Property, intangible

a blog about ownership of intellectual property rights and its licensing

You Are Not the Only One Confused by the Law of Patent Standing

Here are the musings of a bewildered district court judge trying to figure out the difference between a patent owner, an exclusive licensee, and a “de facto” patent owner. The patent owner, a professor named Morris, had exclusively licensed just about everything to plaintiff BRK and the court had to figure out if BRK had standing:

I confess that I don’t understand the Federal Circuit’s position. As a district judge pro tem., mine not to reason why, mine but to do and die, into the valley of death, etc. Still, I am uncomfortable enforcing rules that I don’t understand the basis of. As exclusive licensee, BRK has much to lose from infringement—doubtless a great deal more than Morris, for BRK has built an entire business around its exclusive right to sell the patented products. True, BRK is not the patentee, and 35 U.S.C. § 281 says only that “a patentee shall have remedy by civil action for infringement of his patent.” But since “patentee” has been stretched by the Federal Circuit to embrace a transferee of all substantial rights, why can’t it be stretched an inch farther to include the exclusive licensee, who is after all the only entity that actually practices the patent? And since Morris has surrendered all control over this lawsuit, his participation in it has no significance; why then should he have to be joined? What is one to make of such a statement as “a licensee may obtain sufficient rights in the patent to be entitled to seek relief from infringement, but to do so, it ordinarily must join the patent owner,” Abbott Laboratories v. Diamedix Corp., 47 F.3d 1128, 1131 (Fed.Cir.1995) (emphasis added)?

Well, maybe not so bewildered as he makes out—it is eminent jurist Richard Posner, sitting by designation in the trial court.

Maybe BRK is right and Morris is no longer the owner, BRK having acquired “all substantial rights,” in Federal Circuit-speak. Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1340 (Fed.Cir.2006). (And what by the way are “insubstantial rights”?) But these are just words. Morris is the inventor and the licensor, BRK the exclusive licensee, producer, and seller. Why should Morris have to be dragged into the suit? It used to be thought that without such joinder an alleged infringer would be subject to duplicative suits. Independent Wireless Telegraph Co. v. Radio Corp. of America, 269 U.S. 459, 468, 46 S.Ct. 166, 70 L.Ed. 357 (1926). Not so, at least under modern law, since the (nominal) patentee and the exclusive licensee would be in privity and so subject to collateral estoppel. The Federal Circuit has expressed a related, and likewise it seems an ephemeral, concern: that the rule is needed to “prevent a party with lesser rights from bringing a lawsuit that may put the licensed patent at risk of being held invalid or unenforceable in an action that did not involve the patentee.” Aspex Eyewear, Inc. v. Miracle Optics, Inc., supra, 434 F.3d at 1343. A patentee who, like Morris, authorizes the exclusive licensee to sue infringers and exercise complete control over the infringement litigation has consciously assumed the risk that the Federal Circuit wants to protect him from; and why should it? Morris is not a baby.
Nest is indifferent, however, to whether BRK is held not to have “all substantial rights,” in which event Morris must be joined under the rule of law that we don’t understand the rationale for, or if not that he should be dismissed. Since he may have to be joined, I’ll leave him in as a coplaintiff. But what a waste of time!

BRK Brands, Inc. v. Nest Labs, Inc., No 13 C 7900 (March 19, 2014).

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