Acquiring And Licensing Patents: Does The Language Of Your Agreement Provide You With Enforcement Rights?

When acquiring or licensing patents, it is important to consider whether, and to what extent, the acquisition or license conveys the right to enforce the patents through litigation. It is also important to understand whether you have the right to recover past damages. Indeed, questions of standing to sue frequently arise in patent actions and are raised with great frequency in recent years. As a result, acquirers and licensors of patent rights should focus early on in the negotiation process on questions of standing to make sure that their agreements convey rights to enforce the patents they acquire or license.

Who Can File a Lawsuit for Patent Infringement?

Under the Patent Act, only certain entities or people can sue for patent infringement: the patentee (i.e., the inventor), an assignee, or an exclusive licensee that holds "all substantial rights" in the patent. Mentor H/S, Inc. v. Medical Device Alliance, Inc., 240 F.3d 1016, 1017 (Fed. Cir. 2001); 35 U.S.C. 100(d). An exclusive licensee that does not have all substantial rights in a patent "has standing to sue third parties only as a co-plaintiff with the patentee." Id. The burden is on the plaintiff/licensee to show that it has all substantial rights in the patent. Id. A non-exclusive licensee has no standing to sue, either in its own name or as a co-plaintiff. Intellectual Property Devel., Inc. v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1345 (Fed. Cir. 2001).

Therefore, based on the case law it is plain than an assignee or the inventor can sue for patent infringement and that a non-exclusive licensee may not. The question then arises when can an exclusive licensee sue for patent infringement.

When Can Exclusive Licensees Sue for Patent Infringement?

The determination of whether a licensee is exclusive and holds all substantial rights is a fact determination that depends on the contract and "the substance of the rights transferred and the intention of the parties involved." Intellectual Property Devel., 248 F.3d at 1342.The Federal Circuit has held that the right to sue for infringement is "particularly dispositive" of this inquiry. In Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870 (Fed. Cir. 1991), for example, the Federal Circuit held that because the licensee had the right to sue third parties for infringement, subject only to a requirement that it inform the patentee (but no obligation to obtain the patentee's consent), the licensee was exclusive and...