“Exclusive enterprise licensee” does not have standing to sue for infringement without patent ownerOctober 15, 2007

In a decision today, the Federal Circuit reversed a decision by a district court declining to dismiss a patent infringement case brought by a party possessing an "exclusive enterprise license" in the patent-in-suit. The trial court certified the question of licensee standing to the court for interlocutory appeal. In reversing the district court's denial of the defendant's motion to dismiss, the Federal Circuit concluded that an exclusive enterprise licensee, like a field of use licensee, does not hold all substantial rights in the licensed patent within the licensed territory. As a result, in order to have standing, the patent owner must also be joined in the suit, and the court reversed the denial of the motion to dismiss finding the licensee did not have standing to bring suit alone.More detail of Int'l Gamco, Inc. v. Multimedia Games, Inc. after the jump.

Gamco is the assignee of a patent claiming a gaming system network configured to allow multiple players to engage in games drawn from a fine and centrally-stored pool of game plays. In February 2003, Gamco executed an Asset Purchase Agreement with International Game Technology ("IGT"), by which Gamco assigned the patent to IGT, but reserved for itself rights to sublicense the patent in the "New York State Lottery Market" and to sue for infringement in that market. Thus, IGT held all rights to the '035 patent subject only to Gamco's reserved rights in the New York lottery market.In May 2004, Gamco (without IGT) sued Multimedia for infringement. Concluding that Gamco had sold its proprietary interest in the patent to IGT, the district court dismissed Gamco's claim without prejudice for lack of standing. In November of 2005, Gamco and IGT entered a new agreement whereby Gamco received rights characterized as an "exclusive license" whereby Gamco was granted the exclusive right to license "within the Territory" to make, use, sell, and offer to sell game system networks covered by the patent. The "Territory" was defined as "the lawful operation of lottery games authorized by the New York State Lottery in the state of New York." The modification further granted Gamco exclusive rights to sue for infringement of the patent "within the Territory."Multimedia again moved to dismiss the lawsuit for lack of standing, which the district court denied. The district court characterized Gamco as an "exclusive enterprise" licensee, whereby Gamco's rights were restricted to the operations of the New York State Lottery, an enterprise of the State of New York." With that characterization, the district court concluded that an exclusive enterprise licensee has standing to file suit in its own name, without joining the patent owner. Noting that the issue was one of first impression, the district court certified "the question of whether an exclusive patent license, with exclusive right of enforcement, restricted to the activities of a specific enterprise within a specific geographical territory, is sufficient to confer standing on the exclusive licensee to bring a patent infringement action in its own name only" for interlocutory appeal.The Federal Circuit disagreed with the district court's characterization of the certified question, noting that the court "presupposed the standing of both exclusive territorial licensees and exclusive field of use licensees to sue in their own names without joining the patent owner." In this regard, the court stated that neither it nor the Supreme Court had unequivocally determined the rights of an exclusive field of use licensee with respect to standing. The Federal Circuit cited the Supreme Court's Pope Manufacturing case for guidance, where the Court held that a plaintiff with exclusive rights limited to a particular embodiment of the claimed invention did not have standing to sue in its own name. The primary reasoning for the Court's decision was to prevent multiple litigations against any one defendant and among the licensees themselves for any given act of infringement.The Federal Circuit held that the claim-by-claim exclusive license in Pope was indistinguishable in principle from the exclusive field of use license held by Gamco. In both instances, the court noted that allowing a licensee, even one with exclusive rights to the patent for a particular field of use, to sue in its own name alone poses a substantial risk of multiple suits and multiple liabilities against an alleged infringer for a single act of infringement. The court therefore held that the standing requirement compels an exclusive licensee with less than all substantial rights, such as a field of use licensee, to join the patentee before initiating suit.

Interestingly, Senior Judge Friedman filed an opinion dubitante (doubting the reasoning of the majority). Judge Friedman considered the likelihood of duplicative lawsuits in a geographically-limited license context much lower than in a field-of-use limited license, but was apparently not so convinced that the majority's conclusion was incorrect to dissent. According to a quick Westlaw search, this appears to be the first case with a dubitante opinion since the Eleventh Circuit's June 13 decision in United States v. Taylor, and the first ever dubitante opinion by a Federal Circuit judge.

To read the full decision in Int'l Gamco, Inc. v. Multimedia Games, Inc., click here.