The Grant of a Right to Sue, Doesn't Mean You Can Sue

Propat International Corp. v. Rpost, Inc., [2006-1222, -1223, -1270] (January 4, 2007)[BRYSON, Newman, Mayer]
BRIEF: Propat appealed the dismissal of its patent infringement suit for lack of standing. The Federal Circuit said that the governing principes of standing in patent cases are now “reasonably clear.” The Patent Act provides that a patent is entitled to bring a civil action for patent infringement, and the term patentee includes not only the patentee to who the patent was issued but also the successors in title to the patentee. The provisions of the patent action have been interpreted to require that a suit for infringement of patent rights ordinarily be brought by a party holding legal title to the patent. Even if the patentee does not transfer formal legal title, the patentee may effect a transfer of ownership for standing purposes if it conveys all substantial rights in the patent to the transferee. The Federal Circuit said whether Propat has standing turns on the agreement between Propat and Authentix. The district court found that Propat “was not transferred all substantial rights, and as such, has not standing to sue on its own behalf” and the Federal Circuit agreed. Among other things, Authentix retained a right to approve certain actions by Propat, the right to pursue additional patents, a veto right over licensing and enforcement, a right to terminate the agreement, and the duty to maintain the patent. The Federal Circuit said “a ‘right to sue’ clause in a contract, unaccompanied by the transfer of other incidents of ownership does not constitute an assignment of the patent rights that entitle the transferee to sue in its own name.
Propat also argued that the district court should have granted its motion to add Authentix, rather than dismissing the action, but the district reasoned that Propat had no right to participate in the infringement action, and that dismissal was proper. The Federal Circuit found that the case fell between the situation of an exclusive licensee, which does have standing, and a mere licensee, who does not, but found that Propat was closer to the mere licensee, and agreed with the district court that Propat.
The Federal Circuit affirmed the denial of attorneys’ fees, finding that failure to join the patent owner was not so reckless as to warrant sanctioning, and that the conduct of both sides “fell far short of a model of prosecution and defense of a patent action.”