Holder of an Exclusive Field of Use License Subject to a Territorial Restriction Lacked Standing to Sue Without Joining Patent Owner
October 15, 2007
Last Month at the Federal Circuit - November 2007
Judges: Rader (author), Friedman (filing an opinion dubitante), Moore
[Appealed from: S.D. Cal., Judge Brewster]
In International Gamco, Inc. v. Multimedia Games, Inc., No. 07-1034 (Fed. Cir. Oct. 15, 2007), the Federal Circuit reversed the district court’s denial of defendant Multimedia Games, Inc.’s (“Multimedia”) motion to dismiss for lack of standing. The Court held that International Gamco, Inc. (“Gamco”), the holder of an “exclusive enterprise license” (an amalgam of an exclusive territorial license and an exclusive field of use license), did not have standing to sue in its own name without joining the patent owner as a party.
U.S. Patent No. 5,324,035 (“the ’035 patent”) claims a multiplayer gaming system network. Gamco assigned the ’035 patent to International Game Technology (“IGT”), but reserved for itself the exclusive right within the “Territory,” to make, use, sell, offer to sell, and sublicense game system networks covered by the ’035 patent. The assignment agreement defined “Territory” as “the lawful operation of lottery games authorized by the New York State Lottery in the State of New York.” Slip op. at 4.
On the basis of that license, Gamco sued Multimedia, the New York State Lottery’s (“NYSL”) sole contractor for lottery games, for infringement of the ’035 patent. Multimedia moved to dismiss for lack of standing. The district court concluded that Gamco had standing to file suit in its own name only without joining the patent owner as a party. Recognizing the issue as one of first impression, however, it certified the following question to the Federal Circuit for interlocutory review: “whether an exclusive patent license, with exclusive right of enforcement, restricted to the activities of a specific enterprise within a specificgeographic territory, is sufficient to confer standing on the exclusive licensee to bring a patent infringement action in its own name only.” Id.
On appeal, the Federal Circuit began by explaining that “[a]n exclusive licensee has standing to sue in its own name, without joining the patent holder, where ‘all substantial rights’ in the patent are transferred.” Id. at 5 (citation omitted). The Court then noted that it was settled that exclusive territorial licensees need not join the licensor to maintain a suit for patent infringement. The Federal Circuit explained, however, that neither it nor the Supreme Court had unequivocally determined whether an exclusive field of use license confers standing to sue without joining the patentee. Because Gamco’s license specifies a field of use (the operations of the NYSL), the Federal Circuit determined that it must resolve the issue.
The Court found guidance in Pope Manufacturing Co. v. Jeffery Manufacturing Co., 144 U.S. 248 (1892), in which the Supreme Court held that the licensee of a single claim covering a single embodiment of a patented invention did not have standing to sue in his own name. The Federal Circuit explained that the Supreme Court refused to grant standing to the holder of less than the entire patent because doing so would create the potential for multiple litigations against any one defendant.
The Court reasoned that an exclusive field of use license creates the same multiplicity danger as the single-claim license of Pope because it also divides the scope of a patent by its subject matter. The Court added that this potential for multiple liability for a single infringing act underpins its prudential standing requirement, which compels an exclusive licensee with less than all substantial rights to join the patentee before initiating suit. The Court then contrasted an exclusive territorial license, noting that unlike a license that divides the patent by subject matter, an exclusive territorial license does not present the same multiplicity risk because a single act of infringement would give rise to only one viable suit for infringement by the exclusive territorial licensee in the jurisdiction where the infringement occurred.
Applying these principles to the current case, the Court determined that Gamco’s license included both geographic (the NYSL-authorized sites) and field of use (“lottery games”) restrictions. The Court concluded that a single infringing game system at an NYSL-authorized site might subject the infringer to suit by Gamco for the lottery games, and separately by IGT or some other game-specific licensee for other nonlottery games such as blackjack or keno. Because of this multiplicity problem, and applying the logic of Pope, the Court therefore held that Gamco lacked standing to sue in its own name without joining IGT, and reversed the district court’s denial of Multimedia’s motion to dismiss Gamco’s complaint.
In a rarely issued “dubitante” opinion, Senior Judge Friedman wrote that he was unconvinced that the district court erred in permitting Gamco to sue without joining its licensor. Judge Friedman noted that the statute governing patent assignments, 35 U.S.C. § 261, contains parallel sentences that seem to treat geographical and field of use assignments the same. Specifically, section 261 states that “patents, or any interests therein, shall be assignable” by a written instrument and that patentee or his assignee “may in like manner grant an exclusive right under his . . . patents to the whole or any specified part of the United States.” Judge Friedman concluded that, under this language, “it seems unlikely that Congress intended only the latter (geographical), but not the former (‘any interest’ in a patent) assignees to be able to sue in their own names.” Friedman dub. op. at 2.