Threshold Issues, Misdirected Lawyering, and a Frustrated Federal Circuit

Haug Partners LLP
Contact

The Federal Circuit, in an opinion by Judge O’Malley, did not hold back in expressing its displeasure in being asked to resolve a claim construction dispute in AntennaSys, Inc., v. AQYR Technologies, Inc. and Windmill International, Inc., which it found could not be resolved before various threshold issues were addressed, including a determination of whether the patent’s co-owner, Windmill, needed to have been joined as a plaintiff to the lawsuit, and whether Windmill previously authorized co-defendant and Windmill subsidiary, AQYR, to use the patent-in-suit.i Expressing that there was “little more frustrating for a district court judge than to have the parties jointly lead you down a wrong, and possibly unnecessary, path,” the Court remanded the unresolved, non-patent issues, back to the district court.ii

U.S. Patent No. 7,432,868 (“the patent-in-suit”), directed to portable antenna positioners, named two inventors, each of whom assigned their interests to their respective employers, AntennaSys (the plaintiff) and Windmill (one of the defendants).iii AntennaSys and Windmill then entered into a license agreement in which AntennaSys granted Windmill an exclusive license to its half-interest in the patent-in-suit.iv Under the agreement, Windmill was also required to form an LLC that would own both its one-half interest in the patent and its license to AntennaSys’s interest in the patent.v Windmill satisfied this obligation by creating the LLC “GBS Positioner.”vi

Subsequently, AntennaSys sued Windmill and a wholly owned subsidiary of Windmill, AQYR Technologies, in the District of New Hampshire.vii The suit contained five state law counts against Windmill and AQYR, and a count of patent infringement against only AQYR. After losing on claim construction, AntennaSys asked for summary judgment of non-infringement, and the district court entered judgment for Windmill and AQYR. AntennaSys appealed, challenging the lower court’s claim construction.viii Defendants responded that the merits need not be considered because AntennaSys lacked standing to bring its patent infringement claim without joining Windmill as a co-plaintiff, with AQYR separately raising the affirmative defense that it was authorized by Windmill, a co-owner, to practice the patent-in-suit.ix

Under 35 U.S.C. § 262, “each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.”x The two exceptions to this statutory requirement are 1) when a patent owner has granted an exclusive license, he must permit the licensee to sue in his name; and (2) if a co-owner waives his right to refuse to join suit by agreement, his co-owners may force him to join in a suit against infringers.xi Further, a non-consenting co-owner or co-inventor may not be involuntarily joined in an infringement action.xii

The Federal Circuit found that AntennaSys’s failure to join Windmill as a co-plaintiff would only impact its ability to satisfy the statutory prerequisites for bringing an infringement suit, not its Article III standing.xiii They declined to determine whether Defendants had waived their § 262 challenge by failing to raise the argument earlier, finding it more appropriate for the district court to consider.xiv With respect to the substantive argument, Defendants argued that neither of the two exceptions to § 262 applied.xv First, they argued that AntennaSys was not an exclusive licensee, which AntennasSys did not contest.xvi Second, they argued that there was no contractual waiver of Windmill’s right to refuse to join suit.xvii Plaintiff AntennaSys argued that the spirit of § 262 “is the principle that an accused infringer is entitled to avoid multiple suits for the same acts on the same patents” and that § 262’s requirement requiring the joinder of all co-owners did not apply because there was no risk that Windmill could be held liable multiple times by suing its own subsidiary.xviii Plaintiff AntennaSys further argued that the joinder rule does not apply “where the patentee is the infringer, and must sue itself.”xix

The Federal Circuit declared that neither parties’ arguments were helpful in resolving the dispute and that “[n]either party addresses, in any meaningful way, Windmill’s right as a co-owner, to license the ’868 patent ‘without the consent of and without accounting to’ AntennaSys.”xx The opinion stated that even if Windmill had waived its right to refuse to join suit against third-parties and that AQYR, as its subsidiary, was such a third-party, the Court would still have to consider whether the agreement between AntennaSys and Windmill limited Windmill under § 262 from practicing the patent-in-suit as a co-owner, or AQYR’s right to practice the patent-in-suit under a license agreement.xxi The Federal Circuit noted that neither party addressed the role of the LLC, to whom Windmill’s rights in the patent were assigned, or why the LLC was not an indispensable party to the litigation.xxii Because the Court could not determine whether the license from GBS Positioner LLC, the presumptive co-owner-by-assignment, granted AQYR an express or implied license to practice the patent-in-suit, the Federal Circuit refused to determine
whether the patent infringement claim should be dismissed.xxiii As such, the Federal Circuit vacated the district court’s grant of summary judgment and remanded back to the district court to determine: 1) whether Windmill waived the right to object to AntennaSys’s failure to meet the § 262 prerequisite, 2) whether GBS or Windmill retained any ownership interest in the patent-in-suit; (3) whether AntennaSys’s patent infringement suit should be barred under § 262 because there exists an express or implied license from the real patent owner to AQYR; and, (4) the timing of such a license.xxiv

Finally, the Federal Circuit found that should the district court find that AntennaSys’s claim for patent infringement should be dismissed, the lower court would have no independent jurisdiction over the remaining state law counts in AntennaSys’s complaint.xxv Under Gunn v. Minton, 568 U.S. 251, 258 (2013), federal jurisdiction can extend to causes of action based outside of federal law in only a “special and small category” of cases in which a “federal law issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.”xxvi The Federal Circuit found that AntennaSys could not meet the “substantiality” prong of the analysis.xxvii

In sum, the opinion lamented that “this exercise has been an extremely frustrating one for the court” and admonished the attorneys involved, emphasizing that “just as bad facts can make bad law, misdirected lawyering can do the same.”xxviii

i No. 2019-2244, 2020 U.S. App. LEXIS 32186 (Fed. Cir. 2020).
ii Id. at *1.
iii Id. at *2.
iv Id. at *2-3
v Id. at *3.
vi Id.
vii Id. at *3-4.
viii Id. at *4-5.
ix Id.at *5.
x Id. at *6.
xi Id.
xii Id. at *6-7.
xiii Id. at *7-8.
xiv Id. at *10.
xv Id. at *11-12.
xvi Id. at *11.
xvii Id. at *11-12.
xviii Id. at *12.
xix Id. at *12-13.
xx Id. at *13.
xxi Id. at *13-14.
xxii Id. at *14.
xxiii Id. at *15.
xxiv Id. at *15-16.
xxv Id. at *18.
xxvi Id. at *17-18
xxvii Id. at *17.
xxviii Id. at *18-19.

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.

© Haug Partners LLP | Attorney Advertising

Written by:

Haug Partners LLP
Contact
more
less

Haug Partners LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.