Standing Rights

Due to the lower threshold required for satisfying constitutional standing, a prospective plaintiff may meet the constitutional standing test but fail the one for statutory standing

ALL PATENT INFRINGEMENT lawsuits start with a plaintiff, but the criteria for meeting the threshold standing requirements to make a patent plaintiff eligible to bring and maintain such a lawsuit have not always been clear. The intuitive answer may be that anyone who has been affected by the infringement meets the requisite standing requirement. However, the response to the question may not be as clear as it would seem at first blush. Fortunately, the question has just received significant clarification from the Court of Appeals for the Federal Circuit, which has plenary jurisdiction over all patent appeals¹. In Intellectual Tech LLC v. Zebra Technologies Corporation, although the case dealt only with constitutional standing, the court of appeal clarified and explained the two requisite standing standards, i.e., constitutional and statutory, for bringing a patent infringement suit.

As an overview, a patent infringement plaintiff needs to meet both tests—constitutional standing and statutory standing— to qualify as a plaintiff². Constitutional standing is rooted in Article III, whereas statutory standing is defined under the patent statute at Section 281 in Title 35 of the U.S. Code. Constitutional standing is jurisdictional, meaning that it must exist at the start and in all subsequent stages of the proceeding to maintain the suit and when found to be lacking, its absence cannot be cured. Statutory standing, on the other hand, is not jurisdictional, i.e., its absence can be cured during the litigation if found to be lacking,³ for example, by joining others to the lawsuit as patent plaintiffs.

The U.S. Supreme Court has identified “injury in fact” as the key test for satisfying constitutional standing⁴. Courts have held that to meet this requirement the complained of injury must be “actual or imminent,” “concrete and particularized” and an “invasion of a legally protected interest.”⁵ As for statutory standing, Section 281 of the Patent Act⁶ provides that patent infringement lawsuits can only be initiated by a “patentee,” defined by the Federal Circuit as one who holds “all substantial rights” in a patent.⁷ Comparing the two standing standards, constitutional standing only requires retention of some patent rights by the patent plaintiff, as even someone with just some of the patent rights can suffer an injury in fact, so it often establishes a lower threshold than the “all substantial rights” required for meeting the statutory standing test. Due to the lower threshold required for satisfying constitutional standing, it is possible for a prospective plaintiff to meet the constitutional standing test while failing to clear the statutory standing hurdle.⁸

As a result, how one qualifies as a “patentee” having “all substantial rights” must also be addressed. In the United States, patent applications are required to be initially filed in the name of the inventors. Therefore, the patent inventors start off by owning all patent rights and, thus, are the initial “patentees” within the meaning of the law. Patent rights are frequently referred to as “a bundle of rights” because they represent separate rights that may be kept together or divided among multiple parties. Those rights may then be assigned by the initial patentees in whole or in part to one or more individuals or entities.⁹ When an individual or entity ends up holding a sufficiently large portion of the patent rights, that rights holder would then qualify as the “patentee” and thus be permitted to bring a patent infringement suit in its own name.¹⁰

The patent “bundle of rights” may be conveyed in two basic ways. Transfer of patent rights can be in the form of an assignment or a license. An assignment is normally viewed as a transfer of all the patent owner’s rights, in essence a transfer of ownership from one patent owner to a subsequent patent owner. A transfer through a license, in turn, can be of a portion of the owner’s rights, such as a bare right to use the patent, or of additional rights such as the right to sublicense, the right to share in proceeds of any successful infringement suit, and the right to bring suit against infringers, to name a few possibilities. The patent owner meets the constitutional standing requirement so long he or she retains some rights in the patent.¹¹

Therefore, patent owners, assignees, and licensees comprise categories of parties that may possess varying levels of patent rights. Assignment of patent rights corresponds to transfer of all rights in the patent to another person or entity, which would qualify the transferee as a “patentee” with the right to bring a patent infringement lawsuit in her or his own name. A licensee, on the other hand, possesses some rights and may or may not qualify as a “patentee” with the ability to initiate a lawsuit alone, depending on the rights acquired under the license and those retained by the patent owner. The Federal Circuit has interpreted the Patent Act such that a bare licensee, i.e., one who can use the patent but has no other rights to it, does not possess statutory standing and, thus, is not permitted to bring a patent infringement suit alone.¹² A more substantial license of patent rights may, however, qualify a licensee to bring such a suit in her or his own name if the licensee is considered effectively to be an assignee, that is, that the license includes “all substantial rights to the patent.”¹³

