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Federal Circuit Bars Infringement Suits Where Patent Co-Owner Refuses To Join

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Laura R. Hall

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New York

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24 September 2014

On September 17, 2014, the Court of Appeals issued an order in C.UNM v. Intel Corp., 10-CV-01077, declining to rehear en banc a decision that bars infringement suits where a patent co-owner will not participate in its prosecution.

In its denial, the Court of Appeals ruled that co-owners of a patent have a substantive right under patent law to abstain from joining infringement suits brought by their co-owners against third-parties, concomitant to their ability to separately practice the patent and grant licenses. The compultherefore held not to apply because the plaintiff co-owner had no right to mandate the sory joinder ordinarily required by Federal Rule of Civil Procedure 19 was participation of its co-owner. In the absence of joinder by the co-owner, the infringement dispute was dismissed for failure to join a necessary party. This result is of particular interest to patentees whose co-owners have no contractual obligation to participate in infringement suits as their ability to enforce their rights may be impaired.

Background

STC, University of New Mexico’s licensing arm, sued Intel Corp. for infringement of a patent, which was subject to a terminal disclaimer that rendered it unenforceable when it ceased to be commonly owned with the patent of which it was a continuation-in-part (“CIP”). STC was the sole registered assignee of the CIP patent but co-owned the parent patent with Sandia Corporation (the employer of one of the co-inventors of that patent). Intel moved for summary judgment on the basis that the CIP patent was unenforceable under the terms of the terminal disclaimer. In response, STC asserted that Sandia was in fact a co-owner of the CIP due to its co-ownership of the parent patent, and “out of an abundance of caution” assigned an undivided interest in the CIP patent to Sandia during the proceedings in the district court. (Panel Decision at 5.)

The district court dismissed STC’s theories of ownership arising from the parent patent, but found that the mid-case assignment was effective to render Sandia a co-owner within the meaning of the terminal disclaimer. When Sandia refused to join the suit, stating that it “preferred to take a neutral position”, the district court dismissed STC’s infringement claims for failure to join a necessary party and held that Sandia could not be involuntarily joined because “the right of a patent co-owner to impede an infringement suit brought by another co-owner is a substantive right that trumps the procedural rule for involuntary joinder under Rule 19(a).” (Panel Decision at 6-7.) On June 6, 2014, United States Court of Appeals for the Federal Circuit affirmed on appeal, and STC petitioned for review by the Federal Circuit en banc.

The Decision

In a per curiam decision issued on September 17, 2014, en banc review was denied. Four judges joined two dissents to the denial of en banc rehearing, including Judge Pauline Newman, who had dissented from the original panel decision and from the Court’s prior decision in Ethicon, Inc. v. U.S. Surgical Corp., the decision on which the majority’s decision (and that of the district court below) primarily relies. The dissenting judges focus on the mandatory nature of Rule 19, and its status as co-equal federal law not subject to exception on the basis of substantive patent rights, framing the issue for potential review by the United States Supreme Court as one of a patent-specific exception to rules of general applicability.

The majority opinion did note, however, that compulsory joinder still may require patent owners to join infringement suits under certain circumstances, for example, where required by an agreement among the co-owners, or where the plaintiff is an exclusive licensee under a licensing agreement.

Implications

To ensure the ability to exercise enforcement rights protection afforded by patents, patentees should consider whether their joint development and co-ownership agreements provide adequate contractual bases to compel co-owners to join, at least nominally, any infringement suit prosecuted against a third-party.

 
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The case is STC.UNM v. Intel Corp., --- F.3d ----, 2014 WL 4629058 (Fed. Cir. Sept. 17, 2014).
The cases discussed are:
• STC.UNM v. Intel Corp., 754 F.3d 940, 111 U.S.P.Q.2d 1033 (Fed. Cir. 2014) (“Panel Decision”).
• Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 45 U.S.P.Q.2d 1545 (Fed. Cir. 1998).