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United States Court of Appeals for the Federal Circuit
04-1265
ASPEX EYEWEAR, INC., MANHATTAN DESIGN STUDIO, INC.,
CONTOUR OPTIK, INC., and ASAHI OPTICAL CO., LTD.,
Plaintiffs-Appellants,
v.
MIRACLE OPTICS, INC. and VIVA OPTIQUE, INC.,
Defendants-Appellees.
Michael A. Nicodema, Greenberg Traurig, LLP, of New York, New York, argued
for plaintiffs-appellants. With him on the brief was Barry J. Schindler.
Jeffrey A. Schwab, Abelman, Frayne & Schwab, of New York, New York, argued
for defendants-appellees. With him on the brief were Michael Aschen and Anthony J.
DiFilippi. Of counsel were Mark N. Hurvitz and David B. Abel, Squire, Sanders &
Dempsey LLP, of Los Angeles, California.
Appealed from: United States District Court for the Central District of California
Senior Judge Lourdes G. Baird
United States Court of Appeals for the Federal Circuit
04-1265
ASPEX EYEWEAR, INC., MANHATTAN DESIGN STUDIO, INC.,
CONTOUR OPTIK, INC., and ASAHI OPTICAL CO., LTD.,
Plaintiffs-Appellants,
v.
MIRACLE OPTICS, INC. and VIVA OPTIQUE, INC.,
Defendants-Appellees.
__________________________
DECIDED: January 10, 2006
__________________________
Before LOURIE, Circuit Judge, ARCHER, Senior Circuit Judge, and
GAJARSA, Circuit Judge.
LOURIE, Circuit Judge.
Aspex Eyewear, Inc. and Contour Optik, Inc. appeal from the decision of the
United States District Court for the Central District of California dismissing their action
against Miracle Optics, Inc. and Viva Optique, Inc. on the ground that neither Aspex nor
Contour had standing to sue for infringement of U.S. Patent 6,109,747.1 Aspex
Eyewear, Inc. v. Miracle Optics, Inc., No. 01-10396 (C.D. Cal. Feb. 6, 2004)
(“Decision”). Because we conclude that Contour was the owner of the ’747 patent when
1
In addition to the ’747 patent, the original complaint also asserted infringement
of U.S. Patent 5,568,207, which later issued as U.S. Reissue Patent 37,545. The
original complaint also named as plaintiffs Manhattan Design Studio, Inc. (“MDS”) and
Asahi Optical Co., Ltd. After the district court entered final judgment on the ’545 patent
under Federal Rule of Civil Procedure 54(b), MDS and Asahi ceased to participate in
the action involving the ’747 patent.
the original complaint was filed, and thus it had standing to sue in this action, we vacate
the district court’s dismissal. Given this conclusion, we remand for the court to
redetermine whether all necessary parties to this action were joined.
BACKGROUND
The primary issue in this appeal is whether the district court correctly determined
that appellant Contour transferred all substantial ownership rights to the ’747 patent to
nonparty Chic Optic, Inc., in which case Contour lacked standing to sue for
infringement, or whether it merely granted Chic a license to that patent, in which case
Contour was still the owner of the patent and had standing to sue. On August 29, 2000,
the ’747 patent issued in the name of David Yinkai Chao as inventor and Contour as
assignee. The ’747 patent claims an eyeglass combination having, inter alia, an
auxiliary eyeglass frame that houses specialized lenses (e.g., sunglasses) and attaches
onto a traditional eyeglass frame. A key feature of the patented combination is the
placement of magnetic studs on the traditional eyeglass frame to improve the auxiliary
eyeglass frame’s attachment onto the traditional eyeglass frame.
