Clarifying Standing in Patent Infringement Lawsuits

The Federal Circuit clarified that in patent infringement suits, the key to constitutional standing is the “right to bring suit.” A “bare licensee” with only a promise not to be sued lacks exclusionary rights and cannot sue.

A recent court of appeal decision has clarified the requirements for satisfying constitutional standing in order to bring a patent infringement suit. The Intel. Tech., LLC. v. Zebra Techs. Corp ., 101 F.4th 807 (Fed. Cir. 2024) (Zebra) decision by the Federal Circuit Court of Appeal, which has plenary jurisdiction over all patent appeals, is significant as it confirms that among the many indicia of patent rights, the “right to bring suit” is the most significant and its retention by a prospective patent infringement plaintiff satisfies the constitutional standing requirement.

Constitutional and statutory standing are two types of standing, both of which need to be present to permit a prospective plaintiff to bring a patent infringement suit in court. Constitutional standing is based on Article III of the U.S. Constitution and requires a showing of an “injury in fact” by the plaintiff. Zebra , 101 F.4th at 813. The Federal Circuit has held that only those who have “exclusionary rights” in a patent can claim to have suffered an injury for patent infringement. Lone Star Silicon Innovations LLC v. Nanya Technology Corporation (Fed. Cir. 2019) 925 F.3d 1225, 1235 . An “exclusionary right,” in turn, is defined as “ability to exclude others from practicing an invention or to forgive activities that would normally be prohibited under the patent statutes.” Zebra , 101 F.4th at 813. Therefore, so long as the prospective plaintiff has retained some exclusionary right in the patent, the constitutional standing requirement is met.

Statutory standing, on the other hand, is rooted in the Patent Act, which recognizes the right to bring infringement suits for “patentees.” 35 U.S.C. § 281. Whereas the constitutional standing, as noted above, is satisfied as long as the plaintiff maintains some exclusionary right, the statutory standing requirement is more stringent and requires the plaintiff to hold “all substantial rights” in a patent. WiAV Sols. LLC v. Motorola Inc ., 631 F.3d 1257, 1264 (Fed. Cir. 2010). The Federal Circuit has interpreted this right to be held not just by the patent owner, but by any party who “has a legally protected interest in the patent created by the Patent Act.” Zebra, 101 F.4th at 813.

So, who can possess a legally protected interest in the patent to qualify for statutory standing? Courts have held that such a person can be the patent owner, or an assignee or an exclusive licensee of the patent. See , Intellectual Property Development, Inc. v. TCI Cablevision of California, Inc. (Fed. Cir. 2001) 248 F.3d 1333, 1346. Since patent applications in the U.S. must be filed in the name of the inventors, the inventors of the patent originally own all the rights to the patent. The i nventors, in turn, may assign their rights to others, which would make the assignee the owner of “all substantial rights” to the patent. Lone Star Silicon Innovations LLC v. Nanya Technology Corporation (Fed. Cir. 2019) 925 F.3d 1225, 1231. The patent owners may also transfer all or part of their rights in the patent to others in the form of a license, which may be exclusive or non-exclusive.

Because rights in a patent are numerous, the question is when does the patent owner give away so much of the patent rights that results in loss of standing to the owner; or conversely, when does a licensee acquire enough rights in the patent to have the requisite constitutional and statutory standing for bringing a patent infringement suit. Courts have addressed that question and decided that a “bare licensee,” i.e., one who can practice the patented invention based on a promise to not be sued by the owner, but otherwise has no other rights in the patent, does not possess exclusionary rights and has no standing to bring suit. Ortho Pharmaceutical Corp. v. Genetics Institute, Inc . (Fed. Cir. 1995) 52 F.3d 1026, 1031-1032.

To determine whether an exclusive license is tantamount to an assignment, courts look to the intent of the parties and the substance of the rights transferred, including the exclusive right to make, use, and sel, as well as the nature and scope of the patentee’s retained right to sue. Mentor H/S, Inc. v. Med. Device All., Inc., 240 F.3d 1016, 1017 (Fed. Cir. 2001). For example, in Alfred E. Mann Foundation For Scientific Research v. Cochlear Corp . (Fed. Cir. 2010) 604 F.3d 1354, the patent owner had granted the licensee the exclusive right to make, use, sel, lease, offer to lease and offer to sel, as well as the right to commercial exploitation of the patents, the first right to sue to enforce the patents; the right to settle licensee controlled litigation without prior authorization by owner, and the right to grant sublicenses. Id. at 1357-58. However, patent owner retained the right to sue to enforce the patents if the licensee declined to exercise that right, the right to a significant portion of the recovery in infringement suits; the right to grant licenses to settle litigation that it initiated, the right to prevent the licensee from assigning its rights, the right to terminate the license agreement and any sublicenses if the licensee missed payments to the licensee, and the obligation to pay maintenance fees on the patents. Id. at 1358 .

When the patent owner filed suit against an alleged infringer, the alleged infringer sought to dismiss the complaint on the basis that the patent owner had lost its standing by virtue of the licensed rights. The district court agreed but the Federal Circuit reversed, explaining that the patent owner’s retention of the right to sue, which the court identified as the most important factor in determining whether an exclusive license transfers sufficient rights to render the licensee the owner of the patent, gave the owner the requisite standing.” Id. at 1361. The court of appeal held that because the licensor had complete discretion to control litigation it initiated,

its right to sue was not illusory, even though such right was contingent on the licensee declining to sue. The court of appeal also noted that the licensee had failed to meet the statutory requirements of § 281, because it did not possess all substantial rights in the patent. However, that defect could be cured by joining the licenses as a plaintiff in the case.

Conclusion

Evaluating standing is a threshold inquiry that must be performed before bringing a patent infringement lawsuit. While lack of constitutional standing can’t be cured by joining another party to the case, when there is a question as to plaintiff’s statutory standing, further inquiry would focus on joining the assignee or licensee to the lawsuit to cure the standing defect.