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December 29, 2010

Exclusion

WiAV Solutions sued mobile phone companies for infringing nine patents related to signal transmission (encoding) and reception (decoding), including seven patents owned by Mindspeed Technologies. The Mindspeed patents went through ownership gyrations: assignment, corporate spin-off, and licensing agreement. The district court got lost trying to follow the ownership bread crumbs, deciding that WiAV was deprived of constitutional standing by third-party licensing rights, and so booted the Mindspeed patents. The CAFC saw differently - exclusivity because the accused are not able to license.

WiAV Solutions v. Motorola et al (CAFC 2010-1266) precedential

The winning argument at district court was that six companies "each have the right to grant licenses to the patents in the field of Wireless Handsets." The winning argument at the CAFC was that any exclusionary right makes for an exclusive licensee, regardless of other deals done.

The Patent Act of 1952 is the source of the legally protected interests at issue here... The Act provides that a "patentee" has the right to initiate a "civil action for infringement of [its] patent." 35 U.S.C. ยง 281. The term "patentee" encompasses both the owner of the patent and the assignee of all substantial rights in the patent... The Patent Act, however, does not limit the right to sue to only patent owners and assignees. Intellectual Prop. Dev., 248 F.3d at 1346. This court has explained that a party has the right to sue for infringement of the patent "if that party has a legally protected interest in the patent created by the Patent Act, so that it can be said to suffer legal injury from [the] act of infringement." Propat Int'l Corp. v. RPost, Inc., 473 F.3d 1187, 1193 (Fed. Cir. 2007) (internal citation omitted). Such a party is commonly referred to as an "exclusive licensee."

Because the legally protected interests in a patent are the exclusionary rights created by the Patent Act, a party holding one or more of those exclusionary rights--such as an exclusive licensee--suffers a legally cognizable injury when an unauthorized party encroaches upon those rights and therefore has standing to sue. See Morrow v. Microsoft Corp., 499 F.3d 1332, 1340 (Fed. Cir. 2007) ("Parties that hold the exclusionary rights [under a patent] are often identified as exclusive licensees, because the grant of an exclusive license to make, use, or sell the patented invention carries with it the right to prevent others from practicing the invention."); Intellectual Prop. Dev., 248 F.3d at 1346 ("A party . . . that has the right to exclude others from making, using, and selling an invention described in the claims of a patent is . . . injured by another entity that makes, uses, or sells the invention."); Ortho Pharma. Corp. v. Genetics Inst., Inc., 52 F.3d 1026, 1031 (Fed. Cir. 1995) (explaining that to have "standing in an infringement suit, a licensee must hold some of the proprietary sticks from the bundle of patent rights").1 By contrast, a so-called "bare licensee" holds nothing more than a promise from the patentee that the patentee will not sue the licensee for practicing the patented invention. See Ortho Pharma. Corp., 52 F.3d at 1031-32. Such a licensee "suffers no legal injury from infringement and, thus, has no standing to bring suit or even join in a suit with the patentee." Id. at 1031. See also Sicom Sys., 427 F.3d at 976 ("A nonexclusive license confers no constitutional standing on the licensee to bring suit or even to join a suit with the patentee because a nonexclusive licensee suffers no legal injury from infringement.").

1 An exclusive licensee generally must join the patent owner to the suit to satisfy prudential standing constraints, i.e., the "judicially self-imposed limits on the exercise of federal jurisdiction." Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11 (2004) (citation omitted). See Indep. Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 468-69 (1926) (explaining that, subject to an exception, an exclusive licensee must join the patent owner to an infringement suit initiated by the licensee); Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000) (characterizing the requirement that an exclusive licensee add the patent owner to any patent infringement suit brought by the licensee "as being prudential rather than constitutional in nature"). It is undisputed that WiAV addressed any prudential standing concerns by adding Mindspeed to the suit as the "defendant patent owner."

Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury.

Because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous with those rights. Depending on the scope of its exclusionary rights, an exclusive licensee may have standing to sue some parties and not others. For example, an exclusive licensee lacks standing to sue a party for infringement if that party holds a preexisting license under the patent to engage in the allegedly infringing activity. Similarly, an exclusive licensee lacks standing to sue a party who has the ability to obtain such a license from another party with the right to grant it. In both of these scenarios, the exclusive licensee does not have an exclusionary right with respect to the alleged infringer and thus is not injured by that alleged infringer. But if an exclusive licensee has the right to exclude others from practicing a patent, and a party accused of infringement does not possess, and is incapable of obtaining, a license of those rights from any other party, the exclusive licensee's exclusionary right is violated.

An interesting rationale - license exclusivity defined (partly) by the accused party's inability to obtain a license.

This court therefore holds that an exclusive licensee does not lack constitutional standing to assert its rights under the licensed patent merely because its license is subject not only to rights in existence at the time of the license but also to future licenses that may be granted only to parties other than the accused. If the accused neither possesses nor can obtain such a license, the exclusive licensee's exclusionary rights with respect to that accused party are violated by any acts of infringement that such party is alleged to have committed, and the injury predicate to constitutional standing is met.

The question is whether WiAV has shown that it has the right under the patents to exclude the Defendants from engaging in the alleged infringing activity and therefore is injured by the Defendants' conduct. This court concludes that WiAV has satisfied this standard.

The CAFC panel examined the bread crumbs of ownership and license holders, before deciding that the real meal was whether the defendants looked to be eating WiAV's lunch.

[T]o have standing to sue the Defendants at this point in the proceedings WiAV need only present a sufficient allegation of legal injury. Cf. Davis v. Passman, 442 U.S. 228, 239 n.18 (1979) (explaining that the question of whether a party has standing to sue is separate from the question of whether the party has a cause of action).

Reversed and remanded.

Posted by Patent Hawk at December 29, 2010 1:18 PM | Standing