On March 20, 2001, Contour and Chic executed an agreement entitled
“Distribution and License Agreement” (the “Contour/Chic agreement”). Neither party
disputes that under the terms of the agreement, Contour granted Chic certain rights
under the ’747 patent. Among these were (1) the exclusive right to make, use, and sell
in the United States products covered by the patent, (2) the first right to commence legal
action against third parties for infringement of the patent and the right to retain any
award of damages from actions initiated by Chic, and (3) a virtually unfettered right to
sublicense all of its rights to a third party. Under the terms of the agreement, Contour
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retained the right to commence legal action against third parties for infringement of the
patent if Chic refused to do so within 30 days of receiving notice of infringement, and
the option to contribute up to 50% of the litigation expenses incurred in any patent
infringement action brought by Chic in exchange for the right to receive a pro rata share
of any subsequent award arising from such an action. Most significantly, for purposes
of this appeal, the agreement also contained a clause providing that the agreement
would expire on March 6, 2003, and in no event later than March 16, 2006, if Chic
exercised its one option to extend, after which all of the rights under the ’747 patent that
the agreement initially granted to Chic would terminate.2
On April 5, 2001, Chic and Aspex executed a sublicense agreement entitled
“License Agreement” (the “Chic/Aspex agreement”). In that agreement, Chic granted to
appellant Aspex all of its rights under the ’747 patent, including the exclusive right to
make, use, and sell products covered by the patent, and the right to sue for infringement
of the patent.
Just prior to the grant of the sublicense, however, on March 28, 2001, Aspex and
Contour filed a complaint against appellee Miracle for infringement of the ’747 patent.3
Subsequently, the parties each filed motions for partial summary judgment. Decision,
slip op. at 3. The court denied Miracle’s motion for partial summary judgment of
2
Paragraph 3.1 of the Contour/Chic agreement, which the district court identified
as conferring a “reversionary interest,” states: “Unless terminated earlier as hereinafter
provided, the Term of this Agreement shall commence on the Effective Date and, shall
end on March 6, 2003. CHIC shall have the option to extend the Terms for another
three (3) years from March 16, 2003, upon written notice to CONTOUR on or before
September 1, 2002.”
3
The original complaint also included the ’207 patent and had as additional
plaintiffs MDS and Asahi. See supra n.1. The court added appellee Viva Optique, Inc.
as a defendant on December 4, 2003.
04-1265 3
invalidity of claim 12 and granted Contour’s and Aspex’s motion for partial summary
judgment of literal infringement of claim 12. Id. On February 6, 2004, the court granted
Miracle’s and Viva’s motion to dismiss the action on the ground that neither Contour nor
Aspex had standing to sue for infringement of the patent. Id., slip op. at 26.
According to the district court, neither Contour nor Aspex possessed the “rights of
the patentee” when the original complaint was filed, and thus each lacked standing to
sue. Regarding Aspex’s claim of standing, because a party’s standing to sue must exist
at the time an original complaint is filed, the court determined that Aspex could not have
had standing to sue since its agreement with Chic providing it with certain rights was
executed eight days after the original complaint was filed. Moreover, the court
concluded that the amended complaint, filed on April 9, 2002, could not cure this defect
in standing because an amended complaint must be based on facts existing at the time
of the filing of the original complaint. Id., slip op. at 13-14.
In reaching its decision, the court also rejected Aspex’s contention that, at the
time the original complaint was filed, it possessed the right to sue through a prior,
implied contract with Chic. Citing our decision in Enzo APA & Son v. Geapag A.G., 134
F.3d 1090, 1093 (Fed. Cir. 1998), the court recognized that although “a license may be
written, verbal, or implied, if the license is to be considered a virtual assignment to
assert standing, it must be in writing.” Decision, slip op. at 13. The court concluded that
Aspex could not have been a “virtual” assignee of the ’747 patent through an implied
contract at the time the original complaint was filed, and thus that it did not have
standing to bring this action.
04-1265 4
The district court finally held that Contour did not have standing to sue because it
had already transferred to Chic all substantial ownership interests in the ’747 patent at
the time the original complaint was filed. The court was persuaded by Chic’s
possession of “the right to sue [for infringement of the ’747 patent], an unfettered right to
sublicense [the patent to third parties], and the exclusive right to make, use, and
practice the ’747 patent in the United States.” Id., slip op. at 25. The court also
determined that the agreement’s term clause, which gave Contour a “reversionary
interest,” although a factor weighing in favor of the agreement being a license rather
than an assignment, was not dispositive. Id., slip op. at 19. According to the court, “if
the agreement transfers the other substantial rights to the patent, the court may not find
that a ‘hard’ transfer [date] alone mandates a finding that the agreement is a license
rather than an assignment.” Id.
