University of South Florida Research Foundation, Inc. v. Fujifilm Medical Systems U.S.A., Inc. (Fed. Cir. 2021)

By Kevin E. Noonan --

The issue of standing can be outcome-determinative:  without it, no matter how worthy a party's position or arguments, a court will not consider them without standing.  The vagaries of standing and its importance were illustrated this fall in the Federal Circuit's opinion in University of South Florida Research Foundation, Inc. v. Fujifilm Medical Systems U.S.A., Inc.*

The action arose over a dispute involving an invention described in the opinion as "Workstation-User Interface for Digital Mammography."  This invention was initially disclosed by faculty at the University of South Florida who assigned their rights to the University.  A later assignment of what is presumably a "new and improved" version of the invention was assigned by these inventors five years later, leading to filing an application resulting in U.S. Patent No. 6,630,937, entitled "Workstation Interface for Use in Digital Mammography and Associated Methods."

The details of the relationship between the University and University of South Florida Research Foundation (USFRF) are obscured by redactions, but under a nunc pro tunc license agreement (putatively) relating to the '937 patent between these Florida entities, the USFRF filed suit against Fujifilm for infringement.  USFRF asserted a chain of interest in the patent in the complaint running from the inventors to USF to USFRF:

The inventors of the '937 patent assigned their rights to the University of South Florida in Tampa, Florida.  The University of South Florida in turn assigned their rights to the '937 patent to the Plaintiff in this lawsuit, namely the University of South Florida Research Foundation, Inc. ("USFRF").  USFRF is currently the owner of the entire right, title and interest in United States Patent No. 6,630,937.

Nevertheless, Fujifilm moved for summary judgment that USFRF lacked standing to sue, arguing that the license agreement did not transfer "all substantial rights" to the Foundation for it to bring suit by itself.  The defect, which USF attempted to "correct" if permitted to file a Second Amended Complaint, was that rather than assigning all right, title, and interest to the Foundation, the University had just granted an exclusive license.  The District Court dismissed the action (without prejudice) under Federal Rule Civil Procedure 12(h)(3) for "lack of both statutory and constitutional standing"; as explained in a footnote, "statutory standing" referred to 35 U.S.C. § 281, which the Federal Circuit characterized as "simply a statutory requirement" rather than a separate form of standing.  The defects in the license relied upon by the District Court included a lack of "an exclusive granting of the right to defend the patent to USFRF," the lack of any language regarding "the transference of the right to sue," and the lack of any provisions that "limit[ed] USF's ability to bring suit for alleged infringement."  Importantly, the District Court also considered the license's "grantback" provisions that permitted the University to practice the invention for "internal research, clinical, and education purposes" as standing-precluding provisions.  The District Court's constitutional (Article III) standing decision was based on USFRF's refusal to disclose the invention disclosure referred to in the license, which the Court held was a "necessary document"; another consideration was a question of whether the right to sue had been transferred prior to filing the complaint.  USFRF appealed.

The Federal Circuit vacated the District Court's decision dismissing the action on standing grounds and remanded, in an opinion by Judge Stoll, joined by Chief Judge Moore and Judge Reyna.  The issue, framed by the Court's recitation of a litany of its precedent, is whether "an exclusive license is tantamount to an assignment," which depends on "the intention of the parties [to the license agreement] and . . . the substance of what was granted," citing Alfred E. Mann Found. for Sci. Rsch. v. Cochlear Corp., 604 F.3d 1354, 1358–59 (Fed. Cir. 2010), quoting Mentor H/S, Inc. v. Med. Device All., Inc., 240 F.3d 1016, 1017 (Fed. Cir. 2001).  The panel noted that while there had been decisions where the rights that needed to be transferred to establish standing to sue had been discussed, the Court had never "established a complete list of the rights that must be examined to determine whether a patentee has transferred away sufficient rights to render another party the owner of a patent."  Instead the Court had adopted a "totality of the agreement" approach, wherein "[a]mong the factors that we consider, the exclusive right to make, use, and sell, as well as the nature and scope of the patentee's retained right to sue accused infringers are the most important considerations in determining whether a license agreement transfers sufficient rights to render the licensee the owner of the patent," citing Diamond Coating Techs., LLC v. Hyundai Motor Am., 823 F.3d 615, 619 (Fed. Cir. 2016) (quoting Alfred E. Mann).

