On September 30, 2013, ALJ Theodore R. Essex issued the public version of Order No. 14 (dated September 4, 2013) denying Respondents Telefonaktiebolaget LM Ericsson and Ericsson Inc.’s (collectively, “Ericsson”) motion to terminate the investigation for lack of standing in Certain Wireless Communications Base Stations and Components Thereof (Inv. No. 337-TA-871).

By way of background, the investigation is based on a January 24, 2013 complaint filed by Adaptix, Inc. (“Adaptix”) alleging violation of Section 337 in the importation into the U.S. and sale of certain wireless communications base stations and components thereof that infringe certain claims of U.S. Patent No. 6,870,808.  See our January 25, 2013 and February 26, 2013 posts for more details on the complaint and notice of investigation, respectively.

According to the Order, Ericsson argued that Adaptix lacked standing to assert the ‘808 patent because, under Certain Devices with Secure Communications Capabilities, Components Thereof, and Products Containing the Same (Inv. No. 337-TA-818), Adaptix does not possess “all substantial rights” in the ‘808 patent since it entered into a confidential licensing agreement with a third party in which Adaptix ceded at least the rights to (1) review and object to any proposed license, assignment or settlement involving the ‘808 patent; (2) share in the proceeds of licensing and litigation of the ‘808 patent; and (3) receive assurance that the complainant used commercially reasonably means of enforcing the ‘808 patent.  Ericsson also asserted that Adaptix’s lack of standing cannot be cured by joining the third party as a co-complainant (which “at this stage of the Investigation … would be extremely prejudicial to Ericsson”), and that the third party has “unclean hands” because it “colluded” with Adaptix to “deprive the Commission and Ericsson of necessary information and discovery while pretending” it is a “mere ‘third party.’”

In opposition, Adaptix argued that the license agreement does not confer exclusionary rights to the third party.  Adaptix also distinguished Secure Communication Devices on the ground that the third party in that investigation, unlike the current investigation, retained a right to object to any settlement.  Adaptix further asserted that the so-called “enforcement provision” of the license agreement does not in fact give the third party the right to enforce the ‘808 patent.  Finally, Adaptix argued that in the event it is deemed to lack standing and the third party is considered a necessary party, the ALJ should allow joinder of the third party.  The Commission Investigative Staff also opposed the motion, arguing that the third party is not an exclusive licensee and does not meet the constitutional standing requirements to even assert the ‘808 patent in litigation, and thus is not a necessary or proper party to the investigation.

ALJ Essex denied the motion, finding that (1) Ericsson neither explicitly addressed whether the standing problems it alleged to exist are constitutional or prudential, nor even attempted to explain whether the agreement in question is an assignment, an exclusive license, or something else; (2) Ericsson’s motion is based on the incorrect legal standard, and did not discuss more on-point precedent, such as Alfred E. Mann Found. for Scientific Research v. Cochlear Corp., 604 F.3d 1354 (Fed. Cir. 2010) and Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336 (Fed. Cir. 2006); (3) Ericsson failed to even contest Adaptix’s showing that it is the record title holder to the ‘808 patent; (4) the agreement at issue expressly states that it is not an assignment of ownership and makes clear that Adaptix continues to hold exclusionary rights under the ‘808 patent; and (5) the third party in question is not a necessary party because it is a “bare licensee” and lacks standing to sue.