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hello and welcome to the b2ip webinar series hosted by beijin bienemann beijin bienemann is a boutique intellectual property law firm based out of southeast michigan i'm peter kiros and today my colleague brian hart will be discussing assignments in intellectual property on your screen you will find a q a feature please any of any questions there and we will answer them at the end of the presentation thank you and we hope you enjoyed the presentation thank you peter as he as peter mentioned today we'll be talking about assignments that's that's really about the ownership of inventions and patent applications and patents so to make sure everyone's on the same page with terminology an assignment is a transfer of ownership and an assignee is the owner here's a road map of what we'll cover today there's a brief section to start on the fact that patents are property next who has control of prosecution that will include a focus on the common situation of inventors who are employees and inventing as part of their job the third section is registration of assignments that's filing assignments with the patent office there's benefits to doing that and finally we'll cover standing so that's what interests in a patent allow you to have control of litigation okay so first section patents as property title 35 of the united states code that's brought that says that patents shall have the attributes of personal property that means you can own patents ownership can transfer to other to others in all the ways that it can with property so selling giving as a gift liquidation and bankruptcy inheritance divorce judgments whatever that means that transfers of patents are generally governed by state law not by federal law so maybe a divorce settlement says that one spouse gets the intellectual property and the other spouse gets sole custody of the dog that means for a sale a like a traditional arm's length transaction uh normal rules of contract law uh up supply for whatever state states govern that contract so in particular if party a assigns a patent to party b party b has to provide consideration to party a something of value in exchange for the patent finally normally under contract law contracts are binding whether they are oral or written but the statute here specifies that assignments that you've had have to be in writing by the way you'll see citations in small gray font that's just so they don't clutter things up but we do provide the slides to anyone who wants them so you can use the citations to look up something later if you want okay so next up is the issue of who gets to file a patent application and control the prosecution of an application from the patent office and in this section we'll also be covering kind of the ownership of inventions pre-filing stage and some international considerations so here are the different types of entities that are eligible to file a patent application and to be the applicants so what's at the bottom of the slide is a snippet from an application data sheet an ads which is one of the forms that you have to include with an application the applicant has to check which type of applicant they are so first is the inventor or joint inventor if there's more than one so this is the default under the law if there have been no assignments of the invention then the inventors are the owners for the other for the other category some sort of transfer has occurred the the next category is the legal representative of a deceased inventor uh the the ads form is a bit more euphemistic legal representative under 35 usc section 117 that would be the executor of the deceased inventors estate next is the assignee so the the inventor has executed an assignment to transfer the invention to someone else the fourth category is a person to whom the inventor is under an obligation to assign so the inventor has not uh executed an assignment yet but they do have a legal obligation to do so the primary example here is an employment agreement that says that the employee has to assign inventions to employer and person here means a legal person so this is one of those situations where corporations are people finally there's a person who shows a sufficient proprietary interest this is this is a sort of catch-all category for all the ways that an invention can be transferred that aren't an assignment so basically by operation of law rather than by an assignment so we're going to focus on the last three categories here so first i'll talk about issues related to the assignee and the obligatory assignment and how that transfer of ownership works in the u.s i'll also touch on cross-jurisdictional issues so when you're seeking protection both in the u.s and in foreign countries then i'll wrap this section up briefly with a little bit about that sufficient proprietary interest category so if you are an assignee or what i'll call an obligatory assignee here's what the patent office requires from you first you have to provide documentary evidence of ownership of the invention if you're the assignee that would be the assignment if you're the obligatory assignee then that can be whatever creates the obligation that the inventor has to assign so a common example is an employment you also need to include an application data sheet that's what the snippet on the last slide is from kind of saying who you are which category you fall into if an ads is not included in the application then the patent office assumes that the inventors are the applicant and that they're the ones running the show so that's that's the patent office if you file the correct papers you're basically fine but what if what if those assignments and employment agreements and so on end up in court and you know in an adversarial proceeding so how are the courts going to rule who's the true owner of the invention and of patent to explore that we'll use a federal circuit case from 2009. board of trustees of leland stanford junior university aka stanford versus roche molecular so first let's lay out the facts the the invention here is a way to measure the effectiveness of drugs against hiv using blood samples the method uses polymerase chain reactions which is a way to make copies of dna and rna there's three inventors thomas merrigan david katzenstein and mark hallowedney they were researchers at stanford merrigan ran a laboratory in the department of infectious disease and kassenstein holiday worked at that lab uh so holiday is the one that the disagreement here centers on so let's let's do his story so to begin with he joins marigan's lab uh there he signs an agreement with the title copyright and patent agreement cpa presumably along with a stack of other documents to dealing with his employment the language of the cpa is i agree to assign or confirm in writing