United States: Transfer Of All Substantial Rights In The Patent Results In Transferee Becoming The Effective Owner For Purposes Of Standing

In Azure Networks, LLC v. CSR PLC, No. 13-1459 (Fed. Cir. Nov. 6, 2014), the Federal Circuit affirmed the district court's finding that Tri-County Excelsior Foundation ("Tri-County") be dismissed from the suit for lack of standing because Tri-County had effectively assigned Azure Networks, LLC ("Azure") U.S. Patent No. 7,756,129 ("the '129 patent"). The Federal Circuit also vacated the district court's judgment of noninfringement due to the district court's construction of the term "MAC address," and remanded to the district court for further proceedings.

Plaintiffs Azure and Tri-County filed suit against CSR PLC, Cambridge Silicon Radio International, LLC, Atheros Communications, Inc., Qualcomm Inc., Broadcom Corp., Marvell Semiconductor, Inc., Ralink Technology Corp. (Taiwan), and Ralink Technology Corp. (USA) (collectively "Appellees") for alleged infringement of the '129 patent. The '129 patent describes a wireless communication personal area network between a central hub device and surrounding peripheral devices that are in close proximity to the hub device. Relying on the specification, the district court concluded that the patentee acted as his own lexicographer and redefined the term "MAC address." The district court construed the term in the '129 patent as "a device identifier generated by the hub device." Slip op. at 5 (citation omitted). For purposes of appeal, Azure stipulated to a judgment of noninfringement under the district court's construction. The district court also granted the Appellees' motion to dismiss Tri-County from the suit for lack of standing. The district court concluded that Tri-County's title in the '129 patent and financial and reversionary interests were insufficient to confer standing upon Tri-County. Azure and Tri-County appealed Tri-County's dismissal.

"As the district court recognized, nothing about this relationship structure indicates that Tri-County has control over any aspect of litigation involving the '129 patent. Rather, it is clear that Azure is holding all the strings. In sum, Azure's exclusive right to sue, exclusive license, and freedom to sublicense are factors that strongly suggest that the Agreement constitutes an effective assignment." Slip op. at 11-12.

On appeal, the Federal Circuit held that the district court correctly granted the Appellees' motion to dismiss Tri-County due to lack of standing. The Court explained that "[e]ven 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.'" Id. at 8 (quoting Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000)). At the outset of its analysis, the Court stated that its "inquiry in this case is twofold: (1) whether Tri-County transferred all substantial rights under the '129 patent to Azure, making Azure the effective owner; and if so, (2) whether Tri-County may nevertheless join in an infringement suit brought by the licensee, but now effective owner, Azure."
Id. at 9.

For the purposes of standing, the Court explained that Tri-County had transferred all substantial rights to Azure, and, therefore, Azure was the effective owner for purposes of standing. In this regard, the Court stated that "it is not uncommon for a licensor to transfer to its licensee the exclusive right to enforce the patent." Id. at 11. Significantly, the Court noted, "Tri-County reserved no right to have control over, to veto, or to be notified of any of Azure's licensing or litigation activities. Retaining control of these activities is also critical to demonstrating that the patent has not been effectively assigned to the licensee." Id. After considering Tri-County's evidence demonstrating that it transferred something less than "all substantial rights," the Court determined that, "[a]fter weighing all the factors, we agree with the district court that Azure acquired significant rights under the '129 patent, including the right to enforce, to license, to control the licensing and litigation, to sublicense, to practice exclusively, and to maintain the patent." Id. at 18. The Court made clear that not only did Tri-County lack standing to bring suit, but more importantly, it lacked standing to even join the suit. "Because Tri-County does not have any exclusionary rights under the '129 patent, it lacks standing to join the suit as a coplaintiff. Tri-County's standing deficiency cannot be cured by adding Azure to the suit." Id. at 19.

Turning to the issue of claim construction, the Federal Circuit found that the district court interpreted "MAC address" too narrowly. The Federal Circuit particularly found that the claims in the '129 patent use "MAC address" in a consistent manner with the well-understood industry meaning. The Federal Circuit, explaining its finding, found that the claims of the '129 patent did not make explicit whether the "MAC address" is generated locally or universally. "For a patentee to act as his own lexicographer and give a term something other than its well-established meaning, he must 'clearly set forth a definition of the disputed term.'" Id. at 22 (quoting CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366 (Fed. Cir. 2002)). In the present case, the Court found that "the specification did not re-coin an established term of art by redefining it to have a narrower definition than the traditional MAC address." Id. Particularly, the Court determined that "'MAC address' has a 'clear, settled, and objective' meaning to a person of ordinary skill in the art . . . [a]nd when read in context, it becomes clear that that 'Media Access (MAC) address' in the specification has the same meaning as that of a traditional MAC address: it is a device identifier." Id. at 23 (citations omitted). Thus, the Federal Circuit adopted Azure's proposed construction of "MAC address" as "an address that uniquely identifies a device or group of devices on a shared communication medium." Id. at 25.

Accordingly, the Federal Circuit affirmed the district court's dismissal of Tri-County, vacated the district court's judgment of noninfringement, and remanded for further proceedings as outlined in its opinion.

Judge Mayer concurred-in-part and dissented-in-part. Judge Mayer agreed with the majority's "thorough and well-reasoned analysis of the standing question." Mayer Dissent at 2. Judge Mayer, however, dissented from Section II of the opinion regarding the construction of the term "MAC address." According to Judge Mayer, the specification was replete with references of how the "MAC address" is indeed "an address assigned to a peripheral device by a hub device," id., and discloses no other method for network communication," id. at 3-4. Accordingly, Judge Mayer concluded that fundamental errors infected the Court's decision to expand the '129 patent to cover an invention neither claimed nor described by the patentees, and "the court has no warrant to vastly expand the term to cover any address that uniquely identifies a device on a network." Id.

Judges: Reyna, Mayer (dissenting-in-part), Chen (author)

[Appealed from E.D. Tex., Judge Schneider]

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

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