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Federal Circuit Tightens Patent Standing Requirement in Azure Networks

By Kathleen McGuinness – Edited by Sabreena Khalid Azure Networks, LLC v. CSR PLC, 2013-1459 (Fed. Cir. Nov. 6, 2014). Slip Opinion. radio-wireless-tower-clip-art_resizedOn November 6th, the Federal Circuit issued its decision in Azure Networks, LLC v. CSR PLC. Plaintiffs Azure Networks, LLC (Azure) and Tri-County Excelsior Foundation (Tri-County) sued CSR PLC and its co-defendants for alleged infringement of Tri-County’s patent – U.S. Patent No. 7,756,129 (“the ’129 patent”) – describing a network for wireless communications between a central “hub” and several devices in close proximity. Slip op. at 3. The appeal involved two major issues. The first issue was with regard to standing to sue; the defendants had successfully moved to dismiss Tri-County for lack of standing in the district court, arguing that Tri-County had effectively assigned Azure the patent in suit. The Federal Circuit decided the issue de novo, and upheld the dismissal. The issue of standing turned on the assignment and licensing of the patent: The '129 patent was acquired by Azure, a Texas limited liability company. Azure partnered with Tri-County, a Texas non-profit organization, to join in patent enforcement activities. Azure donated the '129 patent to Tri-County in 2010; a few weeks later, Tri-County and Azure entered into a licensing agreement which granted Azure the exclusive, worldwide, transferrable right to practice the '129 patent, as well as the “full right to enforce or and/or sublicense” the ’129 patent” and various other rights. Id. At 6. Azure's enforcement rights included the right to reach settlements without Tri-County's consent. Id. At 7. Standing to sue for patent infringement is conferred by the Patent Act, which provides that a patent's legal owner has the exclusive right to sue. 35 U.S.C. § 281. However, even where a patentee chooses to license the patent rather than sell it, the right to sue may be effectively transferred if the license grants “all rights or all substantial rights” in the patent. Id. at 9. The court found that, even though Tri-County was the legal owner of the patent, all substantial rights had indeed been transferred to Azure, including the right to practice the patent and exclusive enforcement rights. As a result, Azure was the “effective owner” of the patent for the purposes of standing. Id. At 9.Tri-County had not retained any ability to monitor or control the patent’s litigation activity. The court held that “[r]etaining control of these activities is... critical” to demonstrating that fewer than all substantial rights have been transferred. Id. at 11. The rights retained by Tri-County—an economic interest, unfixed reversionary interest, and certain rights to terminate the license—were insufficiently “substantial.” Id. at 18. In a typical case involving  “all substantial rights,” the licensor or licensee is attempting to sue alone, and the court must decide whether they have standing. Here, the licensor, who had the “legal title” to the patent, attempted to sue together with the licensee, who had the “effective title.” This case therefore raised the relatively unique issue of whether, where all substantial rights have been transferred, the licensor may nevertheless join in the infringement suit brought by the licensee. However, as the court noted, precedent on the issue of standing suggests that joining the licensee in suit cannot cure the lack of standing of the patent owner where he has effectively assigned the patent to another Patently-O suggests that this holding represents a significant expansion upon previous patent standing doctrine. The previous rule, they argue, was that the patent owner did not need to be joined where the licensee had been granted all substantial rights; the new rule forbids the patent owner to be joined, even where they remain a real party in interest. However, as they suggest, this result may have been motivated in part by the parties' apparent desire to manipulate venue in future actions by the assignment of the patent. The second issue before the court was that of claim construction. The court found that the heavy presumption against redefining terms with well-established meanings in the relevant industry had not been overcome here. Id. at 19-20. At the time of the invention, the term “MAC address” had a well-understood meaning. While the district court construed the term “MAC address” in the ‘129 patent more narrowly than its common meaning, finding that the patentee had redefined the term within the specification and leading to a judgment of non-infringement, the Federal Circuit disagreed. Id. at 22. While the specification did not refer to the broadest use of the term, the majority found such an omission was not sufficient to redefine it. Id. However, Judge Mayer, dissenting in part, found that the specification's use of the term “MAC address” was sufficiently unequivocal to redefine the common term. Id. at Dissent, 5-6. Law 360 provides additional commentary.