Abstract
A license agreement did not transfer all substantial patent rights to a licensee asserting patent infringement because it limited the licensee's right to sue, exclude, assign, and license the licensed patent. In response to a request for sanctions, the court ordered the licensee to submit to a deposition on topics related to its knowledge of issues related to its standing to sue and its decision to assert the disputed patents.
A licensee suing for patent infringement without the patent owner must have "all substantial rights" in the asserted patents, such that the license is essentially an assignment of those patents. A Texas court in Keith Manufacturing Co. v. Cargo Floors B.V. found that a licensee asserting patent infringement did not have sufficient rights to sue based on a license from a holding company that owned the asserted patents. After finding that the licensee lacked standing, the court ordered the licensee to submit to deposition on topics related to its lack of standing and decision to sue on the patents without joining the licensor.
Background
KMC sued Cargo Floor B.V. for infringing patents on
conveyer systems in truck trailers. Cargo Floor asserted that KMC
did not own the asserted patents because 1) the former KMC
president, Keith Foster, was designated as the sole inventor and
patentee, 2) there was no record that the patents were assigned to
KMC during Foster's lifetime, and 3) Foster passed away and
probate proceedings for his estate were closed.
KMC claimed it had standing to sue on the patents through a
license from a holding company, "Keith Investments,"
which stood in the position of the owner of Keith Foster's
patents.
The Keith Manufacturing Decision
The court found KMC did not have standing to sue under its
own name because the license agreement did not provide KMC with
"all substantial rights" for the asserted
patents.
First, KMC did not have the right to exclude others, through suit
or otherwise, from making, using, or selling the patented devices.
Instead, the license only gave KMC the right to make, use, and sell
the devices covered by the patents.
Second, the license did not grant KMC the exclusive right to sue
infringers for past, present, or future infringement. And, under
the license, KMC had the right to defend actions against the
licensed patents, but was not obligated to do so. KMC could elect
not to defend the licensed patents and allow the licensor to defend
them instead.
Third, KMC had no right to assign under the license and that
KMC's right to sublicense under the agreement was
uncertain.
Cargo Floor asked the court to sanction KMC for asserting the
disputed patents despite its lack of standing. The court partially
granted this request by ordering a corporate designee of KMC to
submit to deposition on topics related to KMC's knowledge of
standing issues and its decision to assert the disputed
patents.
Strategy and Conclusion
Licensees asserting patent infringement must have sufficient rights in the asserted patents in order to have standing to sue. A court may award sanctions where a licensee fails to adequately investigate issues of standing before filing suit.
The Keith Manufacturing opinion can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.