The usual rule in a patent infringement/enforcement case is
that all owners of the patent being asserted must join in the lawsuit. However, it is well established by the case
law that, if a plaintiff as an exclusive licensee holds all substantial rights
in a patent, the title-owner of the patent need not be joined. See, for example, Morrow v. Microsoft, 499
F.3d 1332 (Fed. Cir. 2007). In those
cases, the exclusive licensee essentially is the de facto owner of the patent
and the owner of the patent is holding an empty title with only economic
interest (i.e. rights to receive royalty).
Because there is a unity of patent rights, the patent title owner needs
not be joined. But, if he chooses to,
the patent title owner can join the suit, until now.
In a recent case, Azure Networks and Tri-County Excelsior v.
CSR, et. al (Fed. Cir. 2014), the Federal Circuit holds that the legal owner of
the patent has no standing to be a co-plaintiff with the exclusive licensee. Azure Networks is the exclusive licensee of U.S.
Patent No. 7,756,129 and Tri-County Excelsior is the legal title holder of the
patent. The ownership of the patent was
transferred by Azure Networks as a gift to Tri-County Excelsior Foundation, a
non-profit organization. Then,
Tri-county Excelsior Foundation granted an exclusive license of “all
substantial rights” to Azure Networks.
The “all substantial rights” include “the exclusive, worldwide,
transferable right to bring enforcement actions, unfettered control over
litigation, and exclusive authority to reach settlements and grant sub-licenses.”
Under the licensing agreement, Tri-County
“may participate in litigation only at Azure’s sole discretion.” In return for
granting the license, Tri-County receives 1/3 of proceeds on the patent.
Azure Network and Tri-County jointly sued CSR for infringing
the patent in the Eastern District of Texas.
The District Court noted that nothing about Azure Network and Tri-County
relationship structure indicates that Tri-County has control over any aspect of
litigation involving the ’129 patent; rather, it is clear that Azure is holding
all the strings. The District Court concluded
that factors such as Azure’s exclusive right to sue, exclusive license, and
freedom to sublicense strongly suggest that the license agreement constitutes
an effective assignment and therefore Tri-county has no standing in the
lawsuit.
Azure and Tri-County appealed. The question on appeal is whether Tri-County,
as the patent owner, has standing as a co-plaintiff. The Federal Circuit ruled no. The court agreed with the District Court
that, when all substantial rights in the patent are transferred to an exclusive
licensee, that entity becomes the effective owner and the license is an
effective assignment. Because Tri-County
had transferred substantially all rights to the exclusive licensee Azure, the
owner has no standing to join the lawsuit.
The court suggested that the motivation for transferring the patent title
and then receiving a license back was largely to ensure that the case venue
would remain in the Eastern District of Texas.
So the implication from this case is that, if you would like
the title holder of a patent to have standing to join an enforcement suit, a
slice of substantive rights other than economic interest should be left to the
owner.
Thanks for reading.
Connie
