A District of Delaware court ruled that an exclusive licensee lacked standing to sue where the licensor retained a right to sue in its field of use. According to the court, Federal Circuit precedent dictates that holders of field of use licenses do not hold all substantial rights to the patent and therefore lack standing to sue. Accordingly, the court found that the patent infringement action should be dismissed unless the licensor was added as a plaintiff.
A couple months ago, we wrote about the Duckweed USA v. Behrens case, where the court found that an exclusive licensee had standing to sue the patent owner for infringement, even though the licensee did not have "all substantial rights" to the patent, because preventing the licensee from doing so would have been "an absolute failure of justice." But what if an exclusive licensee’s substantive rights are limited to a particular (and particularly broad) field of use—are they free to pursue infringers within that field without involving the patentee
Acceleration Bay LLC ("AB") sued several electronics companies for allegedly infringing three patents that AB claimed to have acquired from the Boeing Intellectual Property Licensing Company ("Boeing"). The Boeing assignment conveyed "all right, title and interest" in the patents to AB, but there were several limitations. In particular, Boeing retained: (1) a non-exclusive, non-transferable right to practice the patents in any field of use; (2) the exclusive, transferable right to practice the patents in the "Boeing Field of Use" (which included aerospace, military, transportation, solar energy, and surveillance fields), including the sole right to sublicense and enforce the patents in the Boeing Field of Use; and (3) the right to assert the patents in a counterclaim in any action. When the defendants learned of AB's assignment to Boeing, they moved to dismiss AB’s complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1).
The Acceleration Bay Decision
Generally, a patent infringement plaintiff must have the full legal title to the patent at the time of infringement. And in order to convey the full legal title, the original patent owner must convey the entire patent, an undivided part or share of the entire patent, or all rights under the patent in a specified geographical region. Anything less, and the “conveyance” is really a license. But in some circumstances, a licensee has standing to sue for infringement. Specifically, an exclusive licensee that has "all substantial rights" to the patent may sue in its own name. But an "exclusive" licensee with anything less that "all substantial rights" typically may sue only as a co-plaintiff with the patentee.
Within this, framework, the District of Delaware court analyzed the Boeing assignment. As an initial matter, the court found that the Boeing assignment did not convey all rights to AB, so AB was an exclusive licensee of the patents, not an owner. The court then turned to whether the Boeing assignment granted AB "all substantive rights" to the patents, such that AB had standing to assert infringement on its own.
The court found that AB did not hold "all substantial rights" to the patents and therefore could not sue for infringement on its own. Critically, because Boeing retained the right to sue within the "Boeing Field of Use," AB only had an exclusive license in all other fields of use. Citing Federal Circuit precedent, the court found that holders of field of use licenses, no matter if they cover almost all fields, do not hold all substantial rights to the patent and therefore lack standing. Moreover, the court also pointed to the fact that Boeing retained the right to assert the patents in any counterclaims. And since Boeing maintains a right to sue under certain circumstances, the court cautioned that there exists a substantial risk of multiple suits and multiple liabilities against an alleged infringer for a single act of infringement. Accordingly, the court found that AB did not have standing to sue alone, and that it would have to join Boeing to the lawsuit to continue its suit.
Strategy and Conclusion
This case shows that while an exclusive licensee for a field of use may appear to have all rights, including the exclusive right to sue for patent infringement in its field, that it may still need to join the patent owner if the patent owner retains rights in other fields or the right to assert the patents in counterclaims in any field. Accordingly, it can be useful to address these issues in drafting the patent license and include appropriate language in the agreement regarding the obligation of the patent owner to join in suits filed by the licensee.