• A Patent Owner Who Doesn’t Own the Patent

    by  • July 16, 2013 • patent • 1 Comment

    I’ve often written about the various categories of potential plaintiffs in patent infringement suits. Depending on what rights a licensee acquired, it may or may not have constitutional standing to bring a patent infringement lawsuit. A new case, CopyTele, Inc. v. E Ink Holdings, Inc., comes at it from a somewhat different angle — here, the patent owner is claiming that it didn’t grant an exclusive license and therefore may bring a lawsuit, not the usual case where it is a licensee claiming it obtained enough rights to sue. The court summarizes defendant E Ink’s argument this way:

    In essence, E Ink contends that CopyTele’s lawsuit is premature because (1) it previously assigned all substantial rights to the patents at issue to a third-party exclusive licensee, AU Optronics Corp. (“AUO”); (2) it has not yet secured a judgment (in a related case, CopyTele, Inc. v. AU Optronics Corp., No. C–13–0380 EMC) that the assignment has been rescinded; and (3) even upon rescission CopyTele will have standing only to sue prospectively and not retroactively.

    E Ink convinced the court on all three points. As a refresher on standing:

    [t]here are three general categories of plaintiffs encountered when analyzing the constitutional standing issue in patent infringement suits: those that can sue in their own name alone; those that can sue as long as the patent owner is joined in the suit; and those that cannot even participate as a party to an infringement suit.

    Often these three types of potential plaintiffs are called “owner” (or “assignee”), “exclusive licensee” and “non-exclusive licensee.” Courts create some confusion, though, because the words “exclusive licensee” are used for the second category, one who can sue as long as the patent owner is joined, as well as to describe a subset in the first category, where the transfer of rights is so complete is it effectively an assignment, also sometimes called a “virtual assignment” or “de facto ownership.”

    This case is about the latter situation: CopyTele claimed that it had not effectively assigned the patent. If instead AUO was the de facto owner, then CopyTele could not itself bring suit. See, e.g., Alfred E. Mann Foundation for Scientific Research v Cochlear Corp., No. 2009-1447 (Fed. Cir. May 14, 2010) (“In either case, the question is whether the license agreement transferred sufficient rights to the exclusive licensee to make the licensee the owner of the patents in question. If so, the licensee may sue but the licensor may not.”).

    The opinion has an extensive discussion of the license between CopyTele and AUO — I won’t go into it, but it’s a good example of how to write an agreement that accomplishes de facto ownership without full assignment. There were scarce rights that CopyTele retained, specifically, CopyTele was responsible for maintenance fees, CopyTele “retained a non-exclusive right to use the Licensed Patents and Licensed Products in a non-competitive manner” and AUO couldn’t assign the agreement without CopyTele’s prior written consent. But that wasn’t enough to avoid a conclusion that the patent was assigned.

    CopyTele didn’t even have a contractual right to terminate the agreement, which led to the second point. CopyTele argued that, even if there had been a transfer of ownership to AUO, AUO had breached the license (which was the subject matter of the related case) and therefore the license between it and AUO had been terminated, leaving CopyTele with the right to sue.

    But not so fast, said the court. CopyTele conceded that whether there was a material breach was a question of fact that had to be resolved before patent infringement could be addressed. CopyTele’s “suggestion that it can regain the right to enforce the patent simply by a unilateral declaration that the EPD Agreement is terminated is without any support.”

    Thus, the lawsuit against E Ink was premature. Joinder of AUO wouldn’t solve the problem; CopyTele has to have standing before it can ask another party to be joined, but it doesn’t. Case dismissed without prejudice.

    CopyTele, Inc. v. E Inc Holdings, Inc., No. C-13-0378 EMC (N.D. Calif. July 9, 2013).

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