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District Court Dismisses Action after Patent Is Transferred to President of Company

After Plaintiff Pi-Net International, Inc. (“Pi-Net”) brought suit against Defendants Focus Business Bank and Bridge Bank, N.A. for patent infringement, the Patent and Trademark Office initiated an Inter Partes Review (“IPR”) of the patents-in-suit. The district court then stayed the action pending the resolution of the IPR. During this stay, Pi-Net executed agreements transferring ownership of the asserted patents to its president Dr. Lakshmi Arunachalam.

The defendants, claiming that Pi-Net now lacks standing to sue for infringement of the asserted patents, moved to lift the stay and dismiss the cases as moot.

First, the district court lifted the stay to determine whether to dismiss the cases. “Whether to stay litigation pending the PTO’s review of a patent involved in the lawsuit is within the court’s discretion. The same court that imposes a stay of litigation has the inherent power and discretion to lift the stay. The court may lift the stay if the circumstances warranting its imposition have since changed significantly.”

Second, the court address whether Pi-Net rendered the cases moot by assigning away its rights to the asserted patents. A “patentee who holds all the exclusionary rights and suffers constitutional injury in fact from infringement” as well as an assignee to whom the patentee has transferred “all substantial rights to the patent” have standing to sue for patent infringement. In contrast, “those that hold less than all substantial rights to the patent and lack exclusionary rights under the patent statutes to meet the injury in fact requirement” lack constitutional standing because “[t]hey are not injured by a party that makes, uses or sells the patented invention because they do not hold the necessary exclusionary rights.” Accordingly, “if a patentee transfers all substantial rights to a patent, the transferee becomes the effective patentee and is the only party who may sue for infringement.”

The court then concluded that “[l]ike the plaintiff in Schreiber Foods, Inc. v. Beatrice Cheese, Inc., Pi-Net divested itself of standing to sue for infringement by assigning the asserted patents to Arunachalam. In Schreiber Foods, the plaintiff owned the asserted patent at the time it filed suit against the defendant but assigned the asserted patent and the right to sue for past infringement to its subsidiary while the case was being litigated. The court held that although the plaintiff retained a non-exclusive license to practice the patent, ‘there was no question’ that the plaintiff had ‘lost its personal stake in the outcome’ of the litigation once the assignment was complete.42 Accordingly, the court reasoned that ‘the case became moot’ because the plaintiff had ‘lost standing to sue for infringement.'”

As a result, the court dismissed the case as moot for lack of standing.

Pi-Net International, Inc. v. Focus Business Bank, Case No. 5:12-cv-04958-PSB (N.D. Cal. April 6, 2015)

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