Naming Exclusive Licensee as Defendant, Exclusively, Leads to Dismissal of Declaratory Judgment Action

by Nutter McClennen & Fish LLP

For declaratory judgment (DJ) actions concerning patents, whether a patent owner’s conduct is sufficient for there to be a real and immediate controversy is the usual jurisdictional hurdle. In BASF Plant Science, LP v. Nuseed Americas Inc., a District of Delaware court recently examined a different issue–who must be named as a defendant to support DJ jurisdiction when there is an exclusive patent licensee.

Key Takeaways

  • In a DJ action for non-infringement or invalidity, the plaintiff must join as defendants the same parties that would be required for standing to bring an infringement suit.
  • Unless an exclusive licensee has “all substantial rights” in the patent, the DJ plaintiff should join the patent owner in addition to the exclusive licensee.

The History Between the Parties

Nuseed Americas collaborated with the Commonwealth Scientific and Industrial Research Organization (“CSIRO”) and the Australian Grains Research and Development Corporation (“GRDC”) on technology related to omega-3 fatty acids. 

Beginning in 2013, BASF engaged in cross-licensing discussions with CSIRO, GRDC, and Nuseed Americas. While CSIRO and GRDC owned the patents at issue, they directed BASF to negotiate with Nuseed Americas.  CSIRO and GRDC informed BASF:

CSIRO and GRDC authorise Nuseed, as the exclusive, global licensee of the CSIRO and GFDC technology, to negotiate on their behalf with BASF …. Of course, any negotiated resolution would require an agreement executed by all parties. Pending such resolution, CSIRO will continue overall management of existing and future oppositions and disputes, in relation to the CSIRO and GRDC technology.

The negotiations between BASF and Nuseed Americas eventually reached an impasse. BASF suggested the matter “should be in court” if Nuseed Americas did not reduce its demands, and Nuseed Americas responded, “Maybe that’s where we’re at.” On the same day, BASF sued Nuseed Americas for declaratory judgment of invalidity of the patents owned by CSIRO and GRDC without naming CSIRO or GRDC as defendants. 

Nuseed Americas moved to dismiss, arguing the court lacked subject matter jurisdiction because Nuseed Americas did not own the patents-in-suit.

The Court’s Analysis

BASF argued that the basis for DJ jurisdiction was Nuseed Americas’ expressed intent to sue BASF for patent infringement. The court thus determined that Nuseed Americas must have standing to sue BASF for infringement for there to be DJ jurisdiction. 

The court began its analysis by first noting that under Federal Circuit precedent, where a patent owner exclusively licenses “all substantial rights,” the exclusive licensee has standing to sue for infringement without joining the patent owner. On the other hand, where the exclusive licensee has less than “all substantial rights,” the patent owner must be joined. 

Here, the court found that Nuseed Americas did not possess “all substantial rights” in the patents owned by CSIRO and GRDC. First, the court pointed to CSIRO’s and GRDC’s statement that any resolution to the cross-licensing negotiations “would require an agreement executed by all parties” as showing Nuseed Americas did not have the right to sublicense or assign interests in the patents. Second, the court concluded Nuseed Americas did not possess the right to sue for infringement, noting that CSIRO indicated it would continue “overall management of existing and future oppositions and disputes.” Because the right to assign interests in the patent and the right to sue for infringement are two important rights for the “all substantial rights” analysis, the court concluded Nuseed Americas did not have “all substantial rights” in the patents and lacked standing to sue for infringement. Accordingly, the court dismissed the complaint for lack of jurisdiction.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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