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Corporation Lacked Standing to Sue After Being Administratively Dissolved

January 06, 2003

Decision icon Decision

Last Month at the Federal Circuit - February 2003

Judges: Dyk (author), Bryson, and Lourie (dissenting)

In Paradise Creations, Inc. v. UV Sales, Inc., No. 02-1283 (Fed. Cir. Jan. 3, 2003), the Federal Circuit affirmed the district court’s grant of SJ and dismissal of the patent-infringement claim on the ground that Paradise Creations, Inc. (“Paradise”) did not have standing to file its complaint.

Paradise, a Florida corporation, became administratively dissolved under a Florida corporations statute by failing to file its annual report in 1996. Paradise had yet to regain corporate status at the time it filed its patent-infringement suit in 2000. Rather, Paradise regained its corporate status on June 29, 2001, a week after UV Sales, Inc. (“UV Sales”) moved for SJ and dismissal of the complaint based on Paradise’s administratively dissolved state. Paradise’s standing at the time it filed suit was in question due to the alleged effect Florida corporation law had on a corporation’s ability to transact business while administratively dissolved. Prior to filing the lawsuit, but during its period of dissolution, Paradise contracted for an exclusive license, allegedly sufficient to sue for infringement, under U.S. Patent 4,681,471. UV Sales argued that Florida’s corporations law gave no legal effect to that contract and, therefore, Paradise had no standing. Paradise countered that Florida’s corporations law retroactively gave it standing because a state statute made the reinstatement effective on the day of the dissolution back in 1996.

The Court found that Paradise had no enforceable legal rights at the time it filed its complaint and, therefore, it had no cognizable injury, the first requirement of standing. Paradise admitted, due to its administratively dissolved status when it contracted for the license and filed the case, that it did not have legally enforceable rights to the patent at the time it filed suit, and accordingly, the Court found it did not have standing at the time it filed suit.

The Federal Circuit noted, however, that Paradise could refile now that the contractual rights to the patent under the license had legal effect, and the Court expressed no opinion about the effect of such an action.

Judge Lourie dissented, concluding that Florida law allowed the reinstatement of corporate status to give legal effect to the acts occurring during the dissolution period.