to stanford that right title and interest in such inventions as required by contracts and grants so when he starts he doesn't really know how to do pcr work so merrigan tells him to go do some work on the side for a company called cetus as a way to learn learn the the these techniques the the lab partners with cetus on different projects on a fairly regular basis so they kind of have an ongoing relationship so when when holden goes to cetus they have the him sign their own agreement which is called the visitors confidentiality agreement vca the language in the vca says i will assign and do hereby assign to cetus my right title and interest in each of the ideas inventions and improvements as a consequence of the work that i do at cetus as you can probably guess the court's reasoning is going to turn on the specific language in these two agreements which we will get to in a second um holiday uh published his some work on pcr based on his work at cetus with some with some co-authors from cetus so he's he's moving along there so holiday also is doing his research at stanford along with merrigan and katzenstein stanford files an application on that research listing those three as the inventors so the relationship between the cetus work and the work that becomes the patent application is that the basically the pcr the techniques are kind of developed in the cdis work and then a specific application of that to hiv is what the invention is so stanford does not make holiday sign an assignment right away that actually happens well after the application is filed but still before the litigation occurs uh roche purchases cetus that's why the case caption says roche so stanford and roche are having discussions about the use of this technology stanford wanted roche take an exclusive license and kind of market and bring to market the products based on it roche was pointing to the vca agreement and saying we we think we already own it and so we don't need a license so they fail to come to an agreement and that leads to this litigation stanford files an infringement suit uh and rosh's defense one of their defenses is that we're a co-owner of the patent and you can't infringe your own patents so so that's that's the factual setup for this the court's reasoning depends on the concepts of legal title and equitable type so we're going to take a slight detour to explain what those are legal title is basically complete all the formalities required for ownership there's some legal process and you cross all the t's and you dot all the i's and then you get the legal title to whatever whatever that is and equitable title is basically kind of gives you the right to get the legal title um fairness dictates that you should be able to become the owner but the legal process hasn't happened yet so to take an example outside of intellectual property um we'll look at the home buying process so if if you're in the market for a home you visit homes you see one that's for sale and you like it and so you make an offer to the owner here's how much i'll give you for the house the seller decides yep that's a good number i accept then you know a couple months over the next couple months there's a home inspection some other things happen and then you get to the closing which is you where you sign a bunch of documents and you get the deed to the house so where legal title and equitable title fit into this legal title passes from the seller to the buyer at the closing but the equitable title passes generally passes earlier so when the seller accepts the buyer's offer so when they when they have the actual agreement and so you know if things break down between the you know offer and acceptance and the closing the the buyer can sue in order to try to force the sale to still happen so obviously there's a bunch of complications here that i'm glossing over but that's the essence of what equitable title gets you okay so getting back to the course reasoning here first off i mentioned earlier earlier at the beginning that transfers of patents are generally governed by state law but this this cases all of this reasoning is a matter of federal law so it applies everywhere the cpa that's the agreement with stanford did not pass equitable title to stanford when hollande signed it agree to a sign so you're not assigning then you're just saying that at some point in the future you will make the assignment the court noted that the agreement might pass equitable title at the time when the invention is made but it didn't decide that one way or the other but contrast that with the vca with cetus so the language here is that makes the assignment happen right away do hereby assign as in the vca is the thing that is making the assignment from holiday to cetus so cetus immediately gets equitable title to any future inventions that fall within the scope of that agreement so they've all of that has already been assigned to cetus so the way legal title figures into this the rule is that legal title passes to the equitable title holder upon the creation of the invention the court did not determine the exact date that the invention was made but it could not have been any later than the filing of the application so cetus has legal title no later than when stanford files the application uh poland knee executes an assignment after the filing during prosecution but by that point he doesn't have anything doesn't have any rights that he can sign to stanford so cetus already has those rights at that point so the court finds that roche you know by virtue of cetus is a co-owner of the patent part of owning a patent is the right to practice it so there can't be any infringement and the case is dismissed uh stanford is still a co-owner of the patent because of the rights that it got from the other two inventors merrigan and katzenstein it's just not the solo inventor i think stanford gets to visit the patent on weekends so what what are some takeaways from this case for dealing with employee inventors you know the most obvious takeaway is that the wording of the agreements really matters you want to structure it so that you can get your rights immediately don't don't wait until later you can use hereby assign or some language like that that makes it clear that the document being signed is what is making the transfer of rights happen i should note that that stanford had a reason for using the wording that it did it wasn't just like a pure mistake on their part they they would often let inventors keep their inventions so it's it's only a subset of the inventions that were getting transferred to stanford so and they did that to use as a selling point for researchers so yeah you know unlike private industry and unlike all those other universities we let you keep your inventions um so for most companies that's not the situation they face