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Adventus Americas Inc. v. Innovative Environmental Technologies

March 5, 2007

ADVENTUS AMERICAS INC., AND ENVIROMETAL TECHNOLOGIES, INC. PLAINTIFFS,
v.
INNOVATIVE ENVIRONMENTAL TECHNOLOGIES, INC., DEFENDANT.



The opinion of the court was delivered by: Blanche M. Manning United States District Court Judge

MEMORANDUM AND ORDER

Defendant Innovative Environmental Technologies, Inc. ("IET") moves to dismiss under Federal Rules of Civil Procedure 12(b)(1), (2) and (3) asserting this court lacks subject matter jurisdiction because neither of the plaintiffs have standing, this court cannot exercise personal jurisdiction over it and that venue is improper. Alternatively, IET moves, pursuant to 28 U.S.C. § 1404(a), to transfer this case to the United States District Court for the Eastern District of Pennsylvania. For the following reasons, IET's Rule 12(b)(1) motion to dismiss is granted in part and denied in part and its Rule 12(b)(2) and (3) motions to dismiss are denied. However, IET's motion to transfer to the Eastern District of Pennsylvania is granted.

I. Background

Plaintiffs Adventus Americas Inc. ("Adventus") and EnviroMetal Technologies, Inc. ("EnviroMetal") bring this patent infringement suit against IET for infringement of U.S. Patent No. 5,266,213 ("'213 Patent"). The '213 Patent, owned by the University of Waterloo, Ontario ("University"), a non-party, is a process patent for environmental remediation titled "Cleaning Halogenated Contaminants from Groundwater." Plaintiffs filed suit against IET, a Pennsylvania corporation with its principal place of business in Pipersville, Pennsylvania, after they became aware of an allegedly infringing process utilized by IET in its remediation services. Specifically, plaintiffs claim that "any process that cleans halogenated organic contaminants from groundwater in an aquifer that employs an underground 'body of metal' through which the aquifer passes" likely infringes the '213 Patent. EnviroMetal, a Canada corporation with its principal place of business in Ontario, Canada, is an exclusive licensee under the '213 Patent. Its co-plaintiff, Adventus, a Delaware corporation with its principal place of business in Freeport, Illinois, is a non-exclusive sub-licensee in the United States of the '213 Patent.

II. Discussion

A. 12(b)(1) Motion to Dismiss

IET first seeks to dismiss this case on the grounds that neither plaintiff has standing. The Patent Act of 1952 provides "a patentee shall have remedy by civil action for infringement of his patent." 35 U.S.C. §281 (1988). The term patentee includes "not only the patentee to whom the patent was issued but also the successors in title to the patentee." 35 U.S.C. § 100(d). In addition to the patentee and its assignees, an exclusive licensee holding all substantial rights under the patent is also entitled to bring suit in its own name. Textile Prod., Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir 1998). For all intents and purposes, then, such a licensee is an assignee. Id. Thus, the "proper focus is on the substance of what was granted" to determine whether an exclusive licensee has standing to bring a suit for infringement in its own name without joining the patentee. Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000).

While an exclusive licensee may have standing to bring suit, "[i]t is well settled that a non-exclusive licensee of a patent has no standing to sue for infringement." Kalman v. The Berlyn Corp., 914 F.2d 1473 (Fed. Cir. 1990); Abbott Lab. v. Diamedix Corp., 47 F.3d 1128, 1131 (Fed. Cir. 1995) ("[B]are licensee, who has no right to exclude others from making, using, or selling the licensed products, has no legally recognized interest that entitles it to bring or join an infringement action."). A non-exclusive licensee's lack of standing is based on the fact that a non-exclusive licensee suffers no legal injury from infringement. Ortho Pharm. Corp. v. Genetics Inst., Inc., 52 F.3d 1026, 1031 (Fed. Cir. 1995); Sicom Sys. Ltd v. Agilent Tech., 427 F.3d 971, 976 (Fed Cir. 2005). In fact, a non-exclusive license "grants to the licensee merely a privilege that protects him from a claim of infringement by the owner of the patent monopoly." Ortho Pharm., 52 F.3d at 1031 (citations omitted).

1. Adventus' Standing

IET contends that Adventus lacks standing because it is a mere, non-exclusive sub-licensee to the '213 Patent. The plaintiffs do not dispute this and do not cite any applicable authority to convince the court that Adventus may join the lawsuit as a co-plaintiff. Accordingly, the court finds that Adventus lacks standing to bring suit.

