Recommendation to Grant Motion to Dismiss for Lack of Standing Where Plaintiff Did Not Retain Sufficient Rights in Patent-in-Suit

January 30, 2013

Azure Networks, LLC and Tri-County Excelsior Foundation ("Plaintiffs," "Azure" or "TCEF") filed a patent infringement action against several defendants, including Qualcomm and Marvell, among others. As explained by the court, "[t]he '129 Patent is entitled 'Personal Area Network with Automatic Attachment and Detachment' and discloses a Personal Area Network ("PAN"), which is managed by a hub device and can support wireless "attachment" of multiple Personal Electronic Accessories ("PEAs"). '129 Patent at 3:10-32."

The court further explained the ownership of the patent as follows: "Robert Donaghey, the sole inventor of the '129 Patent, assigned his rights to BBN Technologies Corp. ("BBN") in 2007, who then assigned the '129 Patent to Azure. Azure is a Texas limited liability company with its principal place of business in Longview, Texas. Complaint at 2. In June 2010, Azure donated numerous patents and patent applications (including the application that later issued as the patent-in-suit) to TCEF. TCEF is a Texas non-profit corporation with its principal place of business in Marshall, Texas. Id. Only July 30, 2010, TCEF and Azure entered into an exclusive license agreement whereby Azure received a 'worldwide, transferable, exclusive license under the ['129 Patent], with the right to sublicense others, to (i) make, have made, use, sell, offer to sell, import and lease any products, (ii) use and perform any method, process, and/or services, and (iii) otherwise practice any invention in any manner, such that Azure has full right to enforce and/or sublicense the ['129 Patent].'"

Based on these facts, the defendants filed a motion to dismiss asserting that TCEF lacked standing to bring the action because it transferred all substantial rights to the patent to Azure in the July 2010 agreement.

After reciting the basic law on standing to bring a patent infringement action, i.e., "[a] party has standing to sue on its own if it holds all exclusionary rights and suffers constitutional injury in fact from infringement.," the court addressed ownership of the patent-in-suit. "The Federal Circuit emphasized that frequently "the nature and scope of the exclusive licensee's purported right to bring suit, together with the nature and scope of any right to sue purportedly retained by the licensor, is the most important consideration." Id. at 1361. Here, Azure has the "exclusive right to enforce or defend" the '129 Patent, as well as all interest to "all claims, causes of action and enforcement rights, whether currently pending, filed or otherwise." Agreement § 4.4. By virtue of the parties' agreement, Azure exclusively holds the right to bring suit. Pursuant to the parties' agreement, TCEF only retains the right to internally practice the methods/processes of the patent, but cannot transfer or sublicense any rights of the patent. The only mention of a litigation interest for TCEF is where the agreement states "at Azure's request and expense, TCEF agrees to join Azure as a party and cooperate with Azure in any patent infringement suit, if, desirable to address a legal issue (e.g. establish sufficient standing to enforce the Patent(s) Application(s) against third parties, etc.)" Id. Here, TCEF has not retained any right to sue by virtue of the agreement; at best it maintains an obligation to join litigation at Azure's request. Therefore, the Court finds that this factor strongly supports a finding that Azure is owner of the '129 Patent."

As a result, the court found that Azure was the owner of the patent. The court then analyzed whether TCEF maintained enough rights with respect to the patent to confer standing and concluded it did not. "As mentioned previously, '[t]o have co-plaintiff standing in an infringement suit, a licensee must hold some of the proprietary sticks from the bundle of patent rights, albeit a lesser share of rights in the patent than for an assignment and standing to sue alone.' Ortho Pharm., 52 F.3d at 1031. There is no dispute the TCEF presently holds no exclusionary rights. TCEF only retains a personal, non-exclusive, and non-transferable license to internally practice the method/process of the patent. Agreement § 2.3. Notably, TCEF cannot transfer or sublicense any rights of the patent. Id. TCEF has not reserved rights to assign any interest in the '129 patent, not even with Azure's consent. Where the ultimate injury at issue is infringement, any injury to TCEF through the accused infringement of the '129 Patent is tenuous at best based on the sparse rights it retains with respect to the '129 Patent. Without any semblance of an exclusionary right in the '129 Patent, the Court is hard pressed to find a legal injury that would confer constitutional standing on TCEF in the present case."

Accordingly, the Magistrate Judge recommend granting the motion to dismiss for lack of standing.

Azure Networks LLC and Tri-County Excelsior Foundation v. CSR PLC LLC, et al., Case No. 6:11-cv-139 (E.D. Tex. Jan. 16, 2013)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.