so there isn't that's not a reason to to deviate second when an employee comes up with an invention uh the employer should have them execute a formal assignment of that invention to the employer so this is on top of the employment agreement what this does is to ensure the transfer of the legal title that that happens right away also remember from earlier that the patent office requires some documentary evidence that a party filing an assignee filing as an assignee really does have ownership of the invention and that document becomes a public record so anyone who looks up the prosecution history of that patent will find it if you have an assignment that you can file then you don't have to file anything else like the employment agreement you can you can keep those private another thing that has to be filed when you file a patent application is a declaration by the inventor basically affirming that yes i really did invent this thing the patent office explicitly allows the declaration and the assignment to be the same document so that that can be a good option the inventor is going to sign the declaration anyway so using the combined form means they only have to sign one thing so the final takeaway is don't let your employees just go off signing whatever it's not an uncommon situation for two companies to be collaborating and that may necessitate you know non-disclosure agreements or other types of agreements between the companies and between the individuals so the advice here is not just never sign things but you do want the legal department or outside council to be reviewing those agreements first if stanford had looked at the sea disagreement before poland signed it they could have potentially nipped that kate the case in the bud and also if companies are going to collaborate things are just going to run more smoothly if the ip situation is figured out ahead of time and before there's a bunch of costs sunk into the project it's that that advice assumes that the inventor is willing to do what you ask them to do so um what if they're not so here's some situations uh that the patent office lets you move forward without a declaration by the inventor so first the inventor is deceased the investor is legally incapacitated so a court has decided that the inventor cannot manage their own affairs maybe the inventor's in a coma or they've been committed or something like that the inventor refuses to execute the declaration or the inventor cannot be found after a diligent effort you have to really try and still come up short in order to move forward with the application without the inventor um if you if you do fall into one of these categories what do you do so instead of the declaration you file what's called a substitute statement that involves affirming many of the same things that the inventor would affirm in the declaration it's but it's signed by the applicant representative of the applicant instead of the inventor and instead of the assignment you you can file the employment agreement or whatever other document shows that you should be the applicant so here's another benefit of using an agreement that says hereby assign instead of agree to a sign if it says hereby assign then you have the legal title even though the inventor has backed out if the government says agree to assign then you're an obligatory assignee you could still file the application and control the prosecution but you will need to take some further action maybe in court to actually get the application assigned to you um so that that's all before the u.s patent office so let's talk a bit about cross-jurisdictional practice it's pretty common to want patent protection in multiple countries and the laws governing ownership of inventions and patents differ from country to country the u.s is a bit of an outlier in that everything is contract law in the stanford case we just talked about the court's reasoning was just applying legal rules to these two agreements made by made by the parties other countries have different approaches for inventions made by employees so for example in germany there are statutes spelling out a kind of back and forth where the employee must notify the employer of an invention uh the employer can then choose whether to claim that invention or not and if not then it kind of reverts back to the employee so and this scheme is mandatory you cannot contract out of it also the employee by statute has to receive reasonable compensation for the invention in the uk there's also a statutory scheme for employee inventions that transfers ownership to the employers china similarly also vests the ownership of an employee invention in the employer to begin with um that applies to both state-owned enterprises and private enterprises the statute also lists exactly how much compensation the employee should receive for an invention like it has it has a an amount of in that in a currency amount the employer and employee can agree to a different amount but that still has to be reasonable in japan our last example employee inventions can be subject to contract though there's there are still statutory provisions specifically dealing with rules around employee inventions and again the employee has to receive reasonable compensation for the invention on top of their normal salary so the most a very common way to see protection in multiple countries is through the patent cooperation treaty the pct a pct application is an application that can then be forwarded to multiple countries patent offices pct application can claim priority to a national application so you can file a us application first and then file the pct clinton authority or the pct can be the first application that you file so what happens in a pct application first there's an international phase which is where you've filed the pct application and then after that there's a national phase where it's forwarded to the different countries patent offices and you're then you're dealing with those uh national patent offices and so for different countries different additional information may have to be added for the national phase ing to that country's law so what you see on the slide are some standard forms that are relevant for our topic today that may need to be included for the national phase depending on what countries you're designating so the declaration of inventorship uh which we've mentioned before that's signed by the inventor affirming they really did make the invention this is the us is the only country that requires this so and the rest of the declarations here on this list are signed by the applicants not by the inventors so a declaration identifying the inventors is required by the european patent office germany the uk china and and these are non-exclusive lists of countries here a declaration that the applicant is the one