The district court entered final judgment on May 4, 2004. Aspex and Contour
timely appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
An issue of standing to sue is a jurisdictional one that we review de novo. See
Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1551 (Fed. Cir. 1995) (en banc) (citations
omitted). Under 35 U.S.C. § 281, “[a] patentee shall have remedy by civil action for
infringement of his patent.” The term “patentee” encompasses “not only the patentee to
whom the patent was issued but also the successors in title to the patentee.” 35 U.S.C.
§ 100(d) (2000). A patentee may transfer title to a patent by assignment, and the
assignee may be deemed the effective patentee under 35 U.S.C. § 281 for purposes of
04-1265 5
holding standing to sue another for patent infringement in its own name. Prima Tek II,
L.L.C. v. A-Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000).
While a licensee normally does not have standing to sue without joinder of the
patentee, an exclusive license may be tantamount to an assignment for purposes of
creating standing if it conveys to the licensee all substantial rights to the patent at issue.
Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed.
Cir. 1991); see also Waterman v. Mackenzie, 138 U.S. 252, 256 (1891) (“Whether a
transfer of a particular right or interest under a patent is an assignment or a license
does not depend upon the name by which it calls itself, but upon the legal effect of its
provisions.”). To determine whether an agreement to transfer rights to a patent at issue
amounts to an assignment or a license, we must ascertain the intention of the parties
and examine the substance of what was granted. Vaupel, 944 F.2d at 874 (explaining
that the court must examine whether the agreements transferred all substantial rights to
the patent at issue and whether the surrounding circumstances indicated an intent to do
so).
A. Contour’s Standing to Sue
On appeal, appellants argue that Contour did not transfer to Chic all substantial
rights to the ’747 patent, and thus that Chic was merely a licensee without standing to
sue. As principal support for their position, appellants cite the provision of the
Contour/Chic agreement concerning the term of the license, which provides that the
agreement will expire on March 6, 2003, and in no event later than March 16, 2006.
According to appellants, the existence of a term limit to the license is a dispositive fact
in its favor because of its public policy ramifications. That provision creates the risk of
04-1265 6
multiple lawsuits if Contour were not joined as a necessary party under Federal Rule of
Civil Procedure 19 in any infringement action involving the ’747 patent. Appellants
further assert that because the potential full term of the Contour/Chic agreement is
significantly shorter than the term remaining on the ’747 patent once the agreement
expires,4 the risk of multiple lawsuits is heightened. Finally, appellants distinguish the
term provision contained in the Contour/Chic agreement from the reversionary interests
that we found to be minor in prior decisions, viz., Vaupel, 944 F.2d at 874, and Prima
Tek II, 222 F.3d at 1378-79. According to appellants, the reversionary interests in those
agreements did not have a “hard” termination date. Since the “licensees” of the Vaupel
and Prima Tek II agreements held the patent rights for an indefinite period of time,
appellants argue that the same public policy concern was not implicated in those cases.
Appellants also contend that Contour retained the right to sue for infringement,
which undercuts the district court’s finding of an assignment. Although the Contour/Chic
agreement gives Chic the right to sue for past infringement, appellants assert that it did
not transfer Contour’s right to sue for present and future infringement. Appellants
further argue that Contour could bring its own suit for infringement if Chic did not take
action within 30 days of receiving notice of infringement, and Contour’s retention of that
right weighs in favor of finding the Contour/Chic agreement to be a license, not an
assignment.
Finally, appellants contend that the court did not give enough weight to Contour’s
control over Chic’s ability to assign its rights to the ’747 patent. Appellants point to
4
Contour claims that the ’747 patent expires in 2017. The filing date for the
application leading to the ’747 patent was April 28, 1997. Accordingly, under 35 U.S.C.
