HP's Motion to Dismiss for Lack of Standing Denied Where Plaintiff Demonstrated It Had Substantial Rights to Patents-in-Suit Even Though GE Had Right to Enforce Patents Against Seventeen Specific Companies, None of Which Were Defendants in the Litigation

April 3, 2013

Princeton Digital Image Corporation ("PDIC") filed several patent infringement actions against Hewlett-Packard, Fujifilm, Xerox, Facebook and Ricoh, among others. The Defendants moved to dismiss the complaint for lack of standing. The case is based on two patents for digital image processing technology in cameras, computers and other devices. In May 2009, a predecessor to PDIC purchased the patents from GE.

As explained by the district court, "[a]ccording to the "Patent Purchase and License Agreement" between GE and PDIC LLC (the "Agreement"), "GE wish[ed] to sell ownership and all rights in the Patents to [PDIC LLC]" and "[PDIC LLC] wishe[d] to purchase from [GE] ownership and all rights in the Patents and to license and/or grant back to [GE] certain rights." (Id.) Consequently, GE "s[o]l[d], transfer[red], and assign[ed] to [PDIC LLC] all of [GE]'s right, title and interest in the Patents and all of [GE]'s rights and interest to all past, present and future claims of infringement of any of the Patents," and PDIC LLC agreed to grant GE and its affiliates "an irrevocable, non-exclusive, fully paid up, worldwide license under the Patents, for the lives thereof, to make, have made, use, sell, offer for sale and import products." (Id. Ex. A ¶¶ 2, 3.) PDIC LLC further agreed to grant GE "all rights and interest to all past, present, and future claims of infringement and the exclusive right to enforce (e.g., license, bring suit, etc.) the Patents against [sixteen companies]." (Id. Ex. A ¶ 4.) PDIC LLC finally agreed to join any infringement suit brought by GE and to indemnify GE if litigation PDIC LLC initiated required GE's involvement. (Id. Ex. A ¶¶ 4, 6.) In June 2009, GE and PDIC amended the Agreement to grant GE the right to enforce the '056 and '103 Patents against "any entity that is alleged to have infringed a Patent owing to its having previously engaged in making, using, offering for sale or importing articles that comply with the MPEG-2 or MPEG-4 video compression standards, and that may be liable to [GE] arising out of that infringement; but only to the extent of that infringement." (Id. Ex. A at 2, ¶ 4.) In January 2010, GE and PDIC again amended the Agreement to add another company to the original list of sixteen."

Based on these agreements, the district court concluded that "GE ostensibly holds: (1) a non-exclusive, worldwide license to make, use, and sell products under the Patents; (2) the exclusive right to enforce the Patents - that is, "license, bring suit, etc." - against seventeen enumerated companies for their past, present, or future infringement; and (3) the exclusive right to enforce the Patents against "any entity" for past infringement involving the MPEG-2 or MPEG-4 standards (but not, for instance, the JPEG standard). PDIC LLC, accordingly, retained all other rights. (Id.)"

Importantly, the district court noted that the Defendants in this action were not among the seventeen companies listed in the Agreement.

The district court then analyzed whether PDIC had standing. "As discussed, a patentee has constitutional standing to sue for infringement unless it has transferred "all substantial rights" in the patent to another. See, e.g., Alfred E. Mann, 604 F.3d at 1359; Aspex Eyewear, 434 F.3d at 1341 ("The essential issue regarding the right to sue on a patent is who owns the patent."); Morrow, 499 F.3d at 1340 n.6 ("The all substantial rights inquiry is a proxy for the statutory requirement that a party bringing an infringement suit have the interests of a patentee . . . ."). It is plain to the Court that PDIC holds title to the Patents and has not transferred all substantial rights" in them."

The district court determined that PDIC held title to the patents and that PDIC retained substantial rights in the patents and thus had standing to sue. "The Agreement granted GE a bare license to practice the Patents, in addition to exclusive rights to enforce the Patents against seventeen enumerated companies and "any entity" that infringed on MPEG-2 or MPEG-4 technology. PDIC retained all other rights in the Patents, including all other enforcement rights as well as the right to sell or transfer title to the Patents as it saw fit. The Federal Circuit has held that patent owners retained substantial rights - and standing to sue - in far more tenuous circumstances. For instance, in Alfred E. Mann, the court found that a patentee had substantial rights in a patent where its sole retained right was the power to enforce the patent only after its licensee declined to do so. 604 F.3d at 1363. Here, PDIC retains, at a minimum, litigation rights significantly exceeding those in Alfred E. Mann. Indeed, Defendants allow that PDIC retains substantial rights in the Patents due to its power to sue for infringement concerning JPEG technology. (See Mem. 1.) But Defendants argue that this is immaterial because PDIC lacks all substantial rights. (Id.) However, Defendants either misunderstand or misstate the law: as owner of the Patents, PDIC need not prove that it retained "all substantial rights." It need only establish that it did not transfer "all substantial rights." PDIC, the Court, and Defendants agree that PDIC retains substantial rights in the Patents. Accordingly, the Court finds that PDIC has standing to bring these suits."

Princeton Digital Image Corp. v. Hewlett-Packard, Case No. 12 civ. 779 (RJS) (S.D.N.Y. March 21, 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.