Summary And Strategic Takeaways From The Federal Circuit's Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., Et Al. Decision

On May 30, 2019, the United States Court of Appeals for the Federal Circuit revived a pair of patent infringement cases initiated by Lone Star Silicon Innovations LLC (Lone Star), a Texas licensing entity, against chipmakers Nanya Technology Corp. (Nanya) and United Microelectronics Corp. (UMC). Lone Star allegedly acquired the asserted patents from Advanced Micro Devices, Inc. (AMD) through an agreement that purported to convey "all right, title and interest" in the asserted patents, but which had also significantly curtailed Lone Star's rights to enforce and transfer the asserted patents.

Prior to the appeal, Judge William Alsup of the United States District Court for the Northern District of California dismissed the lawsuit after ruling that Lone Star lacked "all substantial rights" in the asserted patents. In so doing, he declined to join AMD as a necessary party because he claimed that doing so would reward Lone Star for its "litigation gimmick."

The Federal Circuit held that the district court's failure to consider whether AMD could have been, or needed to be, joined under Rule 19 before dismissing the case was legal error and remanded with instructions for the district court to consider whether AMD must be joined as a necessary party.

As discussed below, the Federal Circuit's analysis provides important guidance to plaintiffs and defendants in patent cases on issues such as the "all substantial rights" doctrine, standing to sue for infringement, and required joinder under Rule 19.

The Broad Conveyance of "All Right, Title and Interest" Is Insufficient to Convey "All Substantial Rights" Where Remainder Of Agreement Substantially Curtails Rights

As the Supreme Court cautioned in Waterman v. Mackenzie more than a century ago: "[w]hether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions."

And so the Federal Circuit refused to give dispositive weight to the transfer agreement's use of terminology suggesting a transfer of "all right, title and interest" and examined instead "the total effect of the agreement." In determining whether the total effect of an agreement reflects a transfer of "all substantial rights," the Federal Circuit "ha[s] often focused on two salient rights: enforcement and alienation."

As the Federal Circuit concluded, the transfer agreement at issue in Lone Star imposed several...