§ 154, absent a patent term extension, the ’747 patent will apparently expire 20 years
later, subject to any terminal disclaimer.
04-1265 7
paragraph 19.1 in the Contour/Chic agreement, which states: “[no] right or license
hereunder may be assigned or otherwise transferred nor any duty or obligation
delegated, either in whole or in part, by operation of law or otherwise, by CHIC without
CONTOUR’s prior written consent, unless the said assignment is made to an Affiliate of
CHIC’s.” Appellants contend that such control and veto power over subsequent
assignments by Chic is another important ownership right to the ’747 patent that
Contour did not transfer to Chic, and hence argues for its retained ownership of the
patent.
Appellees respond that Contour had transferred all substantial rights to the ’747
patent by the time the complaint was filed. Citing the Supreme Court’s Waterman
decision, appellees argue that the mere fact that the Contour/Chic agreement contained
a reversionary interest does not preclude a finding of assignment. According to
appellees, until the reversionary interest is triggered, an exclusive licensee continues to
possess all substantial ownership rights in a patent. Accordingly, appellees argue that
until Chic’s rights to the ’747 patent expire in 2006, Chic, not Contour, is the effective
owner of the patent. Appellees also contend that the agreement in Vaupel contained a
reversionary interest, but we still concluded that the transfer of the patent rights there
was an assignment.
Appellees also contest the assertion that the Contour/Chic agreement did not
give Chic the right to sue for present or future infringements during the term of the
agreement. As support for that argument, appellees cite paragraph 11.2 of the
agreement: “CHIC and its authorized exclusive sublicensees may, at its own expense,
take and maintain of [sic] all reasonable measures, including litigation and seeking
04-1265 8
preliminary injunctive and all other available relief, to enforce the ’747 Patent against
and to abate and/or prevent infringements of its rights under the Agreement.” According
to appellees, the plain meaning of this language is that Chic can sue for past, present,
and future infringement of the ’747 patent.
Lastly, appellees contend that paragraph 19.1 of the agreement, which requires
Contour’s written permission before Chic can assign its rights under the agreement to a
third party, is not meaningful to this issue. Appellees argue that the more relevant
provision is paragraph 4.4, which gives Chic the virtually unfettered authority to
sublicense all of its rights to the ’747 patent to any third party of its choosing. According
to appellees, this unrestricted sublicense right is precisely the type of ownership interest
that this court in Prima Tek II, 222 F.3d at 1379-80, found to be consistent with an
effective assignment.
We agree with appellants that the Contour/Chic agreement did not constitute a
transfer from Contour to Chic of all substantial rights to the ’747 patent, and hence it
was not an assignment. The essential issue regarding the right to sue on a patent is
who owns the patent. The landmark Supreme Court case of Waterman v. MacKenzie,
138 U.S. 252, 255, 256 (1891), held that if a transfer of patent rights, regardless
whether it is through an agreement entitled a license or an assignment, includes “the
exclusive right to make, use, and vend” the patented invention, the assignee has
standing to bring suit in its own name. The case law of one of our predecessor courts
has followed Waterman by articulating the “all substantial rights” standard and requiring
a determination whether a particular transfer of rights falls on one side or the other of
that line. See Bell Intercontinental Corp. v. United States, 381 F.2d 1004, 1011 (Ct. Cl.
04-1265 9
1967). Other decisions of this court have continued to draw that line. But, at bottom,
the question is “who owns the patent”? Does the transfer or retention of certain rights
amount to an assignment of the patent or not? A key factor has often been where the
right to sue for infringement lies. See, e.g., Prima Tek II, 222 F.3d at 1380.
To be sure, Contour has transferred to Chic certain rights that are often
associated with ownership of a patent. As the district court correctly recognized, Chic
received (1) the exclusive right to make, use, and sell products covered by the patent;
(2) the right to sue for infringement of the patent; and (3) a virtually unrestricted
authority to sublicense its rights under the agreement. Those provisions themselves
strongly favor a finding of an assignment, not a license.
Moreover, Contour’s attempts to detract from those rights are not persuasive.
