The requirements for ownership of a patent and the right to bring suit for the enforcement of the patent would seem to be well settled in patent law. As demonstrated in the recently decided Federal Circuit Court of Appeals (Case 2019-2244), AntennaSys, Inc. v. AQYR Technologies, Inc., et al., overlooking the ownership or enforcement requirement can result in wasted time and cost for the litigants and frustration for the courts. This article raises awareness of the nuances of ownership and enforcement rights in the hope of avoiding the cost and frustrations for all involved.
The underlying dispute in AntennaSys, Inc. v. AQYR Technologies (AntennaSys and AQYR) involved an allegation of patent infringement concerning portable antenna positioning systems. The patented system was invented by co-inventors working for different companies: AntennaSys and Windmill. Each co-inventor assigned their patent rights to the invention to their respective employer. This is a fairly common event where inventions are made during the course of the employment and employment agreements are in place. Up to this point, there is nothing unusual about the inventorship or the assignment to the separate employers. From here, the details become complicated and the ownership interests and party obligations become increasingly tangled.
AntennaSys and Windmill agreed to a license agreement in which Windmill acquired an exclusive license to AntennaSys’s interest in the patent. However, the license agreement was exclusive as long as Windmill met sales quotas. Windmill subsequently didn't meet the sales quotas, and the exclusive license converted to a non-exclusive license per the agreement. With the sales quotas not met, each party reverted back to its independent ownership of patent rights with the right to exploit the patent as if there never had been an agreement.
Further, Windmill and AntennaSys previously created a limited liability company to own half interests in the subject patent. Windmill and AntennaSys agreed that they created this LLC, but it is unclear what impact this ultimately had on the license arrangement. Sometime later AntennaSys sued AQYR Technologies, which happened to be a wholly-owned subsidiary of Windmill, for patent infringement.
After claim construction, AntennaSys determined that it would not be successful in its patent infringement suit. As a result of the unfavorable claim construction, AntennaSys tried to pull the lawsuit by seeking summary judgment of non-infringement in order to avoid AQYR’s affirmative defenses of invalidity and unenforceability. After addressing some procedural issues, the district court entered judgment for Windmill and AQYR, and AntennaSys appealed to the Federal Circuit. While multiple issues were disputed at the district court level, the focus at the Federal Circuit was somewhat different from the district court.
On appeal to the Federal Circuit, AntennaSys focused its challenge on the unfavorable claim construction it received in the district court. Somewhat surprisingly, AQYR responded by arguing that AntennaSys lacked standing to bring the patent infringement suit without joinder of Windmill as a co-plaintiff. The Federal Circuit agreed that a threshold issue existed regarding whether a patent co-owner had to be joined, which led to the following refresher by the court regarding the nuances of ensuring the correct parties are named in patent infringement suits.
Federal Circuit Analysis
The Federal Circuit began its analysis by explaining that every joint owner of a patent can make, use, offer to sell, or sell the patented invention without consent of or account to the other patent owners. (See 35 U.S.C. § 262). This is a bedrock principle of patent law and a co-owner’s rights to an invention. It is also important to remember that each patent co-owner can deprive the other co-owner of rights or control in the market by granting licenses to third parties. (See Schering Corp. v. Roussel-UCLAF SA, 104 F.3d 341, 345 (Fed. Cir. 1997)). As the Federal Circuit succinctly explained: Section 262 puts each patent co-owner at the mercy of the other. (See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1468 (Fed. Cir. 1998)).
Another foundational principle of bringing patent infringement actions is that the patent infringement action must join all co-owners as plaintiffs. (See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed. Cir. 1998)). The Federal Circuit explained two exceptions to this principle:
(1) ‘when any patent owner has granted an exclusive license, he stands in a relationship of trust to his licensee and must permit the licensee to sue in his name;’
(2) ‘[i]f, by agreement, a co-owner waives his right to refuse to join suit, his co-owners may subsequently force him to join in a suit against infringers.” (See Ethicon, 135 F.3d at 1468 n.9 (citing Indep. Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 469 (1926) and Willingham v. Lawton, 555 F.2d 1340, 1344–45 (6th Cir. 1977.
It is also bedrock of patent law that a non-consenting co-owner of an invention cannot be involuntarily joined to a patent infringement action under Rule 19 of the Federal Rules of Civil Procedure. (See STC.UNM v. Intel Corp., 754 F.3d 940, 946 (Fed. Cir. 2014)). Ultimately, the Federal Circuit concluded it needed to remand the case to the district court in order to address these various issues. The Federal Circuit was clearly exasperated by each party’s arguments regarding whether Windmill needed to join the infringement lawsuit as plaintiff, and stated: “[i]n advancing their confusing and potentially meritless theories, the parties make certain critical omissions.”
The facts of this case are confusing; and ultimately, it may be hard to find the specific lessons that could be gleaned from the Federal Circuit’s holding because of that confusion. However, there are at least the following general takeaway practice pointers.
- Make sure to know all of the team members on any invention, especially when different employers are involved.
- Always be sure that any joint venture clearly defines ownership parameters of any patent rights.
- With respect to infringement actions, it is important for plaintiffs to be certain that they actually own the rights being asserted.
- For defendants, do not assume that the plaintiff owns the patent rights, and always track down the chain of title, particularly when there are multiple entities involved.
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