Chapter §13.05 Standing to Sue for Patent Infringement

JurisdictionUnited States

§13.05 Standing to Sue for Patent Infringement

[A] Introduction

"Standing to sue is a threshold requirement in every federal action."487 Under Article III of the U.S. Constitution, a federal court is empowered to hear only "[c]ases" and "[c]ontroversies."488 The case-or-controversy requirement is understood to mandate that a litigant has "standing" to invoke the power of a federal court.489 " 'In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues.' "490 Standing must exist at the time a lawsuit is brought.491

When a lawsuit alleges patent infringement, the suit must be brought by the holder of the right to exclude that the patent conveys. Section 281 of the Patent Act provides that "[a] patentee shall have remedy by civil action for infringement of his patent."492 The Act further defines "patentee" as including "not only the patentee to whom the patent was issued but also the successors in title to the patentee."493 This statutory definition means that ordinarily, the party bringing an infringement suit must hold legal title in the patent.494 When the plaintiff filing suit is the record title holder, standing is not a concern.

Standing questions often arise when licensees of patents, rather than or in addition to the patent owner/record title holder, seek to sue for patent infringement. Standing questions also arise in declaratory judgment actions when plaintiffs assert noninfringement or challenge the validity of a patent. Beyond the context of infringement litigation in the federal courts, appeals to the Federal Circuit by parties who unsuccessfully challenged patent validity in the USPTO may also invoke standing questions. These contexts are considered separately below.

[B] Licensees

Normally, a licensee is not treated as a "patentee" under 35 U.S.C. §281. Nevertheless, a licensee may seek to file an infringement lawsuit in its own name without the participation of the patent owner/licensor.495 If the plaintiff/licensee is not an effective "patentee" under §281, then it lacks standing. The accused infringer will likely assert this deficiency as a basis for dismissing the lawsuit.

A nonexclusive licensee does not have standing to sue in its own name for patent infringement.496 Nor can a nonexclusive licensee even be joined as co-plaintiff with the patent owner.497 A nonexclusive licensee does not possess the right to exclude others, and thus "suffers no legal injury from infringement."498

On the other hand, an exclusive licensee may have standing to sue in its own name for patent infringement, depending on the terms of the patent license.499 In particular, the exclusive license must operate as a "virtual assignment" that confers standing to sue for infringements.500 The license must transfer "all substantial rights under the patent," and it must be in writing.501 If these conditions are satisfied, the exclusive licensee is treated as an effective "patentee" under 35 U.S.C. §281 and has constitutional standing to sue another for infringement in its own name.502 If the exclusive licensee holds less than all substantial rights, however, the patentee/licensor must be joined as a party to the lawsuit.503

The party bringing a patent infringement action bears the burden of establishing that it has standing.504 The patent owner in Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc.,505 failed to meet this burden when it joined its sister corporation as a co-plaintiff in its infringement lawsuit.

Spine Solutions, Inc. (SSI) owned U.S. Patent No. 6,936,071 ('071 patent), which concerned intervertebral implants used to replace degenerated discs between vertebrae in a patient's spinal column. SSI did not itself make or sell any device covered by its '071 patent; rather, SSI's sister corporation, Synthes Spine, made and sold the commercial embodiment of the patented invention, marketed as the "ProDisc II" implant.506 Seeking potential lost profits damages from ProDisc II sales lost to Medtronic's alleged infringement, SSI sought to amend its complaint a few weeks before jury trial in order to name its sister corporation, Synthes Spine, as a co-plaintiff. The district court allowed SSI to amend.507 Thereafter the jury found that Medtronic infringed the '071 patent and awarded SSI $5.7 million in lost profits.508

On appeal, the Federal Circuit agreed with Medtronic that Synthes Spine lacked standing and that the district court had abused its discretion in permitting SSI to add Synthes Spine as a co-plaintiff.509 SSI argued that its sister corporation was an exclusive licensee for purposes of standing because in its organizational structure, only Synthes Spine made and sold the ProDisc II product. Although no written agreement existed between SSI and Synthes Spine concerning the '071 patent, SSI contended that it had impliedly promised Synthes Spine to exclude entities other than Synthes Spine from practicing the patent. In SSI's view, Synthes Spine was effectively its exclusive licensee.

