Legal Question in Intellectual Property in California

It sounds like this situation has gotten pretty sticky and could get worse later. Are you the patent applicant/holder or one of the 3 "partners" (they're technically "members" of the LLC)? What communications/negotiations have you had with the other party? Are there any agreements (written or oral) between any parties? I have more questions but in the interest of brevity and pointing you in the right direction here are answers to your questions (as best as I could answer them based on the limited information I have)...

1) The short answer is "yes". However, there may be ways the parties can prevent this from happening.

2) I'm not sure I'm clear on what you're asking. If you are asking whether the LLC protects the money that is made using somebody else's patent (i.e. that it can't be sued) the answer is "no". The patent applicant/holder would sue the LLC and potentially the three "partners" (see my answer to your third question).

3) The short answer is "no". The patent applicant/holder would likely sue both the LLC AND the 3 "partners" individually based on an alter ego theory (AKA piercing the corporate veil). This may allow the patent applicant/holder to not only get judgment against the LLC but also the "partners" individually.

There is a lot of risk here for both the company and the "partners". I would highly recommend contacting your corporate attorney (if you have one) and working on this right away. If you don't have an attorney, I would strongly advise you to get one as every move that is made now could make a long and expensive litigation more or less likely - more likely if you don't get proper advice and less likely if you get good advice.

Please let me know if I can assist you in anyway. I have experience in just these sort of risk management issues for small/medium businesses.

I don't have much to add, but here are a few thoughts to expand on Mr. Gibson's answer.

As to #2, the LLC would be the primary target of an infringement lawsuit, and a judgment obtained against it would require it to fork over the money, etc. in the LLC's bank accounts and the other assets capable of levy and seizure. The three LLC members could also be named as parties to the lawsuit, either on an "alter ego" (veil piercing) theory, or on a theory that these individuals personally acted wrongly in their individual capacities. This may sound like legal hair-splitting, and in a way it is, but establishing liability on an alter ego theory is often difficult or impossible when the company was well-run otherwise but its officers caused it to violate the law in a particular area. Further, 35 U.S.C.A. 271(b) says "Whoever actively induces infringement of a patent shall be liable as an infringer." There is case law holding that this applies to officers, managers and directors of infringing companies. See, for example, Int'l. Mfg. Co, v. Landon, Inc. (1964) 336 F.2d 723 - corporate officer liable without regard to alter ego theory.

Further, with respect to #3, corporations, LLCs and other organizations that overcompensate insiders, whether through salaries, dividends or bonuses, in an attempt to place cash and other resources out of the grasp of creditors, are probably making fraudulent transfers or otherwise violating the law in doing so, and could be forced to give back the monies.