By: Daniel Kazhdan, Ph.D. and Blaney Harper – In a recent Initial Determination (“ID”), Administrative Law Judge Lord ruled that a patent owner did not have standing to sue without joining a third party to which certain rights had been transferred. Certain Audio Processing Hardware, Software, and Products Containing the Same, Inv. No. 337-TA-1026, Initial Determination (Oct. 26, 2017).
Andrea Electronics Corp. (“Andrea”) filed a complaint asserting that a number of companies, including Apple Inc. (“Apple”) infringed its patents by importing certain products. It was undisputed that Andrea held formal title of the patents, but Apple argued that Andrea did not hold “all substantial rights in the patents-in-suit,” as required by Diamond Coating Technologies, LLC v. Hyundai Motor America, 823 F.3d 615, 618 (Fed. Cir. 2016).
Typically, questions of standing arise where a party who receives certain rights in a patent sues. In that context, Azure Networks v. CSR PLC, 771 F.3d 1336 (Fed. Cir. 2014), lists nine non-exhaustive factors to consider: (1) the nature and scope of the right to bring suit; (2) the exclusive right to make, use, and sell products or services under the patent; (3) the scope of the licensee’s right to sublicense; (4) the reversionary rights to the licensor following termination or expiration of the license; (5) the right of the licensor to receive a portion of the proceeds from litigating or licensing the patent; (6) the duration of the license rights; (7) the ability of the licensor to supervise and control the licensee’s activities; (8) the obligation of the licensor to continue paying maintenance fees; and (9) any limits on the licensee’s right to assign its interests in the patent.
Here, by contrast, Andrea was the original patentee, but it had transferred a number of rights to AND34 Funding LLC (“AND34”) in exchange for litigation funding. Relying on the Azure factors, ALJ Lord ruled that Andrea did not have standing to sue without joining AND34 and she terminated the investigation. In reaching her conclusion, ALJ Lord found significant the fact that Andrea is required to sue or license certain companies if they infringe and Andrea and AND34 share control over litigation strategy (Azure factor 1); Andrea is contractually prohibited from developing the patented technology itself and is limited in its rights to convey the patent rights (Azure factor 2); AND34 was guaranteed a portion of any revenue received from the patent (Azure factor 5); and AND34 has certain supervisory powers (Azure factor 7).
ALJ Lord rejected Andrea and the Staff’s reliance on the fact that AND34 also did not have all substantial rights in the patent. According to ALJ Lord, it is not an either/or proposition. It could be that “neither of the parties can sue without joining the other.”
This case is an important reminder that patentees—both at the ITC and in district courts—need to be careful to join all relevant parties when enforcing their patents. The ITC may, and here did, look under the hood to find that the formal title holder did not have sufficient rights to sue by itself. Respondents should also be mindful of the Azure factors and seek to challenge standing, when appropriate.
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