2. EnviroMetal's Standing

As to EnviroMetal's standing, the court must determine whether the exclusive license between the University of Waterloo and EnviroMetal conferred substantial rights in the patent to EnviroMetal. See Textile Prod., 134 F.3d at 1484 ("Determining whether a licensee is an exclusive licensee or a bare licensee is a question of ascertaining the intent of the parties to the license as manifested by the terms of their agreement and examining the substance of the grant."). EnviroMetal asserts that it obtained all substantial rights in the '213 Patent. In support, EnviroMetal relies on the License Agreement for Groundwater Treatment between EnviroMetal Technologies Inc. and University of Waterloo ("License") stating that the License grants the following substantial rights: (1) an exclusive license to use, install, market, sub-license, establish distribution and sell; (2) a worldwide territory to practice the invention until the last expiration date of the issued patents; (3) the responsibility for payment of one hundred percent of all patent costs required to obtain or maintain all existing and future patents; (4) a requirement that the licensee indemnify and hold harmless the University from any claims or lawsuits alleging the applicable patents infringe another's patents; and (5) an obligation to incur all necessary costs to commence legal action against any and all infringers where there is reasonable expectation that a repeated and unabated infringement may lead to detrimental loss.

Unsurprisingly, IET counters that EnviroMetal does not have an exclusive license and, even if it did, it does not have substantial rights in the '213 Patent. To that end, IET argues that the University did not transfer to EnviroMetal the right to refrain from suing thereby leaving EnviroMetal without the full complement of enforcement rights. In addition, IET contends that certain rights retained by the University, including a right to use the '213 Patent and the right to approve further assignment of the License, further weighs against a finding of substantial rights. Finally, IET claims that EnviroMetal's license is subject to licenses that the University has already conveyed to DuPont Inc. ("DuPont") and General Electric Company ("General Electric") in the same geographic territory. For the following reasons, the court disagrees with IET's characterization of the facts and its conclusion that EnviroMetal is not an exclusive licensee with substantial rights in the '213 Patent.

a. Exclusive License

Importantly, the University explicitly gives EnviroMetal an "exclusive" license to "use, install, market, sub-license, establish distribution and sell." License 2.1. Of the bundle of rights transferred, "[a] licensee's right to sub-license is an important consideration in evaluating whether a license agreement transfers all substantial rights." Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1380 (Fed. Cir. 2000). Here, there is no limiting language in the License suggesting that EnviroMetal's right to sub-license is encumbered.

Unable to hang its hat on any sub-licensing issue, IET turns to the provision relating to EnviroMetal's right to assign the License. IET contends that because EnviroMetal's right to assign the License is subject to the written consent of the University, EnviroMetal cannot possess substantial rights in the patent. However, the Federal Circuit has held that where such a consent requirement is reined in by an agreement that consent shall not be withheld unreasonably, the provision is not fatally restrictive of the scope of the exclusive licensee's rights. Speedplay, 211 F.3d at 1252. Here, in a section of the License referring to assignment, the License provides that written consent of the University "shall not be unreasonably withheld." See License 5.2(c), 6.0.

In addition, the written consent requirement for assignment runs to both EnviroMetal and the University - the University may not assign the License without EnviroMetal's written consent either. See License 6.2.

In sum, EnviroMetal's unencumbered right to sub-license coupled with only a slight restriction on the right to assign, support a conclusion that the University intended to transfer all substantial rights in the '213 Patent to EnviroMetal.

b. Right to Sue

The transfer of the right to sue is "particularly dispositive" of the question of whether an exclusive licensee is authorized to bring suit without joining the patentee. Abbott Lab., 47 F.3d at 1132 (quoting Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875-76 (Fed. Cir. 1991)). Here, the License specifically provides that "EnviroMetal shall have the obligation to incur all necessary costs to commence legal action against any and all infringers where there is a reasonable expectation that a repeated unabated infringement may lead to detrimental loss...." License 2.9(a). Critically, EnviroMetal is given discretion in commencing legal action and has the obligation to sue if it determines that there is a reasonable expectation of detrimental loss. Put differently, if EnviroMetal determines that there is no reasonable expectation of detrimental loss, it has the right to refrain from commencing litigation. Contrary to IET's arguments, Section 2.9 does not explicitly distinguish between commercial and noncommercial infringement and the court therefore relies on the clear language of the License. See License 2.9 ("EnviroMetal shall have the obligation to incur all necessary costs to commence legal action against any and all infringers where there is a reasonable expectation that a repeated unabated infringement may lead to detrimental loss....")

The policy rationale underlying the importance placed on the right to sue is to prevent multiple lawsuits on the same patent against a single infringer. Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1343 (Fed. Cir. 2006). Here, there is no danger of that occurring. EnviroMetal possesses the right to enforce the patent and the first obligation to sue parties for infringement. The University can only sue for infringement in the event EnviroMetal fails to do so. Compare Mentor H/S, Inc. v. Med. Device Alliance, Inc., 240 F.3d 1016 (Fed. Cir. 2001) (finding patentee retained substantial and significant rights where it had the first obligation to sue for infringement). Moreover, the License explicitly manifests the University's desire to refrain from participating in infringement suits brought by EnviroMetal. Indeed, the University "agrees to take all required actions within its power to grant EnviroMetal...the right to independently prosecute an infringer." License 2.9(a). Therefore, the very terms of the License ensure that a single infringer will not be subject to multiple lawsuits.

After consideration of the language of the License transferring the right to sue and the policy rationale supporting its transfer, the court finds that the University intended to transfer the exclusive right to sue to EnviroMetal. This strongly favors a finding of ...


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