About When Exclusive Patent Licensees Can Sue on their Licensed Patent

In WiAV Solutions LLC v. Motorola, Inc., No. 10-1266 (Fed. Cir. Dec. 22, 2010), the Federal Circuit broadened the scope of exclusive license by holding that “a licensee is an exclusive licensee of a patent if it holds any of the exclusionary rights that accompany a patent.”

The licensing rights at issue were held by six third-parties and seven patents owned by Mindspeed Technologies, Inc. After a series of spin-offs and other agreements that transferred the patents from company to company, WiAV possessed a broad bundle of exclusive rights in patents, including the right to sue for all infringements and the right to grant future licenses and assigns. In contrast, other licensees held limited rights in the same patents consisting of nonexclusive rights to practice the invention and the right to grant sublicenses to closely related entities such as affiliates, subsidiaries, spinoffs, and joint-development partners.

In federal district court, the defendants moved to dismiss WiAV’s infringement suit for lack of Article III standing. The defendants relied on Textile Productions, Inc. v. Mead Corp., 134 F.3d 1481 (Fed. Cir. 1998) and argued that because the non-WiAV licensees could grant future licenses under the Mindspeed patents, WiAV was not an exclusive licensee and therefore lacked constitutional standing. The district court agreed that WiAV cannot be an exclusive licensee of a patent when a third party has the right to license the patent.

On appeal, the Federal Circuit reversed the lower court’s decision and explained that a party holding one or more of the exclusionary rights created by the Patent Act has standing to sue when an unauthorized party encroaches upon those rights. If an exclusive licensee has the right to exclude others from practicing a patent, and the accused infringer does not possess the same right to exclude others, the exclusive licensee’s exclusionary right is violated, satisfying “the injury predicate to constitutional standing.” The court further explained that a licensee need not “be the only party with the ability to license the patent” to be an exclusive licensee able to sue. This decision is in the vein of the court’s earlier decision in 2010, Alfred E. Mann Foundation for Scientific Research v. Cochlear Corp., 604 F.3d 1354 (Fed. Cir. 2010), in which it concluded that a licensee is an exclusive licensee of a patent despite retaining the ability to license the patent to settle lawsuits.

Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury. However, the Federal Circuit has imposed one important limitation on the broad rule for standing: An exclusive licensee may have standing to sue some parties, but not others because “an exclusive licensee derives its standing from the exclusionary rights” and therefore standing should be “coterminous with those rights.” A party may also lack standing to sue a party who has the ability to obtain a license from another party with the right to grant it.