In October, the Federal Circuit held that a patent licensee to an exclusive “field of use” license has no standing to sue in its own name without joining the patentee. Int’l Gamco, Inc. v. Multimedia Games, Inc., 504 F.3d 1273 (Fed. Cir. 2007). Applying this new rule, the Federal Circuit reversed a district court decision denying Multimedia’s motion to dismiss an infringement suit brought by Gamco, the sole contractor for lottery games in New York State.
Gamco was granted an exclusive license, “within the Territory,” to U.S. Patent No. 5,324,035, which is directed to gaming system networks generally. “Territory” was defined as “the lawful operation of lottery games authorized by the New York State Lottery in the state of New York.” The district court characterized this as a hybrid between a territorial license and a “field of use” license because the ’035 patent covers games other than lottery games. Presupposing that licensees with exclusive rights within a territory and licensees with exclusive rights within a field of use would have standing to sue in their own name, the district court denied Multimedia’s motion to dismiss Gamco’s suit.
The Federal Circuit reversed. The court acknowledged the longstanding rule that an exclusive territorial licensee need not join a patent licensor to maintain a suit for infringement, citing Waterman v. Mackenzie, 138 U.S. 252 (1891). In contrast, it found no precedent unequivocally determining the standing of an exclusive field of use licensee. Although dicta from a prior Federal Circuit decision, Textile Productions, Inc., v. Mead Corp., 134 F.3d 1481 (Fed. Cir. 1998), suggested that an exclusive “field of use” license confers standing, the court looked instead to an 1892 Supreme Court decision to reach the opposite conclusion.
In Pope Manufacturing Co. v. Gormully & Jeffery Manufacturing Co., 144 U.S. 238 (1892), the Supreme Court held that a licensee with exclusive rights lacked independent standing to sue where the licensee’s rights were limited to a particular embodiment of the invention. In Pope, the licensed embodiment was set forth in just one of the patent’s several claims. The Court observed that even exclusive licenses to specific embodiments or claims of a patent engendered the threat of multiple suits for any given act of infringement. Citing prudential considerations, the licensee was not entitled to sue in his own name.
The Federal Circuit found Gamco’s exclusive “field of use” license indistinguishable from the “claim-byclaim exclusive” license of Pope because, in each case, patent rights were divided by subject matter. Since this division creates the same risk of multiple suits against one defendant based on a single act of infringement, the court concluded that the “prudential standing requirement compels an exclusive licensee with less than all substantial rights, such as a ‘field of use’ licensee, to join the patentee before initiating suit.”
It should be noted that even an exclusive licensee of an undivided patent right cannot independently pursue infringement claims without possessing “all substantial rights” with respect to the patent. Gamco makes it clear that field of use restrictions alone can destroy a licensee’s claim to independent standing.