District Court Grants Motion to Dismiss for Lack of Standing on the Eve of Trial

March 30, 2015

Plaintiff Labyrinth Optical Technologies LLC ("Labyrinth") filed a patent infringement action against Defendant Alcatel-Lucent USA, Inc. ("Lucent"), alleging that Lucent infringes U.S. Patent No. 8,103,173 (the "'173 Patent"). On the eve of trial, Lucent filed a motion to dismiss the case for lack of standing, arguing that Labyrinth could not show that it holds the rights to the '173 Patent.

The district court review the following facts to analyze the motion: "In November 2011, Teradvance Communications, LLC ("Teradvance") granted to Acacia Research Group LLC ("Acacia") an exclusive licence to certain patents and patent applications listed in an attached exhibit ("Exclusive License"). The list included foreign and domestic patents and pending patent applications, including U.S. Patent Application No. 12/554,241, which later issued as the '173 Patent. In April 2012, Acacia entered into an Assignment and Assumption Agreement ("Assignment") with Labyrinth, one of Acacia's affiliates. By its express terms, the Assignment is governed by Texas law. The Assignment notes that the Exclusive License covered "the Patents listed in the Exhibit attached hereto (the 'Patents')," but the Assignment does not specify whether the Exclusive License covered anything else. The Assignment states that it conveyed rights to the "Patents." But unlike the Exclusive License, which actually has an exhibit identifying the patents subject to the agreement, the Assignment does not."

After analyzing the law of standing for patent cases and the Assignment, the district court considered whether the Assignment's reference to the Exclusive License was sufficient to contain ownership even though the Assignment did not have an exhibit listing the patents assigned. The district court concluded that this was insufficient: The Assignment confers to Plaintiff "all" rights and liabilities under the Exclusive License only "in connection with the Patents" or "as such . . . relate to the Patents." The "Patents" are specifically defined as those "listed in the Exhibit attached hereto." (Id.) The text of the Assignment could have recited that it covered the '173 Patent, but it did not. It seems likely that the parties intended to include a list of transferred patents in the Exhibit, but they did not. Therefore, the text of the Assignment, by itself, does not resolve whether or not rights to the '173 Patent were assigned.

The district court then considered whether the Assignment's reference to the Exclusive License showed that it conveyed rights to the '173 Patent. Here, the district court also concluded that it did not: "This language does not require that the Affiliate own all of the patents subject to the Exclusive License. Thus, even if Plaintiff established that it does not own any patents outside of those covered by the Exclusive License, it does not follow that compliance with the terms of the Exclusive License would require it to own all of the patents covered by the Exclusive License. Further, it is possible that Acacia breached this portion of the Exclusive License."

As a result, the district court concluded that "[t]he Assignment's references to the Exclusive License therefore do not show Plaintiff's standing to sue under the '173 Patent."

Finally, the district court rejected Labyrinth's challenge to the timing of the motion to dismiss on the eve of trial. "Plaintiff argues that it was improper for Defendant to file the Motion so late in the case. (Opp'n 1.) Plaintiff states that had there been a timely meet and confer before Defendant filed the Motion, Plaintiff could have executed another Assignment nunc pro tunc ensuring its valid patent rights, filed an identical lawsuit on claim 1 only for the same accused products, and filed a motion to consolidate the actions, thereby preserving the trial date. (Id.) Plaintiff says that when it proposed this option after the Motion was filed, Defendant ignored it. Plaintiff has the responsibility to ensure that it has standing. The Court cannot deny this motion on the ground that it could have been brought earlier or that other procedural avenues might exist for Plaintiff to move forward with its claim."

Labyrinth Optical Technologies LLC v. Alcatel-Lucent USA, Inc., Case No. SACV 12-00759 AG (DFMx) (C.D. Cal. Mar. 23, 2015)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.