Upon Determining Agreement Failed to Transfer All Substantial Rights to Plaintiff, District Court Required to Consider Whether Joinder of Original Patentee Was Feasible

In Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., No. 2018-1581 (Fed. Cir. May 30, 2019), the Federal Circuit affirmed a district court decision that the plaintiff lacked “all substantial rights” and therefore could not assert the patent on its own, but it vacated and remanded for the district court to consider whether joinder of the original patentee was feasible.

Advanced Micro Devices Inc. (AMD) was originally assigned the asserted patents. AMD executed an agreement that purported to transfer “all right, title and interest” in the patents to Lone Star. That agreement, however, placed limitations on Lone Star, such as: (i) Lone Star could only assert the patents against “Unlicensed Third Party Entities” listed in the agreement; (ii) new entities could only be added if both Lone Star and AMD agreed to them; (iii) if Lone Star sought to sue an unlisted entity, AMD reserved the right to offer that entity a sublicense; (iv) AMD could prevent Lone Star from assigning the patents or allowing them to enter the public domain; (v) AMD and its customers could practice the patents; and (vi) AMD shared revenue Lone Star generated through its monetization efforts. Id. at 4.

The Federal Circuit affirmed the district court’s determination that the limitations in the agreement prevented the transfer of “all substantial rights” in the patents, and that Lone Star accordingly lacked the ability to assert the patents on its own. The Federal Circuit vacated and remanded, however, finding Rule 19 required the district court to consider whether joinder of AMD was feasible.