The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge
MEMORANDUM OPINION AND ORDER
Before the Court is Miranda and Barco N.V.'s Joint Motion Under Fed. R. Civ. P. 12(b)(1) to Dismiss for Lack of Standing. For the following reasons, the Court declines to dismiss Plaintiffs' claims on the patents at issue. Plaintiffs are instructed, however, to join J. Carl Cooper and Pixel Instruments as plaintiffs in order to establish standing to sue.
New Medium Technologies, LLC ("New Medium"), AV Technologies LLC ("AV"), IP Innovation LLC, and Technology Licensing Corporation ("TLC") have sued Barco N.V. ("Barco"), Miranda Technologies ("Miranda"), LG Philips LCD, Ltd., Toshiba Corporation, Toshiba America Consumer Products, L.L.C., and Syntax-Brillian Corporation, alleging patent infringement. (R. 104-1, Third Am. Compl.) The suit alleges infringement of a total of eleven patents, but, with the exception of Barco (which is accused of infringing all eleven patents), only some of the patents are relevant to the claims involving any given plaintiff or defendant. Defendants Miranda and Barco allege that Plaintiffs lack standing as to eight of the patents, six of which are at issue in New Medium's infringement claims ('594, '049, '057, '707, '741, and '869) and two of which are relevant to AV's claims of infringement ('070 and '547).
On February 26, 2007, Barco filed a Motion to Dismiss for Lack of Standing as to the '070 Patent, claiming that AV did not have standing to sue on the '070 patent because (1) AV's license on the patent was executed after the '070 patent expired, rendering it a "legal nullity"; and (2) the license did not support standing because it did not transfer "all substantial rights" under the '070 patent to AV. (R. 217-1.) On March 9, 2007, Barco and Miranda filed the motion currently before the Court, which incorporated the arguments in the February 26 motion and further asserted the "all substantial rights" standing argument as to the '594, '049, '057, '707, '741, '869, and '547 patents. (R. 230-1.) On April 26, 2007, the Court denied the February 26 motion as moot because it seeks the same relief requested in the March 9 motion, and on the same grounds. (R. 342-1.) The Court also made clear that it will consider the arguments raised in the February 26 motion when ruling on the motion now before the Court. (Id.)
The motion turns on the nature and extent of the rights granted to New Medium and AV (collectively, "Plaintiffs") under two licensing agreements ("the Agreements") that conveyed to Plaintiffs their interest in the relevant patents. In one Agreement, TLC, Pixel Instruments Corporation ("Pixel"), and J. Carl Cooper (collectively, "the Licensors") granted AV certain rights in the '070 and '547 patents. (R. 289-9.) In the other Agreement ("the New Medium Agreement"), the Licensors granted New Medium certain rights in the '594, '049, '057, '707, '741, and '869 patents. (R. 289-10.) The relevant provisions of the Agreements, each of which was executed on November 12, 2004, are identical and are discussed at length below.
Standing to sue is a threshold jurisdictional requirement in every federal action. Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 975 (Fed. Cir. 2005). Rule 12(b)(1) motions address standing issues, and federal courts "may not grant relief when standing does not exist." Heartland Direct, Inc. v. Chevron U.S.A. Inc., No. 06 C 1029, 2006 WL 2524139 at *2 (N.D. Ill. Aug. 30, 2006). When considering a Rule 12(b)(1) motion challenging the factual basis for subject matter jurisdiction, district courts look beyond the pleadings and consider all competent evidence. Id.; Hay v. Indiana State Bd. of Tax Comm'rs, 312 F.3d 876, 879 (7th Cir. 2002).
The party bringing the action bears the burden of establishing that it has standing to sue. Sicom, 427 F.3d at 976. "A patentee shall have remedy by civil action for infringement of his patent." 35 U.S.C. § 281. The term "patentee" includes "not only the patentee to whom the patent was issued but also the successors in title to the patentee." Id. § 100(d). Furthermore, if a patentee transfers "all substantial rights" under the patent, the transfer constitutes an assignment, and the assignee is deemed "the effective patentee . . . for purposes of holding constitutional standing to sue another for patent infringement in its own name." Sicom, 427 F.3d at 976.
