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A Party Holding One or More of the Exclusionary Rights Created by the Patent Act Has Standing to Sue When an Unauthorized Party Encroaches upon Those Rights

10-1266
December 22, 2010
Mroz, David K.

Decision icon Decision

Last Month at the Federal Circuit - January 2011

Judges: Rader, Linn (author), Dyk 

[Appealed from: E.D. Va., Senior Judge Payne]

In WiAV Solutions LLC v. Motorola, Inc., No. 10-1266 (Fed. Cir. Dec. 22, 2010), the Federal Circuit ruled that the district court had erred in concluding that the preexisting third-party rights to sublicense at issue stripped WiAV Solutions LLC (“WiAV”) of constitutional standing to assert seven patents-in-suit owned by Mindspeed Technologies, Inc. (collectively “the Mindspeed patents”) and under which WiAV held an exclusive license in a specific field of use.  Accordingly, the Federal Circuit reversed the district court’s judgment and remanded for further proceedings consistent with the opinion.     

WiAV possessed a broad bundle of exclusive rights in the Mindspeed patents, including the right to practice the patents, as well as the right to sue for all infringements, the right to grant future licenses, and the right to assign.  In contrast, certain third-party entities (“the non-WiAV licensees”) held limited rights in the Mindspeed patents, including nonexclusive rights to practice the invention, as well as limited future assignment rights and sublicensing rights.  For example, the non-WiAV licensees could only grant sublicenses to closely related entities such as affiliates, subsidiaries, spinoffs, and joint-development partners.

The defendants moved to dismiss WiAV’s suit for lack of Article III standing.  Relying on Textile Productions, Inc. v. Mead Corp., 134 F.3d 1481 (Fed. Cir. 1998), defendants urged that because the non-WiAV licensees could grant future licenses under the Mindspeed patents, WiAV was not an exclusive licensee and therefore lacked constitutional standing.  The district court agreed. 

On appeal, the Federal Circuit reversed, explaining that a party holding one or more of the exclusionary rights created by the Patent Act has standing to sue when an unauthorized party encroaches upon those rights.  The Court reasoned that “the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury.”  Slip op. at 15. 

Clarifying the holding of the Textile Productions opinion cited by the district court, the Court explained that the Textile Productions court created no rule “that a party cannot be an exclusive licensee of a patent if others have the right to license the patent.”  Id. at 16.   Because WiAV possessed exclusionary rights in the patents it asserted, it met the constitutional standing requirement, even though other entities retained rights to grant future licenses under those same patents.  That is, the Court explained, a licensee need not “be the only party with the ability to license the patent” to be an exclusive licensee able to sue.  Id. at 17.

The Court further explained that because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous with those rights.  Accordingly, an exclusive licensee may have standing to sue some parties but not others.  For example, the Court noted that an exclusive licensee lacks standing to sue a party for infringement if that party already has the right to practice the invention or could obtain such a license from another party with the right to grant it.  The Court held, however, that if an exclusive licensee has the right to exclude others from practicing a patent, and a party accused of infringement does not possess and is incapable of obtaining a license of those rights, the exclusive licensee’s exclusionary right is violated, satisfying “the injury predicate to constitutional standing.”  Id. at 18.

Therefore, WiAV’s standing did not hinge on whether it had the right to exclude all others from practicing the patent: it needed only the ability to exclude the defendants from practicing the patents, and it did.  In evaluating the third-party licenses, the Court found there was no evidence in the record that suggested the defendants could obtain a license to any of the Mindspeed patents.  As a result, the Court held that WiAV had the right to exclude the defendants from practicing the Mindspeed patents, thereby qualifying it as an exclusive licensee with standing to sue.

 

Summary authored by David K. Mroz, Esq.