AsymmetRx, Inc. v. Biocare Medical, LLC (Fed. Cir. 2009)

    By Donald Zuhn --

Last week, the Federal Circuit determined that Plaintiff-Appellant AsymmetRx, Inc. did not have standing to bring an action for infringement of the patents-at-suit absent the participation of the President and Fellows of Harvard College.  As a result, the CAFC vacated and remanded an order by the District Court for the District of Massachusetts granting summary judgment in favor of Defendant-Appellee Biocare Medical, LLC.

Harvard owns U.S. Patent Nos. 6,946,256 and 7,030,227, which relate to anti-p63 monoclonal antibodies and methods for using them to detect malignant carcinoma.  In 2002, Harvard entered into a license agreement with Biocare to make, use, and sell p63 antibodies.  The Biocare license states that it "does not include a license under any U.S. or foreign patents" -- the '256 and '227 patents were pending but had not issued at the time Harvard entered into the agreement with Biocare.

In 2004, Harvard entered into a license agreement with AsymmetRx that also concerned p63 antibodies.  The AsymmetRx license states that AsymmetRx receives "an exclusive commercial license" for the '256 and '227 patents.  Under the terms of the AsymmetRx license, Harvard could (a) make and use the claimed p63 antibodies for academic research purposes, (b) grant non-exclusive licenses for the claimed p63 antibodies to other non-profit or governmental institutions for academic research purposes, (c) render the license non-exclusive if AsymmetRx failed to meet certain commercial use or public availability benchmarks or FDA filing milestones, and (d) suggest sub-licensees to AsymmetRx (Harvard would also receive a portion of all sublicensing income).  In addition, the agreement gave AsymmetRx the right to prosecute in its own name any infringement of the '256 and '227 patents, provided that AsymmetRx gave "careful consideration to the views of Harvard and to potential effects on the public interest in making its decision whether or not to sue" prior to filing suit.  Harvard also retained the right to join as a party in any such infringement action, and AsymmetRx was required to secure written consent from Harvard before settling or otherwise voluntarily disposing of any such infringement action.

In 2007, AsymmetRx sued Biocare for infringement of the '256 and '227 patents, alleging that Biocare's sale of p63 antibodies violated its exclusive rights.  The parties filed cross-motions for summary judgment, and the District Court granted Biocare's motion and denied AsymmetRx's motion.

In vacating the District Court's order granting summary judgment, the Federal Circuit determined that "Harvard retained substantial control over the patent rights it was exclusively licensing, such that its agreement with AsymmetRx did not convey all substantial rights under the patents and thus did not make the license tantamount to an assignment."  Because "AsymmetRx must therefore be considered a licensee, not an assignee," the panel determined that under Waterman v. Mackenzie, 138 U.S. 252 (1891), and subsequent cases, "AsymmetRx does not have a sufficient interest in the '256 and '227 patents to sue, on its own, as the 'patentee' entitled by 35 U.S.C. § 281 to judicial relief from infringement" (absent joinder of the patentee).

In reaching this determination, the Court compared the terms of the AsymmetRx license with those of licenses in three other CAFC cases, and determined that the terms of the AsymmetRx license were more similar to those in the license at issue in Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1130 (Fed. Cir. 1995), than the licenses at issue in Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 874 (Fed. Cir. 1991), and Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000).  Under the license in Abbott, the patentee retained a limited right to make, use, and sell products embodying the patented inventions, a right to bring suit if the licensee declined to do so, and the right to prevent the licensee from assigning its rights under the license to any party other than a successor in business.  In addition, the licensee could not "prejudice or impair the patent rights" in prosecuting or settling any infringement action.  In Vaupel, the license allowed the patentee to retain a veto right on sublicensing, the right to obtain patents on the invention in other countries, a reversionary right in the patent in the event of bankruptcy, and a right to receive infringement damages, the licensee was granted the right to sue in its entirety, subject only to the obligation to inform the patentee of the existence of the suit.  Finally, in Speedplay, the license did not grant the original patentees the right to participate in an infringement action brought by the licensee, or limit the licensee's management of that action.  In view of these three cases, the panel determined that:

This case is more similar to Abbott than to Vaupel or Speedplay in terms of what rights Harvard retained under the patents.  Although the AsymmetRx License effected a broad conveyance of rights to AsymmetRx, Harvard retained substantial interests under the '256 and '227 patents, including the right to sue for infringement, and AsymmetRx therefore does not have the right to sue for infringement as "patentee" under the patent statute.

That Harvard had licensed rights to anti-p63 antibodies to both Biocare and AsymmetRx (the latter in the form of an exclusive license) did not escape the panel's notice:

Harvard, by granting licenses to two parties involving the same subject matter, has potentially put itself in the conflicting position of having to aid two licensees opposed to each other.  Complicating matters is the fact that Harvard is continuing to accept royalty payments from Biocare resulting from sales in the commercial diagnostic market that AsymmetRx asserts are infringing its patent rights.  If anything, this added complication indicates that the purpose of Rule 19 [the federal joinder rule] to avoid multiple suits or incomplete relief arising from the same subject matter is best served by joinder of Harvard, which would permit the relationships between AsymmetRx, Biocare, and Harvard to all be resolved at the same time as well as solve the standing problem.

AsymmetRx, Inc. v. Biocare Medical, LLC (Fed. Cir. 2009)
Panel: Circuit Judges Lourie and Rader and District Judge Clark
Opinion by Circuit Judge Lourie

Comments

[scribo]

Joinder, lost profits.

The need for joinder of licensor when the exclusive license is by Field of Use is to be generally expected, see International Gamco, INC. v Multimedia Games, Inc. 504 F.3d 1273, 1279 (C.A.F.C. 2007). Not sure why Plaintiff left Harvard off.

Fettering the right to sue in an exclusive license is always risky. There are no lost profits damages if the maker/seller is not the owner/true-exclusive-licenssee:
Poly-America, L.P. v. GSE Lining Technology, Inc. 383 F.3d 1303, (C.A.F.C. 2004), (“We have held that a licensee generally may not sue for damages unless it has exclusive rights under a patent, including the right to sue.”), Intellectual Property Development, Inc. v. TCI Cablevision of California, Inc. 248 F.3d 1333, (C.A.F.C. 2001) (”The right to sue in Vaupel, which was deemed ‘particularly dispositive,’ was only subject to an obligation to inform the transferor of any impending litigation”)