An exclusive licensee is generally associated with one that has been transferred all substantial rights in the patents-in-suit and is thus a coveted position for licensees, under which they would enjoy the same status as an assignee.¹⁴ As noted above, the statute grants the right to sue to the “patentee.” Section 281 defines “patentee” as an original inventor to whom the patent was issued, as well as the successor title holders but not including mere licensees.¹⁵ However, exclusive licensee is more than a label. The Federal Circuit has stated that determination of whether an exclusive licensee qualifies as an assignee requires ascertaining the intention of the parties to the license agreement and examining the substance of what was granted.¹⁶

To make that determination, courts are to consider several factors that bear on sufficiency of the transferred rights to render a licensee a patentee within the meaning of the law. These factors include: the scope of the licensee’s right to sublicense, the nature of license provisions regarding the reversion of rights to the licensor following breaches of the license agreement, the right of the licensor to receive a portion of the recovery in infringement suits brought by the licensee, the duration of the license rights granted to the licensee, the ability of the licensor to supervise and control the licensee’s activities, the obligation of the licensor to continue paying patent maintenance fees, and the nature of any limits on the licensee’s right to assign its interests in the patent.¹⁷ In making that determination, the most important factors are the exclusive right to make, use, and sell, as well as the nature and scope of the patentee’s retained right to sue accused infringers.¹⁸

Returning to the test for constitutional standing and the “injury-in-fact” requirement for meeting that test, the Federal Circuit has distinguished the satisfaction of that test for patent owners and exclusive licensees when it comes to considering the right of the licensee to grant sublicenses. In the case of patent owners, the court has said that a patent owner has sufficient exclusionary rights to satisfy the injury-infact requirement even where it grants another party the ability to grant sublicenses. In the case of licensees, however, they may or may not have received the right to exclude practice of the patent by others. Therefore, the ability by other entities to obtain sublicenses can help determine whether the license is an exclusive or a bare one.¹⁹

The tests are clearly fact-specific. Thus, a review of cases applying the tests is helpful to illustrate how it works in practice. The following court of appeal decisions are examples of how the Federal Circuit applies these standards to analyze constitutional and statutory standings.²⁰

In Mann,²¹ patentee Alfred Mann Foundation (AMF) had granted a license to AB, which included the following rights: the right to exclusively make, have made, use, lease, offer to lease, sell, offer to sell, and commercially exploit the patents; the first right to sue to enforce the patents when either AMF or AB learned of any alleged or suspected infringement; the right to settle any AB-controlled litigation on any terms without any prior authorization by AMF; and the right to grant sublicenses.²² However, AMF retained some rights, including the right to sue to enforce the patents if AB declined to do so as well as the right to a significant portion of the recovery in any infringement suits, the right to grant licenses to settle litigation initiated by AMF, the right to prevent AB from assigning its rights, the right to terminate the license agreement and any sublicenses if AB missed payments to AMF, and the obligation to pay maintenance fees on the patents.²³ The license agreement between AMF and AB also provided that in the event of litigation commenced by either AMF or AB, the other party maintained the right to participate in the litigation by requiring the litigationcommencing party to keep it informed of the status of the litigation, but the noncommencing party was not permitted to interfere with the commencing party’s control of the litigation.²⁴ The district court ruled that AMF’s transfer of patent rights amounted to an assignment and left the licensor with no constitutional standing to sue. The Federal Circuit disagreed, holding that AMF did possess the requisite constitutional standing as it had retained the right to sue, which the appeal court characterized as the most important factor in determining whether an exclusive license has received sufficient rights to render the licensee the owner of the patent.²⁵

