Standing Granted in Trustee-Beneficiary Relationship, Says Judge Smith

Posted on August 25, 2011 by Matthew Osborne

Standing can be a tricky issue in situations where affiliated corporate entities assign and cross-license patents amongst themselves. In Pfizer, Inc., v. Teva Pharmaceuticals USA, Inc., Case No. 2:10cv128, 2011 U.S. Dist. LEXIS 90021 (E.D.Va. Aug. 12, 2011), Judge Smith weighed-in on two interesting scenarios: trustee-beneficiary patent ownership and exclusive licenses with owner-retained rights.

Standing, Generally

Before delving into the facts of Pfizer’s multiplicity of corporate entities and transfers of patent rights therebetween, Judge Smith broadly covered the categories of plaintiffs that have standing in suits of patent infringement, along with their respective remedies, as set out by the CAFC:

·         Plaintiffs which can sue in their name alone, including patent owners, assignees, and exclusive licensees with “all substantial rights in the patent;”

·         Plaintiffs which can sue in tandem with the patent owner, including exclusive licensees not holding “all substantial rights;” and

·         Plaintiffs which can sue in equity, including parties with equitable ownership of a patent

 

Trustee-Beneficiary Relationship

In a rather interesting contractual maneuver, dubbed the “Patent Filing Agreement,” Pfizer, Ltd. developed technology to be pursued before the USPTO under the control of affiliate Pfizer, Inc. The arrangement assigned all Pfizer, Ltd. invention rights to Pfizer, Inc., to be held “in trust” for beneficiary, Pfizer, Ltd.  The ability to grant licenses in issued patents was retained by Pfizer, Ltd.

Judge Smith held both Pfizer, Ltd. and Pfizer, Inc. to have standing as plaintiffs in the suit. Regarding Pfizer, Inc., the Court found the Patent Filing Agreement to clearly rest ownership of US patents in the hands of Pfizer, Inc. and, accordingly, the ability to stand as sole plaintiff in litigation. Regarding Pfizer, Ltd., the Court found the beneficiary relationship to the patent-in-suit, coupled with the right to grant licenses and enforce the patent, to independently give the beneficiary the ability of sole plaintiff standing in litigation. Judge Smith further noted that a beneficiary would, at the very least, be able to hold standing in tandem with the patent owner or in equity.

 

Exclusive Licensee (with Retained Rights)

The Court then turned to the complicated case of subsidiary Pfizer Ireland Pharmaceuticals Unlimited Liability Co. (“Pfizer Ireland”), also a party to the litigation. Pfizer Ireland had received an exclusive license to the patent-in-suit though a series of conveyances too complex to list here. With the chain of custody blessed by the Court, Judge Smith turned to the terms of the exclusive license, to determine whether it met the burden required for co-plaintiff standing. In its examination of the license, the Court considered:

·         Whether the licensee has exclusive rights in a territory,

·         Whether the licensor has retained the right to grant further licenses,

·         Whether the licensee has the right to sue for infringement, and

·         Whether the licensor retains rights to develop and market the invention.

After analysis, Pfizer Ireland was deemed a bare licensee for the purposes of standing. The Court pointed to Pfizer, Ltd.’s retained “Right of Conversion,” which allowed Pfizer, Ltd. to revoke exclusivity at a later date, and Pfizer Ireland’s lack of a primary right of enforcement in cutting against a truly exclusive license.

Based on this analysis, Judge Smith removed Pfizer Ireland from the suit, while keeping both Pfizer, Inc. and Pfizer, Ltd. as co-plaintiffs.
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EDVA Judge Grants Partial Summary Judgment and Denies Reconsideration in Long-Running Patent Malpractice Action

Posted on July 16, 2011 by Dabney Carr

In the most recent rulings in the long-running suit by Touchcom, Inc. for malpractice against its Canadian patent firm, Bereskin & Parr (“B&P”), Judge Cacheris recently granted partial summary judgment (found here) to B&P that Touchcom, Inc. lacked standing and denied Touchcom’s motion to reconsider that ruling (found here). Touchcom, Inc. v. Bereskin & Parr, Case No. 1:07CV114, 2011 U.S. Dist. LEXIS 72905 (E.D. Va. July 7, 2011).

The relationship between Touchcom and B&P dates back to 1987, when Touchcom retained B&P to obtain patents over its gasoline pump invention in Canada and the U.S. After a 2005 finding that its U.S. patent was invalid because certain software code was missing from the specification, Touchcom sued B&P for malpractice.

Judge Cacheris dismissed the case for lack of personal jurisdiction over B&P, but the Federal Circuit reversed, holding that under Fed .R. Civ. P. 4(k)(2) the act of filing an application for a U.S. patent at the USPTO was sufficient to subject a Canadian filing attorney to personal jurisdiction in a malpractice claim based upon that filing.  Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403 (Fed. Cir. 2009).

After remand, B&P moved for summary judgment on several grounds, but the Court granted the motion on only one ground – that Touchcom, Inc. lacked standing on the grounds that it had granted its affiliate, Touchcom Technologies, Inc. (“TTI”), the sole and exclusive right to collect proceeds from litigation enforcing patent rights. 

On a motion for reconsideration, Judge Cacheris affirmed his decision that a 2003 Amendment to the licensing agreement between Touchcom and TTI granted TTI sole rights in the patent, even though the Amendment had never been signed. Based on deposition testimony of the inventor, the Court held that the terms of the Assignment had been effected by Touchcom’s and TTI’s Boards of Directors, and so was a binding agreement that deprived Touchcom, Inc. of standing. 

