When Does a Licensee Have Standing to Sue for Patent Infringement?

Author:Mr Bruce Wexler
Profession:Fitzpatrick Cella Harper & Scinto
 
FREE EXCERPT

Co-written by Nathaniel I. Watts

I. INTRODUCTION

The essence of a patent is the right to exclude: “Every patent shall contain . . . a grant to the patentee, his heirs or assigns, of the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States . . . . ”1 In order to exercise this right, the patent statute authorizes “[a] patentee” to bring a “civil action for infringement of his patent.”2 From this clear expression of the “patentee's” right to exclude by bringing an action for infringement, comes the more ambiguous situation in which the patentee has granted some or all of his exclusive rights under the patent either by way of license or assignment. This article examines when such licensees have standing to sue.

II. STANDING

In order to bring any civil lawsuit in the United States, including patent infringement actions, the party suing must have “standing.” The term “standing” generally includes requirements imposed directly by Article III of the United States Constitution as well as “prudential considerations” imposed by the courts.

Article III of the Constitution limits the judicial power of the United States federal courts to the resolution only of “cases” or “controversies.” In order to have sufficient standing to satisfy this Constitutional limitation, the party who invokes the court's authority must be able to "show that he personally has suffered some actual or threatened injury as a result of putatively illegal conduct by the defendant,” that the injury can fairly be traced to the challenged conduct, and that the injury is likely to be redressed by a favorable court decision.3

Beyond the Constitutional requirements, the federal judiciary has also adhered to a set of “prudential principles” that bear on the question of standing. For example, the courts have held that a plaintiff must generally assert his own legal rights and interests, and cannot rest his claim to relief on the rights and interests of third parties.4

The question of a party's “standing” goes directly to the subject matter jurisdiction of the federal court -- i.e., the power of the court to hear the case. Consequently, a party's failure to have proper standing is a matter that can be raised by the parties or by the court sua sponte, at any time during the litigation (even on appeal), and cannot be waived either intentionally or by a party's failure to raise the issue.5

Obviously, it is therefore important for a plaintiff to make sure that all standing requirements have been satisfied in order to avoid dismissal of its lawsuit. Conversely, a defendant should consider seeking dismissal of the suit if it believes the plaintiff lacks standing.

III. STANDING OF LICENSEES OF PATENT RIGHTS

The basic rules for standing are as follows. An assignee who receives all of the patent owner's substantial rights generally has standing to sue for patent infringement in its own name. An exclusive licensee may bring suit, but generally must join all the patent owners as plaintiffs as well. A “bare” or non-exclusive licensee under a patent has no standing to sue for patent infringement. The name of the agreement transferring rights under the patent is not controlling -- the courts look to the “substance” of the agreement and its provisions to determine in which category it falls.6

Since nothing in the law is as simple as three general rules, each of these topics is addressed in more detail below.

A. “Bare” Or Non-Exclusive Licensees Have No Standing

A non-exclusive, or “bare,” licensee has no standing to bring suit for patent infringement.7 The justification for this rule can be found in Crown Die & Tool Co. v. Nye Tool & Machine Works,8 a case often cited in supporting the above proposition. Crown Die explained that one who seeks to bring an action for infringement must hold legal title to the patent during the time of infringement. Since a non-exclusive license does not expressly or impliedly hold any promise by the patentee to exclude others from using the patented technology, the patentee has transferred no property interest in the patent to the licensee.

The Court of Appeals for the Federal Circuit has set forth guidance as to whether a licensee may be fairly characterized as a bare licensee who has no standing or an exclusive licensee who as discussed below may have standing. In Rite-Hite Corp. v. Kelley Co., Inc.,9 the patentee sold its products through independent-sales-organizations (“ISOs”) under...

To continue reading

REQUEST YOUR FREE TRIAL