Implied Exclusive Licensee Lacks Standing to Sue for Patent Infringement

Authored by D. Brian Kacedon, John C. Paul, and Andrew E. Renison

Abstract

A California court recently dismissed a plaintiff's patent-infringement action for lack of standing despite finding that the plaintiff held an implied exclusive license at the time of filing suit. The sole inventor of the asserted patent, also the sole owner and president of the plaintiff, formally executed two assignments of the patent to the plaintiff only after the complaint was filed. Thus, the court reasoned, no written license existed at the time of bringing suit to confer standing. The court also refused the plaintiff's attempt to retroactively cure standing. Lastly, the court explained, amending the complaint and joining the inventor could not remedy standing because he no longer had any rights to the asserted patent because of his two assignments.

A party wishing to assert patent rights against an accused infringer must have legal standing to litigate before a district court. Generally, only the patentee—the entity to whom the patent issued or the patentee's successor in title—has standing to sue for patent infringement. As an exception, a party who obtained an exclusive license from the patentee may have standing to enforce patent rights. But parties must follow certain formalities in conveying rights under the patent for exclusive licensees to have standing. In Freed Designs, Inc. v. Sig Sauer, Inc.,¹ the United States District Court for the Central District of California dismissed a plaintiff's patent-infringement suit for lack of standing. Specifically, while the facts supported an implied exclusive license from the patent's sole inventor to the plaintiff, no written license existed at the time of bringing suit to confer standing. In granting dismissal, the court also refused plaintiff's attempt to retroactively cure standing via assignment.

Background

Freed Designs, solely owned by the inventor of the patent-in-suit, filed suit against the accused infringer Sig Sauer in December 2013. In May 2014, the inventor executed an assignment transferring to Freed Designs his “entire right, title, and interest in and to” the asserted patent. Later, in September 2014, the inventor executed a second assignment purporting to have an effective date of August 16, 2005, the date the asserted patent issued. Sig Sauer later filed a motion to dismiss, arguing that Freed Design lacked standing to sue because it had not been assigned the asserted patent at the time of filing the complaint. Countering, Freed Design argued that it had an implied exclusive license from the inventor and therefore standing to sue.

The Decision

The court disagreed with Freed Design and dismissed its complaint for lack of standing. Citing Federal Circuit precedent, the court emphasized that standing must be shown at the time of filing the complaint; a standing defect cannot be cured after the lawsuit begins. When the complaint was filed, the inventor had not yet executed any assignments to his company, Freed Design. While the court acknowledged that Freed Design held an implied exclusive license at the time of filing, the court explained that a license must be in writing to confer standing.

Relying on Federal Circuit precedent, the court also rejected Freed Design's attempt to retroactively cure standing with the September 2014 assignment. Finally, the court noted, amending the complaint and joining the inventor could not remedy standing because he no longer had any rights to the asserted patent because of his two assignments.

Strategy and Conclusion

This case demonstrates the value of having written agreements documenting chain of title in place prior to filing a suit for patent infringement, regardless of the intentions, closeness of relationship, and any implied rights between the entities in the alleged chain of title.

Endnotes

¹ The opinion can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/FreedDesigns_v_SigSauer.pdf.