United States: Suit Dismissed For Lack Of Standing Because All Patent Co-Owners Must Join Suit

In STC.UNM v. Intel Corp., No. 13-1241 (Fed. Cir. June 6, 2014), the Federal Circuit held that STC.UNM ("STC") lacked standing to maintain its suit and affirmed the district court's dismissal of the case.

STC sued Intel Corp. ("Intel") for infringement of U.S. Patent No. 6,042,998 ("the '998 patent").  The '998 patent was filed after U.S. Patent No. 5,705,321 ("the '321 patent") and was designated as a CIP of the '321 patent.  Three inventors of the '321 patent—Steven Brueck, Saleem Zaidi, and An-Shyang Chu— were employed by the University of New Mexico ("UNM").  The fourth inventor, Bruce Draper, was employed by Sandia Corp. ("Sandia").  All inventors executed a joint assignment to UNM of the application that issued as the '321 patent, but the assignment erroneously defined all assignors as employees of UNM.  UNM later executed an assignment to Sandia to correct Draper's prior assignment to UNM, referencing the invention that led to the '321 patent and transferring to Sandia "those rights and interests previously assigned to [UNM] by Bruce Draper . . . and to any and all Patents which may be issued thereon . . . and to any and all divisions, reissues, continuations, and extensions."  Slip op. at 3 (alteration in original) (citation omitted). 

While the application that led to the '321 patent was pending, two of the UNM inventors continued their research and filed the application that led to the '998 patent.  This application incorporated the '321 patent by reference, but did not claim priority to any earlier-filed application.  UNM obtained assignments from both inventors.  Sandia's employee, Draper, was not listed as an inventor to the '998 patent.  During prosecution, the PTO rejected the claims of this application for double patenting over the '321 patent, which shared two common inventors.  To overcome these double-patenting rejections, UNM filed a terminal disclaimer specifying that any patent granted on this instant application shall be enforceable only while the '998 and '321 patents "are commonly owned."  Id. at 4 (citation omitted).  In the terminal disclaimer, UNM stated that it was "the owner of record of a 100 percent interest in the instant application."  Id. (citation omitted).  The '998 patent issued on March 28, 2000.

UNM subsequently assigned its own interest in the '321 and '998 patents to STC—a wholly owned licensing arm of UNM.  In 2008, STC corrected the inventorship of the '998 patent to include two additional inventors, Steve Hersee and Kevin Malloy.  Hersee and Malloy were employees of UNM at the time of invention and assigned their interests in the '998 patent to UNM.  STC also successfully sought a certificate of correction from the PTO to indicate that the '998 patent is a CIP of the '321 patent.  STC held itself out as the sole owner of the '998 patent, licensed the '998 patent, and asserted the '998 patent without Sandia.  In 2010, STC filed suit asserting the '998 patent against Intel.  Sandia was not named as a coplaintiff.

Intel asserted that STC could not enforce the '998 patent under the terms of the terminal disclaimer, which required identical ownership of both the '321 and '998 patents.  In response, STC contended that Sandia co-owned the '998 patent either from UNM's assignment of Draper's interest to Sandia or by formal designation of the '998 patent as a CIP of the '321 patent.  In December 2011, STC also "'assign[ed] an undivided interest in each of' the '321 and '998 patents to Sandia."  Id. at 5 (alteration in original) (citation omitted). 

Intel moved for SJ, asserting that the '998 patent was unenforceable for failing to comply with the common-ownership requirement of the terminal disclaimer.  The district court found that Sandia did not co-own the '998 patent with UNM or STC at any point prior to the December 2011 assignment.  Intel and STC then cross-moved on the issue of standing, given Sandia's co-ownership of the '998 patent (since at least December 2011) and absence from the case.  Sandia refused to join the case.  The district court granted Intel's motion and dismissed STC's suit for lack of standing.  STC appealed.

"To remove any doubt, this court holds that the right of a patent co-owner to impede an infringement suit brought by another co-owner is a substantive right that trumps the procedural rule for involuntary joinder under Rule 19(a)." Slip op. at 11.

On appeal, the Federal Circuit affirmed the district court's dismissal, applying "the rule that a patent
co-owner seeking to maintain an infringement suit must join all other co-owners."  Id. at 7.  The Court also noted that its decision in Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998), held that "co-owners must ordinarily consent to join as plaintiffs in an infringement suit."  Slip op. at 7
(quoting Ethicon, 135 F.3d at 1468).  The Court rejected STC's argument that the Court's holding in Ethicon should yield to Rule 19(a)'s involuntary joinder test.  The Court explained that Ethicon's holding that substantive patent law normally requires co-owners to consent to suit was not dictum, as asserted by STC.  Examining its Ethicon decision, the Court noted that the licenses at issue in Ethicon could not eliminate the claim of a co-owner to allege past infringement.  As a result, the Ethicon decision applied the "settled principle" that an "action for infringement must join as plaintiffs all co-owners."  Id. at 10 (quoting Ethicon, 135 F.3d at 1467).  The Court then held that "the right of a patent co-owner to impede an infringement suit brought by another co-owner is a substantive right that trumps the procedural rule for involuntary joinder under Rule 19(a)."  Id. at 11. 

The Court next found that, although there are instances where the rule against involuntary joinder of a patent owner or co-owner can be overcome, neither applied in this case.  The Court noted that each of the recognized exceptions relies on an absent co-owner affirmatively giving up its substantive right to refuse to join the suit, whereas in this case, Sandia has affirmatively and consistently retained this right.  Accordingly, the Court held that "because Sandia has not voluntarily joined this suit, and because no exception to this general substantive rule applies, STC lacks standing to maintain its suit against Intel."  Id. at 12. 

Because STC could not maintain its suit without Sandia due to its lack of standing, the Court declined to address the appealed ownership issues concerning the '998 patent. 

Judge Newman dissented.  Judge Newman acknowledged that, under precedent, all entities with the right to enforce a patent are necessary parties to an enforcement action.  Judge Newman argued, however, that Rule 19(a) is not permissive because the word "must" appears in each section.  Newman Dissent at 2.  Judge Newman asserted that there was no support for the panel majority's "holding that [a] co-owner of a patent cannot be involuntarily joined in an infringement suit and can thereby, by its absence, bar the suit."  Id. at 8.

Judges:  Newman (dissenting), Rader (author), Dyk

[Appealed from D.N.M., Judge Brack]

This article previously appeared in Last Month at the Federal Circuit, July 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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