Courts look to a variety of factors to determine whether a licensing agreement provides a licensee with "all substantial rights" in a patent. These factors include: (1) whether the licensor has the power to bar the licensee from transferring its interest to a third party; (2) whether the licensor maintains an equity interest in the proceeds of licensing and litigation activities; (3) whether the licensor has a right to notice of licensing decisions, and, if so, the right to veto them; (4) whether the licensor has a right to notice of litigation decisions, and, if so, the right to veto them; (5) whether the licensor has the ability to terminate the licensing agreement in certain circumstances; and (6) whether the licensee or licensor bears the obligation to maintain the patent. See Propat Int'l Corp. v. RPost, Inc., 473 F.3d 1187, 1190-93 (Fed. Cir. 2007). The ability to transfer patent rights is "particularly significant" within the "all substantial rights" analysis, and the Federal Circuit has gone so far as to refer to a restraint on transferability as "'fatal' to the argument that the agreement transferred all substantial rights in the patent." Id. at 1191 (quoting Sicom, 427 F.3d at 979).
Licensees that do not receive "all substantial rights" to a patent through a licensing agreement may still have standing to sue in some circumstances. "A party that is neither the legal owner of the patent nor the transferee of all substantial rights in the patent still has standing to sue for infringement if that party has a legally protected interest in the patent created by the Patent Act, so that it can be said to suffer legal injury from an act of infringement." Propat, 473 F.3d at 1193. Exclusive licensees, meaning those parties with "the exclusive right to make, use, or vend the invention," have this type of interest. Id. (quoting Independent Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 469 (1926)). But "[u]nlike the patentee or the transferee of all substantial rights in the patent . . . an exclusive licensee ordinarily may not sue in its name alone, but must join the patent owner in an action brought against an accused infringer." Propat, 473 F.3d at 1193. The requirement that an exclusive licensee must ordinarily join the patent owner is a prudential requirement rather than a constitutional requirement based on Article III, and as a result, an exclusive licensee that initially brings its action alone may maintain its suit so long as the patent owner is joined in the course of the litigation. Id., Intellectual Prop. Dev., Inc. v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1348-49 (Fed. Cir. 2001).
Unlike exclusive licensees, "bare licensees," or parties possessing only a covenant from the patentee that the patentee will not sue it for infringing patent rights, lack standing to sue third parties for patent infringement. Propat, 473 F.3d at 1193. Bare licensees cannot cure their lack of standing by joining the patentee as a party, and as a result, courts must dismiss infringement actions brought by bare licensees. Id. at 1193-94.
Some cases, such as those in which the relevant licensing agreement indicates that the parties contemplated that the licensee would engage only in licensing and litigation activities (and not practice of the patent) do not fit neatly into the "exclusive licensee versus bare licensee" distinction that often drives the outcome of a patent standing dispute. See id., 473 F.3d at 1194. In these situations, courts look to the same factors that inform the "all substantial rights" analysis -- including the rights to sue infringers, license the patent, and transfer the patent without excessive interference from the licensor -- to see whether the rights afforded by the license agreement provide a plaintiff with standing to sue in their own name. See id.
The parties' arguments and the Federal Circuit's legal framework raise three key questions in this case. First, did New Medium and AV receive "all substantial rights" in the patents such that they may sue for infringement without joining the licensors? Second, if the answer to that question is "no," did New Medium and AV receive the right to practice the patents such that they are "exclusive licensees" entitled to sue for infringement so long as they join the patentee? And finally, if the answer to that question is also "no," do the rights afforded by the Agreements render New Medium and AV the equivalent of exclusive licensees who may sue if the licensor is joined, or the equivalent of "bare licensees" that have no right to sue for infringement regardless of joinder?
I. All Substantial Rights
If the Agreements grant all substantial rights in the patents to Plaintiffs, they have standing to sue without joining the Licensors. The ...