Plaintiff Lacks Standing to Enforce Patent When Co-Owner Refuses to Participate in Litigation

by McDermott Will & Emery

STC.UNM v. Intel Corp.

Addressing whether standing and joinder are matters dictated by substantive patent law or by Federal Rule of Civil Procedure 19(a), the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s ruling of no standing, finding that plaintiff STC.UNM could not involuntarily join a patent co-owner in an infringement action.  STC.UNM v. Intel Corp., Case No. 13-1241 (Fed. Cir., June 6, 2014) (Rader, J.) (Newman, J., dissenting).

The asserted patent is a continuation in part (CIP) of a parent patent.  The parent patent had three inventors who were employed by University of New Mexico (UNM) and one inventor who was employed by Sandia.  Two of the UNM inventors of the parent patent went on to file the CIP patent application, but did not claim priority to any earlier-filed application.  During the prosecution of the CIP patent, the U.S. Patent and Trademark Office twice rejected its claims for double patenting over the parent patent.  As a result, UNM filed a terminal disclaimer specifying that “any patent granted on this instant application shall be enforceable only for and during such period” that the two patents “are commonly owned.”  Further, UNM stated that is was the “owner of record of a 100 percent interest in the instant application.”  Later UNM assigned its interest in both patents to STC, a wholly owned licensing arm of UNM.

When STC.UNM filed suit against Intel, Sandia claimed it had no ownership interest in the CIP patent.  As a result, Intel claimed that the CIP patent was unenforceable for failing to comply with the common-ownership requirement of the terminal disclaimer.  STC.UNM disagreed claiming, inter alia, that Sandia had obtained an ownership interest due to the fact that the CIP patent was a continuation in part.  Nevertheless, “in an abundance of caution,” STC.UNM assigned an undivided interest in the CIP patent to Sandia.  Consequently, Intel then moved to dismiss the case because Sandia refused to join as a party.  The district court agreed based on Ethicon v. United States Surgical Corp. (Fed. Cir., 1998), which holds that when a patent is co-owned, a co-owner seeking to enforce the patent must join all other co-owners as plaintiffs to establish standing.  STC.UNM appealed.

STC.UNM argued that Sandia should be joined under FRCP 19(a).  The Federal Circuit disagreed affirming the dismissal because “rules of procedure shall not abridge, enlarge or modify any substantive right.”  The Court explained that while under 35 U.S.C. § 262, a patent co-owner such as STC.UNM could license and commercialize its interest in the patent without its co-owner’s permission, a co-owner cannot be forced to participate in litigation.  The Federal Circuit acknowledged that license negotiations with third-parties may lose their “bite” if the target knows that the co-owners are not aligned.  Nevertheless, the limits on joinder are necessary to protect a co-owner’s right to not be thrust into costly litigation if its patent is subject to potential invalidation.  Furthermore, the rule requiring the participation of all co-owners safeguards against the possibility that each co-owner would subject an accused infringer to a different infringement suit on the same patent.

Practice Note:  Joint development agreements—particularly in instances where inventors are required to assign rights to their respective employer—should address whether a co-owner will be contractually obligated to join a co-owner in efforts to enforce the patent rights.  Likewise, defendants should carefully analyze the ownership chain of asserted patents—especially when a patent issues from a continuation-in-part application that added inventors who may have different assignment obligations than the parent application.

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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