A patent licensee must hold "all substantial rights" in the licensed patents in order to maintain a patent infringement suit on its own. What constitutes "all substantial rights" is often the subject of dispute in cases brought by licensees without their licensors. Courts faced with these disputes will often examine the nature and scope of the rights transferred by the license, including the right to use the patent, the right to sublicense, and the right to sue.
Judge Andrews recently resolved a standing dispute in favor of the licensee, finding that the license in question conveyed "all substantial rights" in the patents-in-suit despite the fact that the licensor retained a few key rights (including the right to consent to any sublicense, the right to manufacture and sell, the right to bring enforcement actions, the right to proceeds from an enforcement action, and the right to file amendments and new applications).
In resolving the Rule 12(b)(7) motion to dismiss for failure to join a necessary party, Judge Andrews reasoned that the license - including its conveyance of an "exclusive, royalty-free right to use and sublicense the patent, and the ability to sue for infringement," was sufficient to give the plaintiff Roger Jackson standing to sue.
He noted that while the licensor (Alphatec) had "retained the right to enforce the patents, this right to sue is 'illusory.'" Because Dr. Jackson was granted "the unfettered right to sublicense the Alphatec Patents" without payment of royalties to the Alphatec and because Alphatec did not retain the right to grant sublicenses, Dr. Jackson could "render Alphatec's right to sue nugatory by granting the third-party infringer a royalty-free sublicense."
Thus, Judge Andrews found that the case at hand was closer to Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000) (where standing was found) than it was to Abbott Lab'ys v. Diamedix Corp., 47 F.3d 1128 (Fed. Cir. 1995) (where no standing was found). Although the Alphatec license - like the license in Abbott - required approval for sublicensing, the fact that Alphatec could not unreasonably withhold approval meant that the consent requirement did not "significantly restrict the scope of Dr. Jackson's rights." Similarly, Alphatec's retention of the right to manufacture and sell products practicing the patents was not dispositive because, as Judge Andrews explained:
Dr. Jackson has an exclusive, perpetual license to use the patented technology, the unfettered right to sub license the patents, and the right to effectively control the enforcement of the patents. Alphatec's retention of the right to practice the patents--effectively a non-exclusive license--does not significantly restrict the substantial rights granted to Dr. Jackson.
Judge Andrews also granted-in-part defendant's 12(b)(6) motion to, dismissing indirect and willful infringement claims for two of the 10 patents-in-suit.
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