Contour transferred to Chic more than the right to sue only for past infringement.
Paragraph 11.2 gave Chic the right to “abate and/or prevent infringements.” Such
language contemplates the grant of the right at least to sue to enjoin future
infringements during the term of the agreement. We also agree with the district court
that Contour’s right to participate in lawsuits initiated by Chic during the term of the
agreement is insignificant since that participation is limited to monetary contributions
and receipts; Contour does not have a right to make decisions on litigation strategy. In
addition, we agree with the district court that the agreement minimizes the significance
of any right to sue that Contour may have had since it retained “no supervisory or veto
power over Chic’s grant of sublicenses.” Decision, slip op. at 21. Furthermore, given its
virtually unfettered right to sublicense, Chic’s limited ability to assign its rights to
unaffiliated third parties is not controlling.
04-1265 10
However, the dominant factor in the Contour/Chic agreement on which we differ
with the district court’s otherwise well-reasoned opinion is the provision limiting the term
of the license. Chic’s rights, however substantial in other respects, are unquestionably
valid for only a limited period of time, ending no later than March 16, 2006. See supra
n.2. As of March 16, 2006, Contour, absent an amendment of the agreement, will
regain all of the rights under the ’747 patent that it had previously transferred to Chic. It
is thus the unquestioned owner of the patent, and, whatever rights Chic had up until
2006, it is clear that Chic never had all substantial rights to the patent, i.e., it never was
the effective owner of the patent. Barring the ’747 patent being found invalid or
unenforceable, as of March 16, 2006, Chic will have possessed its rights for
approximately five years, in contrast to Contour’s sole and exclusive rights for the
remainder of the patent term. See supra n.4. Chic never had effective ownership of the
’747 patent. It was not a situation in which Chic had an exclusive license with all
substantial rights that was only defeasible in the event of a default or bankruptcy, or
some other condition subsequent.5 By having rights for only a limited portion of the
patent term, it simply did not own the patent. It was merely an exclusive licensee
without all substantial rights. The ’747 patent was never assigned; it was exclusively
licensed for only a fixed period of years, which does not meet the all substantial rights
standard. Thus, we hold that the Contour/Chic agreement was a license, not an
assignment, and Contour was the owner of the patent when the complaint was filed and
entitled to sue.
5
We also note that we are not presented with the situation in which a patent was
effectively assigned and ownership changed for a period of time, after which by
separate agreement it was to be reassigned in the future to the original patentee.
04-1265 11
Our conclusion that the termination provision in the Contour/Chic agreement
precludes a finding that the agreement was an assignment is consistent with the policy
concerns that we expressed in Vaupel. In Vaupel, while considering the importance of
an agreement’s right to sue provision, we noted the public policy in favor of preventing
multiple lawsuits on the same patent against the same accused infringer. 944 F.2d at
875-76. That policy favors finding Chic not to be the effective owner of the ’747 patent.
If we were to consider Chic the assignee of the patent under the Contour/Chic
agreement, as appellants recognize, it is possible that Chic could assert that patent
against an accused infringer during the term of the agreement without Contour’s
participation in the lawsuit, and Contour could later assert the patent against the same
accused infringer once the agreement expired. After all, the six-year limitation on
damages could encompass a period when Chic, according to the district court's holding,
and Contour both had rights to sue under the patent.
As we expressed in Evident Corp. v. Church & Dwight Co., Inc., 399 F.3d 1310,
1314 (Fed. Cir. 2005), another policy consideration is to prevent a party with lesser
rights from bringing a lawsuit that may put the licensed patent at risk of being held
invalid or unenforceable in an action that did not involve the patentee. That policy
counsels against allowing Chic, who only putatively had rights under the patent for a
limited time, to bring a patent infringement action without Contour, who would own the
patent rights for a much longer period of time, and thereby unilaterally jeopardize
Contour’s future enjoyment of the ’747 patent.