Another decision, that of AsymmetRx, Inc. v. Biocare Medical LLC,²⁶ concerned a licensing agreement between licensor Harvard College and licensee Asymmetrx under which AsymmetRx got the right of first refusal in suing alleged infringers but provided that in the event the licensee chose to not proceed with a suit, then the licensor could step in and bring such a suit.²⁷ In addition, according to the terms of the license, in the event AsymmetRx initiated an infringement suit, it had to consider Harvard’s views and seek Harvard’s approval for any settlement. Harvard also retained the option to join the action and share in control of the suit. When AsymmetRx brought suit against an alleged patent infringer, the defendant sought to have it dismissed, arguing that the licensee could not maintain the suit because the patentee licensor still retained substantial interests in the patents-in-suit, including the right to sue for infringement.²⁸ The district court agreed, and the court of appeal affirmed, concluding that the licensee did not have statutory standing to be able to maintain a suit on its own because Harvard College had not conveyed the entire right to enforce the patents to AsymmetRx as it had retained the right to sue as well as other rights and thus had conveyed less than all substantial rights in the patents.²⁹

Likewise, in Diamond Coating Technologies, LLC v. Hyundai Motor America,³⁰ the court of appeal affirmed the district court’s decision to dismiss a licensee’s patent infringement suit for failure to qualify for statutory standing on the ground that it had not acquired all substantial rights in the patents-in-suit and, thus, failed the test of statutory standing. In Diamond Coating, patent owner Sanyo had conveyed various patent rights to licensee Diamond Coating as follows: 1) Diamond Coating was prohibited from licensing the patents to a third party without Sanyo’s consent; 2) Sanyo retained an economic interest in future proceeds, including proceeds from litigation; 3) Sanyo retained a license to make, use, and sell products covered by the patents-in-suit; and 4) Sanyo retained significant control over the decision to enforce the patents because the agreement required that Diamond Coating consider the best interests of both Diamond Coating and Sanyo in enforcing the patents.³¹ The appeal panel found that Sanyo had retained significant control over the licensee’s enforcement and litigation activities since the agreement had conditioned Diamond Coating’s litigation and enforcement activities on Sanyo’s “best interests” and had contained limits on the licensee’s authority to license the patents and limited Diamond Coating’s discretion to refrain from suing certain companies.³² The court of appeal thus concluded that Diamond Coating could not maintain a patent infringement suit on its own.

A nuanced fact pattern was addressed by the court of appeal in Speedplay, Inc. v. Bebop, Inc.,³³ where the Federal Circuit affirmed the lower court decision holding that the licensee’s right to grant royaltyfree sublicenses to defendants sued by the licensor rendered the licensor’s right to sue as “illusory.”³⁴ The licensors in the case, Bryne and Zoumaras, argued that the licensee, Speedplay, lacked statutory standing and thus could not maintain an infringement action without joining them because the licensors had retained substantial rights in the licensed patent. According to the terms of the license agreement, in the event of infringement, Speedplay had three months to stop the infringement, after which the licensors could take legal action on their own. In support, Byrne and Zoumaras cited an earlier decision of the appeal court in Abbott Laboratories v. Diamedix Corporation³⁵ for the proposition that the grantors’ retention of that option was dispositive of their position. The appeal panel disagreed, noting that the licensor in Abbott had retained an option to sue an infringer if the exclusive licensee did not
and that, in contrast with Speedplay, even if the licensee did initiate a suit, the licensee could not manage the action in a manner that would compromise the licensor’s rights in the patent and could not prevent the licensor from participating in the suit. In addition, the decision noted that the grant to the licensee in Abbott was subject to prior-granted licenses and to a limited right of the licensor to make, use, and sell products embodying the patented invention. Finally, the court of appeal found it relevant that the licensee in Abbott could not freely assign its license. Considering all the rights retained by the licensor, the appeal court concluded that the Abbott licensor was properly determined to be a necessary party to the infringement action brought by the licensee.³⁶

The Speedplay appeal court then also distinguished Abbott on the ground that the licensing agreement in Speedplay did not grant licensors the right to participate in an infringement action brought by Speedplay or to limit Speedplay’s management of such a suit. Additionally, the cases differed in that Speedplay could nullify the suit by granting the alleged infringer a royalty-free sublicense. Finally, the appeal court noted that while the licensor in Abbott had an absolute right to veto any assignment proposed by the licensee, other than to a successor in business, here, the licensors’ consent to an assignment “shall not be withheld unreasonably,” which the panel found not to be enough.³⁷