The Federal Circuit disagreed, concluding that SSI had granted Synthes Spine, at most, a "bare license," but not an exclusive license that would have conveyed standing to join the lawsuit:

[T]he fact that Synthes Spine is currently the only entity practicing the '071 patent does not mean that SSI has promised to exclude all others from doing so. Nothing in the record shows that SSI would be prohibited from licensing the '071 patent to a third party, should it so desire. Indeed, Mr. Donohue's testimony [as Chairman of SSI] shows that the "understanding" regarding the '071 patent is based on nothing more than the way in which the various Synthes entities presently operate. This indicates that by allowing Synthes Spine to practice the claimed invention, SSI has granted it at most a bare license. 510

The Federal Circuit further reasoned that if it were to find standing on the facts of Spine Solutions, "any company related to a patent owner could be treated as an exclusive licensee, so long as the patent owner allows only that company to practice the patent, regardless of any actual agreement as to exclusivity."511 Such a result would contravene Federal Circuit precedent, which "specifies that a 'bare license . . . even if it is the only license granted by the patentee, does not provide standing without the grant of a right to exclude others.' "512 Because SSI had failed to establish any evidence other than its current "organization" to show that its sister corporation Synthes Spine was an exclusive licensee, the Federal Circuit concluded that the district court had abused its discretion in allowing SSI to amend its complaint to add Synthes Spine as a co-plaintiff. Accordingly, the appellate court vacated the jury's award of lost profits damages.513

[C] Declaratory Judgment Plaintiffs

Standing is a critical threshold issue for many plaintiffs in patent declaratory judgment actions.514 Federal courts do not issue advisory opinions about the validity or infringement of a patent, so a declaratory judgment plaintiff must have some real connection to the dispute.515 The Supreme Court has held that a plaintiff's standing turns on three elements: (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; that is, the injury has to be "fairly . . . traceable to the challenged action of the defendant"; and (3) that it must be "likely," rather than "merely speculative," that the injury will be redressed by a favorable decision.516

In 2012, the Federal Circuit held that to satisfy the second element of standing, i.e., an injury in fact traceable to the patentee, a declaratory judgment plaintiff in a patent matter must allege both "(1) an affirmative act by the patentee related to the enforcement of his patent rights"517 and "(2) meaningful preparation to conduct potentially infringing activity."518 The appellate court applied this standard to decide the standing controversy in the matter of Ass'n for Molecular Pathology v. U.S. Patent and Trademark Office ("AMP II").519 In AMP II a number of medical organizations, researchers, genetic counselors, and patients jointly sued Myriad Genetics, Inc. ("Myriad"). The plaintiffs sought a declaratory judgment that seven gene-related patents owned by Myriad were invalid for failure to claim patent-eligible subject matter under 35 U.S.C. §101.520 The organizational plaintiffs included the Association for Molecular Pathology, the American College of Medical Genetics, the American Society for Clinical Pathology, the College of American Pathologists, Breast Cancer Action, and Boston Women's Health Book Collective.

Myriad's patents were directed to certain isolated sequences of breast cancer genes ("BRCA1/2") and diagnostic methods of identifying mutations in these sequences. Before reaching the merits, a district court held that all the plaintiffs (organizations and persons) had standing to bring the action "based on 'the widespread understanding that one may engage in BRCA1/2 testing at the risk of being sued for infringement liability by Myriad.' "521

In AMP II, the Federal Circuit disagreed with respect to the standing of all but one plaintiff—Dr. Harry Ostrer, a researcher at New York University School of Medicine. Contrary to the district court's view, all the remaining plaintiffs lacked standing, an essential element of declaratory judgment jurisdiction.522 The Federal Circuit explained that

[s]imply disagreeing with the existence of a patent on isolated DNA sequences or even suffering an attenuated, non-proximate, effect from the existence of a patent does not meet the Supreme Court's requirement for an adverse legal controversy of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. See MedImmune, 549 U.S. [MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007)], at 127. The various organizational plaintiffs in this suit in particular were

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