Relationship Between Commercial Rental Property and Inventories
Landlords own the real property rented by tenants (rental property). Tenants have an interest in the use of that real property. A commercial landlord rents square footage to the tenant and grants the tenant permission to operate a business from the rented space. Under most commercial leases, inventory remains the personal property of the tenant. Landowners may also operate their own businesses from commercial real properties.
Real Property Cases: Traditionally Matters for State Courts, However…
For centuries, disputes involving real property and rental property contracts have fallen under the law of the jurisdiction where the real estate is located. Each State has its own version of its real property laws. However, in today’s world, federal laws can influence a State’s real property laws.
Intangible Patented Inventions as Tangible Personal Property
A Patentee can sell tangible widgets that include intangible patent rights for the circuitry, processor, and memory that cause the tangible widgets to operate differently from unpatented widgets. Patent infringement of the patented widget can result when someone who did not purchase the patented widget from the Patentee makes, uses, sells or offers to sell the patented widget without the permission of the Patentee.
Under United States law, Patent infringement cases have exclusive jurisdiction and venue in federal district courts.
When Patented Widgets are Offered for Sale on Consignment
Possible interactions between the real estate owner or the commercial tenant (hereinafter Commercial) and the Patented Widgets Owner (hereinafter PWO):
- As long as Commercial and PWO meet the terms of the consignment agreement, both parties are probably happy.
- When Commercial refuses to pay PWO according to the consignment agreement, the PWO could sue the Commercial for breach of contract in a State court.
- When Commercial refuses to honor the consignment agreement and subsequently gives the patented widgets to a third party who thereafter uses the patented widgets in the third party’s plant. Under the Supreme Court’s Impression Products, Inc. v. Lexmark International, Inc., 581 US 1523 (2017) case, because there was no sale of the patented widgets by the Patentee, PWO can sue both the thirty party and Commercial in a federal district court for patent infringement. Any case by PWO for breach of contract by Commercial would likely be joined with the patent infringement case in federal court.
The commercial tenant (hereinafter Tenant) and the PWO:
- When Tenant sublets a space for a booth to PWO and PWO fails to pay rent to Tenant, the Tenant can sue PWO in State court for collection of unpaid rent.
- In a State that provides for commercial landlord lockouts and seizures of personal property, Tenant fails to pay rent and the landlord locks out and seizes all inventory including PWO’s patented widgets. Under the lease, Tenant did not have a right to sublet space to PWO and the landlord is unaware that PWO’s patented widgets are not part of Tenant’s inventory. After seizing PWO’s patented widgets, the landlord sells PWO’s patented widgets to a third party who resales the patented widgets to a fourth party who destroys the patented widgets and sells the junked parts to a recycler. Under Impression Products, Inc. v. Lexmark International, Inc., 581 US 1523 (2017), because there was no sale of the patented widgets by the Patentee, PWO could sue the commercial landlord, the third party and the fourth party for patent infringement in federal court. For the landlord, the third party and the fourth party, reliance solely on real estate law is insufficient to prevent a patent infringement lawsuit in federal court.
Have More Questions About Intellectual Property?
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