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Federal Circuit Reverses EDVA Dismissal of Patent Infringement Claims For Lack of Standing

Posted on December 23, 2010 by Robert Angle

As reported previously here, in WiAV Solutions LLC v. Motorola, Inc., et al., Case No. 3:09CV447, Judge Robert E. Payne dismissed seven claims of patent infringement for lack of standing because the plaintiff did not have the exclusive right to license the patent. Plaintiff WiAV had licensed seven of the nine patents at issue from Mindspeed Technologies (which was also named in the case as defendant patent owner).  In a December 18, 2009 decision, Judge Payne ruled that WiAV lacked constitutional standing because it was not an exclusive licensee of the patents. Judge Payne later certified WiAV’s appeal of that decision to the Federal Circuit, as reported here. 

On December 22, 2010, the Federal Circuit (Judge Linn, joined by Chief Judge Rader and Judge Dyk) reversed Judge Payne. After reciting the history of the patents at issue, which included a complicated series of license agreements with six other entities, the Court framed the issue thusly:

Because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous wit those rights. Depending on the scope of its exclusionary rights, an exclusive licensee may have standing to sue some parties and not others…. [I]f an exclusive licensee has the right to exclude others from practicing the patent, and a party accused of infringement does not possess, and is incapable of obtaining, a license of those rights from any other party, the exclusive licensee’s exclusionary right is violated.

* * *

The question is whether WiAV has shown that it has the right under the patents to exclude the Defendants from engaging in the alleged infringing activity and therefore is injured by the Defendants' conduct.

 

Id.at 17-18 (emphasis in original) (a copy of the opinion can be found here). The Federal Circuit answered this question in the affirmative, finding that WiAV, while not the exclusive licensee of the patents at issue, had exclusionary rights vis-à-vis the Defendants. The fact that the six other licensees of the patents retained rights to grant additional licenses did not defeat WiAV’s standing because those six other licensees had limited licensing rights and could not grant a license to the particularly Defendants sued by WiAV.

 

Accordingly, the Federal Circuit reversed Judge Payne’s decision and remanded the case for further proceedings.
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EDVA Court Certifies Appeal of Dismissal for Lack of Standing

Posted on March 11, 2010 by Dabney Carr

As we blogged here, Judge Payne recently dismissed claims relating to seven of the nine patents asserted by WiAV Solutions against multiple defendants (including Nokia, Motorola and Palm) because the plaintiff did not have the exclusive right to license the patents. The Court  has now certified WiAV’s appeal of that decision to the Federal Circuit.  WiAV Solutions LLC v. Motorola, Inc. et al., 2010 U.S. Dist. LEXIS 21508 (E.D. Va. March 9, 2010).

In his opinion, Judge Payne rejected the defendants’ argument that the appeal should not be certified because most of the accused products are alleged to infringe both the dismissed patents and the two remaining patents.  The judge also rejected the argument that certification of the appeal could result in a “two-trial scenario” that may subject the defendants to “double jeopardy on damages.” Judge Payne noted that the appeal would only involve the discrete issue of standing and that delaying certification could also result in two trials if the Federal Circuit overturns the standing decision after trial on the remaining patents.

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EDVA Court Dismisses Patent Infringement Claims For Lack of Standing

Posted on February 26, 2010 by Dabney Carr

In a December 18 decision, the U.S. District Court in Richmond dismissed seven claims of patent infringement for lack of standing because the plaintiff did not have the exclusive right to license the patent.

In WiAV Solutions LLC v. Motorola, Inc., et al., Case No. 3:09CV447 (E.D. Va. Dec. 18, 2009), WiAV brought claims of infringement of nine patents involving wireless communication technology against multiple defendants. Seven of the patents (the “Mindspeed Patents”) had been assigned to Mindspeed Technologies, which was named in the case as defendant patent owner.

The defendants moved to dismiss the claims related to the Mindspeed patents for lack of standing. In a December 18, 2009 decision, Judge Robert E. Payne ruled that WiAV lacked constitutional standing because it was not an exclusive licensee of the patent. The key points from Judge Payne’s opinion:

  • To show that a case or controversy exists, a plaintiff must meet both constitutional and prudential standing requirements.
     
  • To have constitutional standing, a plaintiff in a patent suit must have both the contractual right to bring suit and the right to exclude others from making, using, selling or offering to sell the patented invention.
     
  • A party with “all substantial rights” under a patent or an exclusive licensee of a patent in a field of use has standing to sue but a “bare licensee” has no standing.
     
  • A licensee which is granted an exclusive license subject to prior, nonexclusive licenses has standing as an exclusive licensee.
     
  • A licensee is not an exclusive licensee, however, if others retain the right to grant additional licenses, even when the right to sublicense is limited to subsidiaries and affiliates.

The Mindspeed Patents had been transferred and licensed through a complicated series of agreements. At least four other parties retained the right to grant new licenses in the field of wireless handsets, defeating WiAV’s claim of exclusivity.

Judge Payne rejected WiAV’s request to adopt a new legal principle that, if a grantor retains a limited right to sublicense, it does not defeat exclusivity because WiAV could have alleviated the standing issue at the time it contracted for its rights and because WiAV’s request ran against well-accepted legal principles.

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