Drafting Agreements To Allow Licensing Companies To Litigate Without Joining Patent Owners

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When patent owners grant licensing companies or other licensees the right to license and enforce their patents, they often struggle with how much control to retain over the licensing and enforcement. If the patent owner retains too little control, it may be unable to use those patents offensively when sued by others or protect its customers from the assertion of those patents. Conversely, retaining too much control may require the patent owner to become a party to any litigation and thus incur the costs and disruption associated with litigation rather than having those costs borne by the licensing company.

On many occasions, the Federal Circuit has analyzed the various bundles of rights that patent owners may grant a licensee and determined whether the licensee may bring a patent enforcement litigation at all and if so, whether the licensee must join the patent owner as a party in any such litigation. In performing this analysis, the Federal Circuit has identified three categories of licensees: (1) the exclusive licensee who has received "all substantial rights" in the patent (this category of licensee has enough rights to sue alone); (2) the exclusive licensee with "fewer than all substantial rights" in the patent (this category of licensee has enough rights to sue so long as the patent owner is joined in the suit); and (3) the non-exclusive, or "bare" licensee (this category of licensee has too few rights to sue even if the patent owner is joined in the suit).

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