Returning to the factual background of Zebra, plaintiff Intellectual Tech LLC filed suit for patent infringement against Zebra Technologies Corporation. Intellectual Tech was an assignee of the patent in suit through OnAsset. Intellectual Tech and OnAsset had borrowed money from Main Street Co. and agreed that, in the event of a default, patent rights would be transferred to Main Street, allowing Main Street the right to “sell, assign, pledge, encumber or otherwise dispose of IT’s Patents and Trademarks.”³⁸ Intellectual Tech later defaulted but nonetheless went ahead and filed suit against Zebra for patent infringement. Zebra objected, arguing that Main Street’s ability to license the patent deprived plaintiff Intellectual Tech of all exclusionary rights, pointing out Main Street had the exclusive ability to license and that even if both Main Street and Intellectual Tech had the ability to license, Main Street’s non-exclusive ability to do so still divested Intellectual Tech of all exclusionary rights.³⁹

The district court agreed, ruling that the licensee, Intellectual Tech, was not a patentee within the meaning of 35 USC Section 281 and thus could not sue without joining the patentee, Main Street. The appeal court reversed and vacated the district court ruling, rejecting the conclusion that the agreement had granted Main Street exclusive licensing rights upon default. The appeal panel concluded that Intellectual Tech retained exclusionary rights to qualify for constitutional standing despite Main Street’s non-exclusive ability to grant licenses to others, noting that a patent owner has exclusionary rights sufficient to meet the injury-in-fact requirement even when it grants sublicensing rights to the license.⁴⁰ In particular, the Zebra appeal panel focused on the license agreement’s silence on the right to sue as indication of licensor’s intent not to transfer that right to the licensee. Additionally, the decision found other license factors, such as the damages award allocation formula weighed against the conclusion that Intellectual Tech had transferred all substantial rights to Main Street. In that regard, the Zebra appeal court distinguished Speedplay, noting that unlike in Speedplay the patent owner in Zebra was required to cooperate in enforcement of the licensed patent.⁴¹

Another factor taken into account in determining whether a patent owner retained rights sufficient to qualify for constitutional standing is the duration of the license. The court of appeal, citing its own precedent,⁴² concluded that the patent owner had not transferred away all of its rights where the rights it granted to a third party, including an unfettered right to sublicense (among many other rights), were given “for only a limited portion of the patent term.”⁴³

An additional relevant and important factor addressed by the Zebra appeal decision was the impact of an unexercised right to assign the patent.⁴⁴ In that regard, the Zebra defendant had argued that Main Street had been granted the option to “sell, assign, transfer, pledge, encumber or otherwise dispose of” the patent, thus divesting IT of all exclusionary rights. The Federal Circuit disagreed, holding that an unexercised option to assign was not a present divestment of IT’s exclusionary rights and that Main Street’s option to assign was equivalent to the ultimate ability to license, explaining that “whatever role another entity’s ability to license has in the Article III inquiry for a patent owner, it is clear that assignment must be evaluated based on the actual transfer of rights, not mere ability.⁴⁵ The decision explained that “the exclusionary rights that IT would have lost upon Main Street’s foreclosure or assignment to another party must be evaluated in the same way the court evaluated title—based on the actual state of rights instead of their hypothetical redistribution at some unspecified point in the future.”⁴⁶ Furthermore, since Main Street had not exercised any options, IT was not presently divested of all exclusionary rights. The court of appeal thus concluded that IT did possess the requisite constitutional standing.⁴⁷ The appeal panel held that “whatever role another entity’s ability to license has in the Article III inquiry for a patent owner, it is clear that assignment must be evaluated based on the actual transfer of rights, not mere ability.”⁴⁸ Applying this standard, the decision found that although Main Street did possess the option to assign the patent, it had not exercised that option as of the time the case was filed and, therefore, IT had not lost its exclusionary rights.⁴⁹

In Zebra the court of appeal clarified that owners of patents as well as assignees do not lose exclusionary rights and thus constitutional standing for bringing patent infringement suits despite transferring some of their patent rights. The determination of whether the plaintiff in patent infringement suit meets the constitutional standing test is fact-dependent, but so long as the patent owner keeps some relevant right, it meets the constitutional standing requirement.

