The Federal Circuit Court of Appeals ruled that the legal owner of a patent lacked the right to sue Broadcom Corp. and others for alleged patent infringement because the patent owner had entered into an exclusive license for the patent.
Azure, based in the Eastern District of Texas (a popular location with non-practicing entities – also called “patent trolls” – due to a perception of patent-owner-friendly juries), acquired the ‘129 patent for “Personal Area Network with Automatic Attachment and Detachment.”
Azure partnered with local Texas charities to join in its patent enforcement activities. One such partner was Court Appointed Special Advocates (CASA) of Harrison County.
CASA formed Tri-County, a Texas nonprofit corporation also based in the Eastern District of Texas. Azure then donated a number of patents and patent applications to Tri-County. One such application became the ‘129 patent.
Shortly after this donation, Tri-County licensed the ‘129 patent rights back to Azure. This agreement gave Azure:
the exclusive, worldwide, transferable right to (i) make, have made, use, sell, offer to sell, import, and lease any products, (ii) use and perform any method, process, and/or services, and (iii) otherwise practice any invention in any manner under the ‘129 patent.
Azure also obtained the “full right to enforce or and/or sublicense” the patent — “including the authority to reach settlements without Tri-County’s consent.”
In exchange, Tri-County was to receive 33% of the proceeds from Azure’s patent monetization efforts for five years, and 5% thereafter.
The Patent Infringement Suit
Together, Tri-County and Azure filed a patent infringement suit against Broadcom, Marvell Semiconductor, Qualcomm, and other companies. They claimed the patent was infringed by Bluetooth networking devices. The defendants sought to dismiss Tri-County from the case, on the grounds that it had transferred all its significant rights to Azure and had none left to assert. The district court agreed, dismissing Tri-County from the case. Tri-County and Azure appealed. The Federal Circuit agreed with the dismissal, finding,Even if a patentee does not transfer legal title, it may transfer significant rights to the patent. When the patentee transfers rights, the “party that has been granted all substantial rights under the patent is considered the owner regardless of how the parties characterize the transaction that conveyed those rights.”
What are you giving up when you grant a license?
This case illustrates that a patent owner needs to be careful about what rights it gives up when it grants an exclusive license to a patent, as this may affect the owner’s ability to sue for enforcement of the patent.
If you have questions about patent licensing and litigation, please contact our office at 626-796-4000 or toll-free at 855-UR-IDEAS (855-874-3327) for a free initial consultation with one of our intellectual property attorneys. Please also visit our website at http://leechtishman.com/practices/intellectual-property/ for more information about us.
Photo Attribution: “1861 Galveston Customs and Courthouse” by Nsaum75 – Own work. Licensed under Creative Commons Attribution-Share Alike 3.0