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Patentee Who Retains Substantial Rights in Patent Must Join Exclusive Licensee in Infringement Suit Despite Terms of License

September 18, 2009

Decision icon Decision

Last Month at the Federal Circuit - October 2009

Judges: Lourie (author), Rader, Clark (District Judge sitting by designation)

[Appealed from: D. Mass., Judge Stearns]

In AsymmetRx, Inc. v. Biocare Medical, LLC, No. 09-1094 (Fed. Cir. Sept. 18, 2009), the Federal Circuit raised sua sponte the issue of lack of standing of plaintiff AsymmetRx, Inc. (“AsymmetRx”), and on this basis vacated the district court’s grant of SJ to defendant Biocare Medical, LLC (“Biocare”).

The President and Fellows of Harvard College (“Harvard”) own U.S. Patent Nos. 6,946,256 (“the ’256 patent”) and 7,030,227 (“the ’227 patent”), which relate to p63 antibodies and methods for using them to detect malignant carcinoma. Harvard entered into a license agreement with Biocare (“the Biocare License”) to make, use, and sell the p63 antibodies. The Biocare License stated that it did not include a license under any U.S. or foreign patents. The ’256 and ’227 patents were pending but had not issued before the effective date of the Biocare License. The Biocare License also defined a limited field of use, the life science research market, but did not actually limit the license grant to that field.

A few years later, Harvard entered into an agreement with AsymmetRx (“the AsymmetRx License”) that also concerned the p63 antibodies. Under the AsymmetRx License, AsymmetRx received “an exclusive commercial license” under the ’256 and ’227 patents, and “a license” to use the p63 antibodies. The AsymmetRx License was limited to a field defined as the “[s]ale of clinical and diagnostic products and services based on detecting p63 expression or mutation.” Slip op. at 2-3 (alteration in original). Under the license, Harvard reserved certain rights and imposed certain obligations on AsymmetRx. Moreover, AsymmetRx could enforce the patents in an infringement action as long as AsymmetRx still had an exclusive license at the time the action was commenced AsymmetRx sued Biocare for patent infringement, alleging that Biocare’s sale of the p63 antibodies violated AsymmetRx’s exclusive rights in the commercial diagnostic field. The district court granted Biocare’s motion for SJ and found that the Biocare License was not limited to the life sciences research market, and that the Biocare License excluded only rights to any materials covered by patents already in existence when Biocare received its license.

On appeal, the Federal Circuit first addressed sua sponte the antecedent question of whether AsymmetRx had the statutory right to bring an action for infringement without joining the patent owner, Harvard. A suit for infringement ordinarily must be brought by a party holding legal title to the patent. The Court noted that a mere license that gave the licensee no title in the patent did not give the licensee right to sue at law in his own name for an infringement.

Noting that the critical determination regarding a party’s ability to sue in its own name is whether an agreement transferring patent rights to that party is, in effect, an assignment or a mere license, the Court proceeded to examine whether the agreement transferred all substantial rights to the patents and whether the surrounding circumstances indicated an intent to do so.

The Court found that although the AsymmetRx License effected a broad conveyance of rights to AsymmetRx, Harvard retained substantial interests under the ’256 and ’227 patents, including the right to sue for infringement. Harvard also retained the right to make and use the p63 antibodies for its own academic research purposes, as well as the right to provide the p63 antibodies to nonprofit or governmental institutions for academic research purposes. In addition, Harvard retained a great deal of control over aspects of the licensed products within the commercial diagnostic field and over sublicenses. The agreement also specified that AsymmetRx was to cooperate with Harvard to maintain the patent rights, so as to enable Harvard to apply for, to prosecute, and to maintain patent applications and patents in Harvard’s name. The Court found that retention of all of those rights was inconsistent with an assignment of the patents. Moreover, although AsymmetRx had the option to initiate a suit for infringement, it did not enjoy the right to indulge infringements, which normally accompanies a complete conveyance of the right to sue. Finally, if AsymmetRx did commence an infringement action, it was obligated to consider Harvard’s views and Harvard’s approval was necessary for any settlement of suit. Harvard may elect to join as a party in that action and, if Harvard does join such an action, it jointly controls the suit with AsymmetRx.

In short, the Court held that Harvard did not convey the entire right to enforce the patents to AsymmetRx. Thus, the Court concluded that AsymmetRx must be considered a licensee, not an assignee, and that it did not have a sufficient interest in the patents to sue, on its own, for infringement as a “patentee.” The Court held that Harvard, by retaining the various rights to its patents, must join in any infringement suit its licensee chooses to bring.

The Court also stated that the policies underlying Fed. R. Civ. P. 19 argue for Harvard’s joinder in this case. The disposition of AsymmetRx’s suit against Biocare could either prejudice Harvard’s interests or expose Biocare to the risk of multiple litigations. Under the Biocare License, the Court noted that Harvard was obligated to help Biocare defend against any infringement suit by a third party. By granting licenses to two parties involving the same subject matter, Harvard had potentially put itself in the conflicting position of having to aid two licensees opposed to each other. Complicating matters was the fact that Harvard was continuing to accept royalty payments from Biocare for the allegedly infringing sales. Thus, joinder of Harvard would permit the relationships between AsymmetRx, Biocare, and Harvard to all be resolved at the same time as well as solve the standing problem.

Summary authored by Adam M. Breier, Ph.D., student associate at Finnegan.