The cases cited by appellees in its argument that a reversionary interest alone
should not compel us to conclude that the Contour/Chic agreement is a license, and not
04-1265 12
an assignment, are readily distinguishable. As we have stated, this case involves more
than a reversionary clause. Moreover, none of the cases that appellees cite, Vaupel,
944 F.2d at 874 (termination provision triggered only in the case of bankruptcy), Prima
Tek II, 222 F.3d at 1378-79 (agreement provided for one-year renewals, but otherwise,
the agreement did not contain a fixed termination date), or Waterman, 138 U.S. at 261
(patentee could regain rights to the patent by paying off a mortgage), addressed an
agreement with a definite termination date, as is the case here.6 On the contrary, in
each of the agreements in appellees’ cited cases, the term of the agreement existed
potentially for the life of the respective patents, and it was presumable that the
transferred patent would never return to the assignor. That is not the case here.
We therefore vacate the district court’s decision that Contour lacked standing to
bring this action in view of our conclusion that Contour was the owner of the ’747 patent
when the original complaint was filed.
B. Joinder of Necessary Party
However, a further inquiry awaits us concerning whether the district court’s
dismissal was proper. Even though the lawsuit was properly brought in the name of the
owner of the patent, we must still determine whether the action as brought by appellants
included all necessary parties. For the same policy reasons that a patentee must be
joined in any lawsuit involving his or her patent, there must be joinder of any exclusive
licensee. See Independent Wireless Tel. Co. v. Radio Corp., 269 U.S. 459, 466 (1926)
(stating that both the owner and the exclusive licensee are generally necessary parties
6
In Prima Tek II, we expressly stated that we were leaving unanswered the
question whether an agreement with a “hard” termination date could convey to a
licensee standing to sue. 222 F.3d at 1378.
04-1265 13
in an action in equity). Appellants assert that all of the necessary parties to this action
were parties to the original complaint since Contour was the patentee and Aspex was
the exclusive licensee of the ’747 patent. According to appellants, Aspex obtained an
exclusive license through a prior implied or oral sublicense agreement with Chic that
matured contemporaneously upon later execution of the written Contour/Chic
agreement. Appellants contend that all of the rights that were conveyed to Chic by the
Contour/Chic agreement were also passed on to Aspex. Even if Aspex had not
acquired its exclusive license before the original complaint was filed, appellants argue
that Aspex had acquired sufficient standing through the Chic/Aspex agreement, which
was executed before the amended complaint was filed.
In its decision, the district court did not consider whether Aspex was an exclusive
licensee with the right to sue, either through an implied license or the later Chic/Aspex
agreement. The court determined only that Aspex was not an assignee of the ’747
patent when the original complaint was filed. Once the court determined that Contour
was not the patentee at the time the complaint was filed, the only way a dismissal could
have been avoided was if Chic had transferred to Aspex all of its rights under the patent
through a written agreement prior to the filing of the complaint, which the court found
had not occurred. However, now that we have concluded that Contour was the effective
patentee when the complaint was filed, whether Aspex or Chic was an exclusive
licensee at that time is an issue that must be decided. If the license between Chic and
Aspex was not effective at the time of the original complaint, then Chic was a necessary
party and it has not been joined. If Aspex was an exclusive licensee at the proper time,
then Chic was not a necessary party and Aspex was in fact a proper plaintiff.
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However, we leave the question of Aspex’s status for the district court to decide.
As the district court has already recognized, determining whether an assignment or a
license was granted involves different analyses. For example, an assignment must be
in writing, while a license can be implied. Enzo, 134 F.3d at 1093. Determining
whether there was an implied license between Chic and Aspex prior to the filing of the
complaint may involve a factual determination. As an appellate court, we decline to
undertake that inquiry in the first instance. We also leave it for the district court to
determine whether Chic, if it was a necessary party to this action, could have been
joined. Thus, we remand for the district court to determine whether all necessary
parties to this action were joined, or could have been joined.
CONCLUSION
We vacate the district court’s decision dismissing this action on the ground that
neither Contour nor Aspex had standing to sue for infringement of the ’747 patent, and
remand for further proceedings consistent with this opinion.
COSTS
No costs.
VACATED AND REMANDED
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