Exclusive Patent Licensees May Have Standing to Sue for Infringement Even if Others Have the Right to License the Patent

Authored by D. Brian Kacedon and John C. Paul

A U.S. patent provides a statutory right to exclude others from practicing the invention claimed in that patent. Generally, only the owner of a patent has the ability (or "standing") to sue to enforce that exclusionary right. U.S. courts have recognized, however, that when a patent owner grants a licensee those exclusionary rights, that licensee may also have the ability to sue to enforce that right. Thus, an exclusive licensee by virtue of being granted exclusivity under the patent will typically have the right to sue to protect that exclusivity. A non-exclusive licensee, however, will not have the right to sue because it has been granted only a waiver from suit without any exclusionary rights.

Confusion regarding the ability to sue, however, often arises when a patent holder licenses its patent rights to one or more entities in a manner that makes it unclear whether the licensee is truly an exclusive licensee. In such situations, where a licensee possesses some, but not all, of the rights in a patent, a court must determine whether a licensee possesses enough rights in a patent such that infringement causes sufficient injury to warrant the licensee's involvement in the suit. Determining this boundary, however, can often be difficult. In WiAV Solutions LLC v. Motorola, Inc., No. 2010-1266 (Fed. Cir. Dec. 22, 2010), the Federal Circuit clarified the boundary between exclusive and bare licensees in holding that a licensee can be an exclusive licensee under a patent even if other entities also have limited rights to license those patents.

The WiAV Solutions Decision

In WiAV Solutions, the plaintiff, WiAV Solutions Inc. ("WiAV"), was a patent licensee possessing several valuable rights in the patents-in-suit, such as the exclusive right to practice the patented inventions, to sue, and to grant future licenses. Prior to receiving its license, however, several licenses under the patents-in-suit had been granted to other entities besides WiAV (the "non-WiAV licensees") granting those entities the right to practice the invention, as well as limited future assignment rights and licensing rights.  Under the limited assignment and licensing rights, the non-WiAV licensees could only grant future assignments and licenses to closely-related entities such as affiliates, subsidiaries, spinoffs, and joint-development partners of the non-WiAV licensees.

On appeal, the defendant, Motorola, argued that WiAV could not be an exclusive licensee because other entities retained the right to license the patents-in-suit. To support its argument, Motorola relied on a prior Federal Circuit decision, Textile Productions, Inc. v. Mead Corp. No. 1997-1245 (Fed. Cir. Jan. 28, 1998), in which the court stated: "if a patentee-licensor is free to grant licenses to others, licensees under that patent are not exclusive licensees . . . To qualify as an exclusive licensee, an agreement must clearly manifest the patentee's promise to refrain from granting to anyone else a license in the area of exclusivity."

On appeal, the Federal Circuit held that the non-WiAV licensees' future assignment and licensing rights did not prevent WiAV from qualifying as an exclusive licensee. The court disagreed with Motorola's reliance on Textile Productions noting that in that case the licensee had not been explicitly granted any exclusionary rights under the patents  and that the facts did not support an interpretation that such rights were intended to be granted. Thus, the case did not stand for the proposition that a licensee needed to be the "only" licensee to qualify as an exclusive licensee.

Instead, the Federal Circuit held that whether an entity has the ability to sue turns on whether the entity possesses an exclusionary right created by the Patent Act. Thus, the relevant inquiry is not whether the licensee has the right to exclude all other entities, but rather whether the licensee has the right to exclude the defendants at issue.  In this case, despite the complex licensing framework underlying the patents asserted by WiAV, no scenario existed where a defendant could obtain a license to one of the patents. As a result, WiAV had the right to exclude each defendant from practicing the patents at issue, thereby qualifying it as an exclusive licensee with standing to sue.

The Federal Circuit also explained that the standing analysis for licensees must be conducted on a party-by-party basis. In other words, an exclusive licensee may have standing to sue some parties, but not others.  For example, 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 right in the future (likely through another party's right to grant a future license). 

Strategy and Conclusion

1. A future right to license no longer automatically prevents standing. The WiAV Solutions case could eliminate certain standing issues for patent licensees filing cases in federal court.  Before this case, a defendant could comb through the licenses relating to the asserted patents in search of another entity's right to grant future licenses.  If identified, some federal district courts would rely on this future right, regardless of how limited, to deny the plaintiff standing. The WiAV Solutions case made it more difficult for defendants to prevent standing by holding that a future licensing right only destroys standing if it can be used to license one of the defendants under the asserted patents.
2. Join all co-owners of the asserted patents. Whether a licensee qualifies as exclusive or bare is only half of the standing analysis. The other half, called the "prudential standing analysis," requires that the plaintiff joins all co-owners of the asserted patents (the parties did not dispute this issue in WiAV Solutions). This rule protects defendants from having the same patents asserted against the same products at different times. Therefore, for an exclusive licensee to properly perfect standing, it must identify, and join, all co-owners of the asserted patents.
3. Prevent others in the licensing family from having broad future licensing rights. A licensee wanting to sue should attempt to prevent another entity in the license family from obtaining either of the following rights in the asserted patents: (i) the right to license any party, or (ii) the right to license any infringer. With either of those rights, a defendant could obtain the right to practice the invention from that other entity, which would destroy standing under WiAV Solutions.

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