First published in LES Insights
The Federal Circuit has long held that a patent co-owner seeking to maintain a patent-infringement suit must join all other co-owners. Co-owners, however, are not always willing to join. In a recent decision denying standing to a university licensing entity, the Federal Circuit held that a patent co-owner's substantive right to refuse to join the infringement suit trumped a federal procedural rule that otherwise may have forced the co-owner to join suit. Thus, unless a co-owner has given up the right to refuse to join a suit, the co-owner can effectively impede another co-owner's ability to sue infringers.
The Federal Circuit has long held that a patent co-owner seeking to maintain a patent-infringement suit must join all other co-owners. Co-owners, however, are not always willing to join. According to an often-quoted principle, patent co-owners are "at the mercy" of each other. In STC.UNM v. Intel Corp.,1 the Federal Circuit again confirmed this principle, holding that a patent co-owner's substantive right to refuse to join an infringement suit trumps Federal Rule of Civil Procedure 19(a), which can allow for involuntary joinder of a party. Thus, unless a co-owner has given up the right to refuse to join an infringement suit, the co-owner can effectively impede another co-owner's ability to sue infringers. InSTC.UNM, a patent co-owner had retained the right to refuse joinder and, in fact, had consistently expressed its desire not to join the suit. In the co-owner's absence, the Federal Circuit dismissed the action for lack of standing. This decision highlights a significant obstacle to enforcing co-owned patents and raises the need for written agreements between patent co-owners regarding enforcement.
STC.UNM (STC), a wholly owned licensing arm of the University of New Mexico (UNM), sued Intel Corp., alleging infringement of U.S. Patent No. 6,042,998 ("the '998 patent"), which is a continuation-in-part of U.S. Patent No. 5,705,321 ("the '321 patent"). The '321 patent arose from collaboration between three UNM researchers and an employee of Sandia Corp. As a result of various assignments, both STC and Sandia co-owned the '321 patent.
The '998 patent arose from continued research performed by only UNM personnel. UNM, as the sole assignee, prosecuted the application issuing as the '998 patent and filed a terminal disclaimer to overcome a double-patenting rejection over the '321 patent. The terminal disclaimer specified that a patent issuing on the application "shall be enforceable only for and during such period" that the '998 and '321 patents "are commonly owned." UNM later assigned all of its interest in the '998 patent to STC.
When STC sued Intel Corp. alleging infringement of the '998 patent, STC and Sandia co-owned the '321 patent, but only STC claimed ownership of the '998 patent. Intel therefore asserted that the '998 patent was unenforceable for failing to comply with the common-ownership requirement of the terminal disclaimer. In response, STC contended that Sandia did in fact co-own the '998 patent because of various provisions in the assignments regarding the '321 patent. Nonetheless, out of caution, STC executed an assignment giving Sandia an undivided interest in each of the '321 and '998 patents to ensure compliance with the terminal disclaimer.
Significantly, Sandia, now a co-owner of the '998 patent, refused to join STC's infringement suit against Intel. Granting a motion to dismiss filed by Intel, the district court ruled that Sandia had the right impede STC's action by refusing to join, and thus Sandia's absence defeated STC's standing. STC appealed.
The Federal Circuit's Decision
On appeal, a 2-1 majority at the Federal Circuit affirmed the district court's dismissal for lack of standing, refusing to join Sandia involuntarily as a necessary party under Federal Rule of Civil Procedure 19(a). The court relied on its earlier opinion in Ethicon, Inc. v. U.S. Surgical Corp., which held that "all co-owners must ordinarily consent to join as plaintiffs in an infringement suit.
" STC argued that Ethicon did not explicitly address whether an unwilling co-owner may be involuntarily joined under Rule 19(a). But rules of procedure, the majority explained, "must give way to substantive patent rights." Thus, the court held, the substantive right of a co-owner to impede another co-owner's infringement suit by refusing to join trumped the procedural rule for involuntary joinder.
The court noted two recognized exceptions where a patent owner or co-owner can be involuntarily joined to an infringement suit: (1) an exclusive licensee can involuntarily join a patent owner because the owner "stands in a relationship of trust to his licensee," and (2) a co-owner who has agreed to waive the right to refuse joinder can be forced to join an infringement suit. As the court observed, each exception relies on a voluntary commitment by the patent owner or co-owner.
Here, Sandia retained its right of refusal, consistently expressing its desire not to join the case. Accordingly, the court affirmed the district court's dismissal of STC's infringement action for lack of standing. In doing so, the court advanced policies of protecting a co-owner's right to avoid costly litigation where its patent is subject to invalidation, while also protecting accused infringers against the possibility of multiple infringement suits by different plaintiffs on the same patent.
Strategy and Conclusion
This case illustrates the inherent complexity of enforcing a co-owned patent. Because co-owners can impede an infringement suit by refusing to join, joint patent owners may want to consider taking steps to address this issue if possible early in the inventing and patenting process, such as unifying ownership or seeking to reach agreements with co-owners regarding how and when co-owned patents will be enforced.