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Exclusive Licensee Without All Substantial Rights Can Independently Sue Patent Owner For Infringemen

Tuesday, April 12, 2016   (0 Comments)
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Exclusive Licensee Without All Substantial Rights Can Independently Sue Patent Owner For Infringement 

By John Paul, Brian Kacedon, and Ben Cassady

Duckweed USA, Inc. obtained a license on a patent related to producing “a cost effective, clean, and renewable petroleum oil substitute from algae, waste water or vegetable oils,” and proceeded to develop facilities using this technology.  

Rudolph Behrens, the inventor of the patent, had other ideas. He and others attempted to take over Duckweed’s development projects through their company B.E.A.R. Oceanics and to convince Duckweed’s investors to leave Duckweed and to back BEAR instead.

In response, Duckweed filed suit against Behrens for patent infringement.  Behrens countered by asking the court to dismiss the suit, claiming that Duckweed lacked standing to sue the inventor for infringing the inventors own patent.  However, the court did not dismiss the suit because it found that a license agreement between Duckweed and Behrens did, in fact, allow Duckweed to sue Behrens for patent infringement.

The Duckweed Decision
Whether a licensee has standing to sue for patent infringement depends on the scope of the license.  A “bare” licensee—one that receives no more from the patentee than a promise not to be sued for infringement—has no standing to sue others for infringing the licensed patent.  An “exclusive” licensee that has received “all substantial rights,” on the other hand, may sue for patent infringement in its own name.  But an “exclusive” licensee with anything less than “all substantial rights” typically may sue only as a co-plaintiff with the patentee, with at least one exception—to prevent a failure of justice, such as when the patentee infringes their own patent.

Within that framework the court analyzed a license agreement between Duckweed and Behrens, referred to as the “Resolution.”  The “Resolution” gave Duckweed a license to “exclusively develop, market and license commercial synfuel feedstock facility(s)” using the patented technology.  Although this license was an exclusive right and Duckweed was an exclusive licensee, the court found that the rights received by Duckweed did not include “all substantial rights” under the patent—the full complement of rights typically necessary to sue in its own name.  

But while the law would typically prevent a licensee without “all substantial rights” from suing others for patent infringement without participation by the patent owner,, the court went on to find that Duckweed’s situation was an exception to the rule.  As an exclusive licensee, Duckweed must be able to prevent Beherens, the patent owner, from infringing Duckweed’s exclusive right in order to avoid “an absolute failure of justice.”  Accordingly, the Court found that Duckweed had standing to sue Behrens for patent infringement and permitted Duckweed’s infringement suit against Behrens to continue.

Strategy and Conclusion
As the Duckweed case indicates, patent licensees receive rights on a spectrum ranging from “bare” licenses that merely guarantee licensees freedom from a patent infringement suit, to full, exclusive licenses containing “all substantive rights” under the patent, including the right to sue others.  Many licenses fall somewhere in between the bare license and the full, exclusive license, so parties should consider their possible future activities and the impact of the license’s terms on those activities.  For example, licensors who grant any exclusive rights should consider whether they  intend to practice those rights in the future—otherwise they may be accused of infringing their own patent.  Likewise, licensees should consider the limits of their license—if they acquire less than the full exclusive rights to the patent, they may not be able to enforce their rights except in rare situations.

Further information
The Duckweed decision is available here.

Editors and authors
The editors and authors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

John Paul  john.paul@finnegan.com 
Brian Kacedon  brian.kacedon@finnegan.com 
Robert Wells  robert.wells@finnegan.com 
Christopher McDavid  christopher.mcdavid@finnegan.com 
R. Benjamin Cassady  r.benjamin.cassady@finnegan.com 

This article is for informational purposes and does not constitute legal advice.
The views expressed do not necessarily reflect the views of LES or Finnegan.