Is “One Dollar” Sufficient Consideration For An Assignment?

In order for a contract to be valid and enforceable, it must meet certain legal criteria. One such criterion is “consideration”. Consideration requires that each party receive a benefit or advantage for fulfilling its obligations under the contract. Generally, except in cases where the consideration is unconscionable, such as when a party abuses a superior bargaining position, the Courts will not enquire into the adequacy of the consideration. This old and trite concept was recently tested by MemoryLink Corp (MemoryLink) in MemoryLink Corp v Motorola Solutions Inc, No. 08 C 3301, 2013 WL 4401676 (ND Ill Aug 15, 2013).

MemoryLink was a corporation formed by one of the inventors of a handheld camera recording technology that was developed jointly with Motorola Solutions Inc (Motorola). At some point, all of the inventors had signed an assignment agreement that transferred all their rights in the technology to MemoryLink and Motorola. Thus, MemoryLink and Motorola became joint owners. The assignment began with the statement:

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

MemoryLink later sued Motorola for patent infringement relating to the technology, arguing that the assignment was void for lack of consideration. In rejecting the arguments relating to the inadequacy of the consideration and holding the assignment to be valid, the United States District Court for the Northern District of Illinois granted summary judgment in favour of Motorola on August 15, 2013. This decision was affirmed by the United States Court of Appeals on December 5, 2014.

For more information see: http://tinyurl.com/np4h6m5.