Applying this precedent, the panel compared the rights transferred here with rights transfers deemed sufficient to satisfy the standing requirements.  In Alfred E. Mann, for example, the licensor's retention of the right to sue for infringement was "the most important factor in determining whether an exclusive license transfers sufficient rights to render the licensee the owner of the patent."  "[A] broad right to decide whether to bring suit and to control litigation is thoroughly inconsistent with an assignment of the patents-in-suit to [a licensee]" according to that opinion, thereby setting out a well-defined basis for finding lack of standing.  Similar considerations applied in AsymmetRx, Inc. v. Biocare Med., LLC, 582 F.3d 1314, 1321 (Fed. Cir. 2009), where the patentee retained "substantial interests in the patents-in-suit," including the right to sue for infringement.  Finally, in Diamond Coating, limitations on the licensee (including prohibition against licensing the patent without licensor's permission, a  grantback license that included a right to sell patented products and control over decisions regarding enforcement) precluded the licensee from having standing to sue on its own behalf.

Here, the panel opined, the District Court was not incorrect in finding that USFRF was not a patentee as defined in § 281 and could not sue without joining USF.  The Court's decision was grounded in the first instance on an absence in the license of transfer from USF to USFRF of the right to sue on the patent.  As synthesized by the Federal Circuit, "[t]he agreement's silence on the right to sue accused infringers does not show an intent to transfer that right.  Rather, it shows that USF retained the important right to enforce the patent against accused infringer," and the panel decision was thus consistent with their Alfred E. Mann, AsymmetRx, and Diamond Coating precedent.  Additional features of the license (including redacted provisions on reservation of undisclosed rights and a weighting of infringement suit recovery amounts) supported this conclusion.  And the panel rejected USFRF's attempt to rely on their decision in Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000), regarding a transferred royalty-free right to sublicense.

Turning to Article III standing, the Court applied Second Circuit law relating to USFRF's failure to disclose the invention disclosure and failure to provide evidence of when the license agreement was signed.  On this issue the Federal Circuit held that the District Court erred in deciding that production of the invention disclosure was the only way USFRF could satisfy the requirement that the license covered the '937 patent, because doing so would involve waiver of attorney-client privilege and work-product protections.  The Court found sufficient disclosure in the license of the equivalence of the invention disclosure and the '937 patent to establish that the license extended to that patent.  According to the opinion, "[t]he correlation of the patent application serial number listed on the assignment and the face of the patent should have been sufficient in this case to prove that the license agreement covered the '937 patent."

Also, the Federal Circuit held that the District Court erred in finding lack of Article III standing due to the undated nunc pro tunc license that failed to show when it was signed.  According to the panel, "[e]ven if the license agreement was signed after the filing of the complaint, USFRF would have held at least one exclusionary right in the patent under [a Revenue Allocation Agreement previously entered into by the parties]."  Constitutional standing arises when a party holds at least one such exclusionary right under the Court's precedents, including WiAV Sols. LLC v. Motorola, Inc., 631 F.3d 1257, 1265 (Fed. Cir. 2010);  Morrow v. Microsoft, 499 F.3d 1332, 1340–41 (Fed. Cir. 2007); and Intell. Prop. Dev., Inc. v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1347 (Fed. Cir. 2001), according to the opinion.

Whether USFRF can cure the deficiencies in statutory standing under § 281 will be the issue the District Court will be asked to decide on remand, because as explained in the opinion "the district court's dismissal was predicated on [USFRF's lack of] constitutional standing" and thus did not consider USFRF's attempt to cure in its Second Amended Complaint.  But both USF and USFRF believed the Foundation had standing to sue, and the District Court's decision on statutory requirements for standing and the Federal Circuit's opinion illustrate how wrong parties can be in arranging their agreements to be consistent with the rubrics discussed in this opinion.

University of South Florida Research Foundation, Inc. v. Fujifilm Medical Systems U.S.A., Inc. (Fed. Cir. 2021)
Panel: Chief Judge Moore and Circuit Judges Reyna and Stoll
Opinion by Circuit Judge Stoll

* The opinion was handed down under seal on October 22nd and then reissued on November 23rd in partially redacted form.

Comments

[skeptical]

Vagaries....?

Noun: an unexpected and inexplicable change in a situation or in someone's behavior.

Or did you mean something else?

[Kevin E Noonan]

I think that Federal Circuit precedent on almost any topic can have vagaries .

Happy holidays!

[Paul F Morgan]

Re: "..illustrate how wrong parties can be in arranging their agreements.." [for patent enforceability standing, etc.]. My impression over the years is that a high percentage are from universities. Including serious legal deficiencies in employee agreement/invention assignments or "policies", insistence on "joint ownership," or retention of more than a license, without full understanding of the legal consequences, etc.

[Paul F Morgan]

On the subject of standing and compulsory joinder in split rights in a patent note LONE STAR SILICON INNOVATIONS v. NANYA TECHNOLOGY CORPORATION (Fed. Cir. 2019) and FRCP 19.

[Kevin E Noonan]

Thanks, Paul. Happy holidays!