 220.)

Husband claims the co-ownership impairs the value of the

patents and may hinder commercial exploitation of their

technology. To the contrary, there is no evidence of

impairment of value and little but speculation to support

7 Inhis opening brief, appellant briefly argues he “should be given

full authority to manage the patents.” We can find nowhere in the record

any explicit request by Husband that, should the trial court award Wife an

undivided one-half interest in the patents, Husband be given full

managerial control. In any case Husband's appellate request for

management of the patents is coupled with a request that “Wife’s name

not be added to [the] title[s]” of the patents, a claim which is tantamount

to a derogation of Wife’s ownership interest, which interest we now

uphold.

Husband's claim that Wife’s co-ownership of the present

patents will frustrate the commercial development of his future

work.®

Husband relies on Rodrigue v. Rodrigue (E.D.La. 1999) 55

F.Supp.2d 534, 536, which held that federal copyright law

preempted Louisiana community property law regarding

substantial commentary critical of the Worth decision. (55

F.Supp.2d at 537, fn. 2; see, e.g., Polacheck, The “Un-Worth-y

Decision: The Characterization of a Copyright as Community

Property” (1994) 17 Hastings Comm/Ent L.J. 601, 614-626; 1

6A.03[C], 6A.04, pp. 6A-17 - 6A-30.) The court ruled that

federal law preempted state community property law. (55

F.Supp.2d at pp. 546-547.) But the district court was reversed

by the Fifth Circuit, which held that federal law did not

preempt all community ownership interests, and the non-

authoring spouse was entitled to an undivided half-interest in

all the economic benefits of community copyrights. (Rodrigue

v. Rodrigue, supra, 218 F.3d at pp. 439-440, 442-443.)

We are persuaded that despite scholarly criticism,

Marriage of Worth controls. Federal law does not preempt

California community property law regarding the ownership

of community property patents under the facts of this case, and

a family law court may award an equal, undivided interest in

a community property patent to the spouse who did not

perfect the patent. Under the unique facts of this case where

the value of the patents is unknown community property

. Husband apparently believes the “negative” attitude of a prospective

licensee toward co-ownership may hinder the licensing of a packet of the

present patents with any new ones. But beyond the general notion that a

prospective licensee would rather deal with one owner than two, there is no

substantial evidence that co-ownership would in fact hinder or prevent such

licensing — particularly if Husband develops lucrative technologies with

major commercial applications.

interests can coexist with federal patent law under the retained

jurisdiction of the trial court. This case does not present a

direct and irreconcilable clash between state and federal law

warranting preemption. The trial court’s decision does not

place stumbling blocks in the way of fostering creative

inventiveness.

In conclusion, we see no error in the trial court's ruling,

and find none of Husband’s contentions persuasive.

III. DISPOSITION

The judgment is affirmed.

Marchand, J.

We concur:

Stein, Acting PJ

Stager, J.

In re Marriage of Weres, A090448

DOCUMENT 7

Review Denied by California Supreme Court

Court of Appeal, First Appellate District, Division One - No.

A090448

S098045

IN THE SUPREME COURT OF CALIFORNIA

EN BANC

SUPREME COURT

FILED

AUG 15 2001

Frederick K, Ohirich Cler]

DEPUTY

In re the Marriage of NANCY WERES

NANCY WERES, Respondent,

OLEH WERES, Appellant.

Petition for review DENIED.

George, C.J., and Werdegar, J., were absent and did not

participate.

CHIN

Acting Chief Justice

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.