_{1 Intellectual Tech LLC v. Zebra Techs. Corp., 101 F. 4th 807, 813-17 (Fed. Cir. 2024).
2 Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F. 3d 1225, 1234 (Fed. Cir. 2019).
3 Abraxis Bioscience, Inc. v. Navinta LLC, 625 F. 3d1359, 1363 (Fed. Cir. 2010).
4 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).
5 Id. at 560.
6 35 U.S.C. §281.
7 WiAV Sols. LLC v. Motorola Inc., 631 F. 3d 1257, 1264 (Fed. Cir. 2010).
8 Lone Star, 925 F. 3d at 1234-35 (“[A]lthough Lone Star does not possess all substantial rights in the asserted patents [to satisfy Section 281] its allegations still satisfy Article III.”); Univ. of S. Fla. Research.
Found., Inc. v. Fujifilm Med. Sys. U.S.A., Inc., 19 F. 4th 1315, 1324 (Fed. Cir. 2021) (“[W]e hold [the plaintiff] fails to meet the statutory requirements of § 281 but does meet the requirements of constitutional standing.”).
9 Alfred E. Mann Found. for Sci. Research v. Cochlear Corp., 604 F. 3d 1354, 1360 (Fed. Cir. 2010).
10 Id.
11 Intellectual Tech LLC v. Zebra Techs. Corp., 101
F.4th 807, 816 (Fed. Cir. 2024).
12 WiAV, 631 F. 3d at 1264.
13 Lone Star, 925 F. 3d at 1229.
14 Mann, 604 F. 3d at 1358-59 (Fed. Cir. 2010)
15 35 U.S.C. §100(d)
16 Mann, 604 F. 3d at 1359 (quoting Mentor H/S, Inc. v. Med. Device All., Inc., 240 F. 3d 1016, 1017 (Fed. Cir. 2001)).
17 Id. at 1360-61
18 Diamond Coating Techs., LLC v. Hyundai Motor Am., 823 F. 3d 615, 619 (Fed. Cir. 2016) (quoting Mann, 604 F. 3d at 1360-61).
19 Intellectual Tech LLC v. Zebra Techs. Corp., 101 F.4th 807, 816 (Fed. Cir. 2024).
20 University of S. Fla. Research Found,, Inc. v. Fujifilm Med. Sys. U.S.A., Inc., 19 F. 4th 1315, 1319-1324 (Fed. Cir. 2021).
21 Mann, 604 F. 3d at 1357.
22 Id. at 1357-58.
23 Id. at 1358.
24 Id.
25 Id. at 1361.
26 AsymmetRx, Inc. v. Biocare Med. LLC, 582 F. 3d 1314, 1320 (Fed. Cir. 2009).
27 Id. at 1320-21.
28 Id. at 1320.
29 Id. at 1321.
30 Diamond Coating Techs., LLC v. Hyundai Motor Am., 823 F. 3d 615, 617 (Fed. Cir. 2016).
31 Id. at 619.
32 Id. at 620-21.
33 Speedplay, Inc. v. Bebop, Inc., 211 F. 3d 1245 (Fed.Cir. 2000).
34 Id. at 1251.
35 Abbott Labs. v. Diamedix Corp., 47 F. 3d 1128 (Fed. Cir. 1995).
36 Id. at 1251, 1252.
37 Id. at 1252.
38 Intellectual Tech LLC v. Zebra Techs. Corp., 101 F. 4th 807, 816 (Fed. Cir. 2024).
39 Id. at 812-817.
40 Id. at 812 (citing Uniloc USA, Inc. v. Motorola Mobility LLC, 52 F. 4th 1340, 1345 (Fed. Cir. 2022)).
41 Zebra, 101 F. 4th at 817.
42 Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F. 3d 1336, 1342-43 (Fed. Cir. 2006); Alfred E. Mann Found. for Sci. Research. v. Cochlear Corp., 604 F. 3d 1354, 1361 (Fed. Cir. 2010).
43 Zebra, 101 F. 4th at 816.
44 Id. at 817.
45 Id.
46 Id.
47 Id.
48 Id. at 817 (citations omitted).
49 Id.}

Dariush Adli