For purposes of patent standing, there are generally three categories of ownership described: patent owner, exclusive licensee, and non-exclusive licensee. The first has the right to sue, an exclusive licensee must join the assignee in any patent infringement suit, and the non-exclusive licensee has no standing at all.
But the first category can be subdivided. It includes situations where the patent owner has not transferred legal title but nevertheless has assigned all substantial rights under the patent. Prima Tek II, L.L.C. v. A–Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000). The recipient of the rights is a “virtual assignee,” “de facto owner” or “effective patentee.” When does one fit into this category instead of being an exclusive licensee?
The difference is whether the assignor/licensor retained any rights in the patent. The purpose of the rule is to avoid multiplicity of suit. Take, for example, a situation where a patent owner grants an exclusive license to manufacture green widgets and the defendant is making turquoise widgets. The defendant might be infringing the exclusive licensee’s right, depending on how green the widgets are, or it might be infringing the original patent owner’s, if not so green. So both must participate in the suit so that the defendant does not get sued multiple times for the same infringement.
But wait, it’s even more complicated than that. If the assignor/licensor granted all rights within a specific territory rather than a field of use, then the assignee/licensee has standing without joining the assignor/licensor. This is so because the Patent Act says one may assign patent rights for less than all of the United States:
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The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States.
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35 U.S.C. §261. If, however, the assignor/licensor granted all rights within a field of use rather than a territory, then the assignee/licensee is not the “virtual owner” and must join the owner of the patent in the lawsuit. International Gamco, Inc. v. Multimedia Games, Inc., 504 F.3d 1273 (Fed. Cir. 2007) (interpreting a license with both a field-of-use restriction and a territorial restriction). In a dubitanteopinion, Friedman, C.J., opined that the statute didn’t actually mean to distinguish field-of-use and territorial restrictions that way, but it is the current rule.
But one more thing – an exclusive licensee who, in general, may not sue without joining the patent owner as plaintiff, may do so if it is the patent owner who is the infringer. In other words, if the patent owner granted rights excluding even itself, and then infringes, the licensee would have a claim for patent infringement as well as breach of contract.
And how do I know all this? Because of a very thorough opinion that explains all of this and more. Trendx Enterprises, Inc. v. All-luminum Products, Inc., No. 11-2512 (D.N.J. April 18, 2012).
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