Standing in Patent Infringement Suits and the “All Substantial Rights” Doctrine
On Thursday, November 16 at New York University School of Law, patent lawyers and students gathered for the Patent Law Reading Group Alumni Night hoping to gain some insight on who has standing to bring a suit for patent infringement. NYU alum and patent lawyer at Goodwin Christopher Morten (’15) gave a presentation on his research decoding the federal circuit’s “All Substantial Rights” doctrine and, in his opinion, which factors are truly dispositive for standing.
Morten opened his presentation explaining the concept of standing; under constitutional law, a claim must contain an injury in fact that the court can redress to have standing. In patent law, what is the injury that gets you in? The U.S. Patent Act gives a patent owner the right to exclude others and further provides that if your patent is infringed, the patent owner may receive remedy by civil action. Parties who are not patentees usually do not have standing to file a patent infringement suit, except when the patentee has issued an exclusive license. Whether or not an exclusive licensee has standing to bring a suit was the complex question Morten was addressing.
Constitutional standing alone does not confer on the exclusive licensee the right to bring a suit on its own. Prudential standing is a jurisdictional limitation on a court’s power to decide a case and consist of three doctrines: (1) the general prohibition against litigating the rights of a third party, (2) the prohibition against litigating generalized grievances, and (3) the requirement that a plaintiff’s complaint fall within the zone of interests protected by the invoked statute. Prudential concerns underlie the all substantial rights doctrine—a party may not bring an infringement suit in its own name unless it possesses all substantial rights in the patent. A party with fewer than all substantial rights cannot bring such suit. The crux of the matter is figuring out who actually owns the patent when certain rights were transferred.
In such cases, courts will scrutinize the patent as a “bundle of rights” to determine who has effective ownership. The Federal Circuit has articulated a non-exhaustive list of individual rights within the bundle that may be considered in the all substantial rights analysis. Courts have performed this analysis very differently, not all factors are always considered, and confusion on this inquiry is frankly quite justified – Posner himself confessed “I don’t understand the Federal Circuit’s position” on the law of patent standing.
Morten argued that although the federal circuit law is far from clear, two black letter rules have emerged. To possess all substantial rights, a party must first possess a full, unfettered right to practice the patent. The party must be the effective patent owner with the right to make, use, offer to sell, sell, and import the claimed invention in all fields of use for the life of the patent. The right to sue provision within a license cannot, of its own force, confer standing on a bare license. The field-of-use restriction also prevents a party the ability to possess all substantial rights, as would a hard expiration date of a party’s rights (prior to expiration of the patent). The right to practice the patent must not have such limitations.
Assuming that the party does have the full right to practice the patent, then the other critical right is the right to enforce the patent. Morten’s research has revealed that if a party has lacked either of these, the federal circuit has not ruled in favor of the party being the patent owner; these two rights are dispositive. It is also imperative that both are unrestricted rights to practice and to enforce the patent–every time an agreement did not provide a party with an unburdened right to enforce, the federal circuit has concluded that the party did not possess all substantial rights.
Outside of these two factors, it appears that a few other factors may also separate themselves from the pack, although the case law is not currently developed enough to confirm this. Morten believes that the buyer’s right to alienate (e.g. to sell, reassign, or otherwise transfer its rights under the patent) will become more important as one federal circuit has said this right is critical. The buyer’s right to indulge infringement may also become more prominent as this is arguably a necessary corollary of the buyer’s right to enforce. However, there are not enough cases addressing these rights at this time to call them pivotal.
In sum, if advising a client on how to ensure standing in a patent infringement suit when all substantial rights are being transferred, the buyer should obtain an exclusive right to practice the patent in full and the right to enforce the patent. Those who wish to learn more can read Morten’s impending article titled, Standing with a Bundle of Sticks: The All Substantial Rights Doctrine in Action.
Tatiana Fields is a J.D. candidate, 2019, at NYU School of Law.