An Exclusive License Does Not Automatically Eliminate a Patent Owner’s Right to Sue

Abstract

In A.L.M. Holding Co. v. Zydex Industries Private Ltd., No. 25-1317 (Fed. Cir. May 19, 2026), the Federal Circuit ruled that a patent owner did not automatically lose its standing to sue an infringer by granting an exclusive license. The key question was what rights the patent owner kept. The owner retained a real business interest by maintaining certain exclusionary rights, such as the right to participate in enforcement, approve sublicenses, and collect royalties. Accordingly, it maintained the right to sue. The decision is an important reminder that the terms of an exclusive license will determine whether a patent owner can enforce its patent after licensing.

Background and the District Court Decision

A.L.M. Holding Company granted Ingevity Corporation an exclusive worldwide license to several of its patents. The license allowed Ingevity to make, use, sell, and sublicense products covered by those patents. Under the agreement, A.L.M. retained certain rights. For instance, A.L.M. kept the right to approve sublicenses, receive royalties, and, depending on the circumstances, either jointly or solely pursue infringement claims.

A.L.M. later sued Zydex Industries for infringement of the licensed patents. Zydex moved to dismiss, arguing that by issuing Ingevity an exclusive license, A.L.M. had forfeited its constitutional standing to sue. The district court agreed and dismissed the case. A.L.M. appealed.

Federal Circuit Appeal

The Federal Circuit reversed. The court considered two related questions relevant to standing: whether a party has suffered an injury sufficient to be in court at all – a question of constitutional standing, and whether that party is qualified under the Patent Act to bring the claim – a question of statutory standing. Although distinct, these questions often overlap in patent license disputes because both may depend on the factual question of what rights the patent owner holds.

The court highlighted two retained rights in the A.L.M.-Ingevity license agreement. First, the patent owner retained a right to sue (either jointly with the licensee or alone if the licensee declined to act). This right was not illusory as it granted the patent owner meaningful control over enforcement actions. Second, the patent owner had the final say on sublicenses and would receive royalty payments from sublicensees. This right was also not illusory because it meant Ingevity could not grant sublicenses without A.L.M.’s approval and therefore could not simply moot A.L.M.’s potential enforcement by authorizing an accused infringer’s use.

The court explained that these retained exclusionary rights, including the right to sue, veto sublicenses, and receive royalties, gave A.L.M. a real continuing stake in enforcement, which was enough for constitutional standing.

A Parallel Example

On the same day, the Federal Circuit issued ReCor Medical, Inc. v. Medtronic Ireland Manufacturing Unlimited Co., No. 25-1998 (Fed. Cir. May 19, 2026). In that case, Medtronic Ireland granted an exclusive license to an affiliated manufacturer, Medtronic Galway, to make, use, and sell covered products, and to have the first opportunity to enforce the patents. Medtronic Ireland retained the right to participate in enforcement actions, to sue on its own if Medtronic Galway declined or failed to act, to approve sublicenses and assignments, and to receive royalties from sales and enforcement proceeds.

Applying A.L.M., the Federal Circuit ruled Medtronic Ireland’s retained rights, including sublicense approval authority, royalty rights, and a meaningful enforcement role, were together enough to establish constitutional standing.

Strategy and Conclusion

Granting an exclusive license does not automatically prevent a patent owner from suing an infringer on its own. What matters is what the patent owner retains. In an exclusive license whether the patent owner has veto authority over sublicenses, how royalties and enforcement proceeds are allocated, and whether the patent owner may sue (either alone or at least if the licensee declines) can help a patent owner preserve a meaningful legal stake in its patents and be more likely establish constitutional standing.