who is entitled to receive the patent that's that's required in germany for example um so this this declaration explains why you're the owner so for a u.s invention it would reference the assignment from the inventor but for a german invention it would reference the employment relationship because that's enough under german law a declaration of entitlement to priority points to an earlier application that the pct is claiming priority to so the right to priority is a right that can be transferred separately from other rights something that you have to pay attention to so with this comparative and international scheme in mind what are some best practices so there's a couple different scenarios that that might come into play uh you might file a u.s application and then file a pct application or a national application claiming priority to the us application or you might file a national application in a foreign country and then a u.s application claiming priority to that application or you might file a pct application first so for all three scenarios it is better to get an assignment executed by the inventors uh as early as possible assuming that you want protection in the us um you know so preferably before filing the first application um so you know at that point in time the inventor is still your employee but 12 months or 30 months down the road when you know maybe that has changed so in in the scenario in which you're claiming priority to a u.s application you need to ensure that you have the right of priority to that u.s application the easiest way to do this is to be the applicant when the us application is filed by including assignments from all the inventors this is this is common practice in the us for non-provisional applications it's not as common for provisional applications in the u.s a lot of times uh companies will just file those without the assignments and then get the assignments in time for the non-provisional application but if you do that then the inventors are the ones that have the right to priority since they were technically the applicants for that first provisional application so the piece of advice about getting the assignments on on file with the first application applies to both provisionals and non-professionals in the u.s so if you're filing a foreign application claiming priority it's better to get the assignments on file with the us patent office with the application even if the application is provisional so if that's not possible you'll need to get the priority rights transferred from the inventors to you since the inventors are now the applicants the assignment should explicitly mention that the priority rights from the u.s application are being transferred also the assignment should be uh signed by both the assigner so the the inventors uh and the assignee so the employer also needs to sign it so this this is again where a situation where european practice in particular is deviating from u.s practice in the us is typically enough for just the assigned order to sign the agreement but in the epo and in some european countries you need signatures from both the other alternative is to include the inventors as app as applicants alongside the company when filing the pct application so if there are applicants then they're conferring their right of priority to the application all right so in the second scenario if you're filing the pct application first you won't actually need the assignments until you get to the national phase but again it's better to get them early as we saw in the last slide the inventor declarations and declarations by the applicant referring to the assignments can be included in the international phase of the pct application or they can be held back for the to the national phase okay so if you remember the categories of applicants from earlier everything we just covered is talking about assignees and obligatory signees so now we're going to briefly touch on that last category persons having a sufficient proprietary interest in the patent so this is basically the miscellaneous category so one type of sufficient proprietary interest is transfer of ownership by legal judgment so that could be liquidation and bankruptcy splitting assets in a divorce inheritance as a result of a probate judgment stuff like that uh another so if you're the applicant under this category what does the patent office want from you the the rule is that you have to make a showing of interest you need to explain why you are the legally correct applicant and why you're the legal owner of the invention so the recommended way to do that ing to the manual of patent examining procedure is a legal memorandum explaining why you're the owner ing to the laws of the relevant jurisdiction so if it's a legal judgment to give you ownership then that's the jurisdiction that that court sits in so it might be a state it might be a foreign country all right so that that wraps up the section on controlling prosecution and ownership of inventions pre-filing so next up is the registration of assignments with the patent office so let's let's start with what it is that we're talking about the patent office keeps public records of assignments of patent this is another spot where we can make a comparison with real property there's you know for for real property there's a county office and has the deeds for all the parcels of real est real estate in that county depending on where you live maybe it goes back to the 1800s so the patent office does the same thing with patents there's an assignment history for each patent starting with the inventors and this this is a separate database from the from the prosecution history and so in in this in the registration system assignments are not the only type of entry there's also security interests that's where the patents are used as collateral for loan or something like that for some types of companies like startups or non-practicing entities intellectual property might be the only valuable asset they've got so if they want a loan that's what they're going to have to use to secure it also releases of security interests are recorded so when the loans paid off also when the patent holder changes names or merges into another company that's also something that needs to be recorded the patent office will also record licenses to patents it's although it's less common for parties to choose to record those so here here's an example of what the records show so these are for u.s patent number 752373 this is one of the patents involved in the recent trial between vlsi and intel in the western district of texas where the lsa got a 2 billion verdict so this is a fairly valuable patent when you look up the assignment history for this patent there's 25 transactions listed in reverse chronological order so i pulled out two here to show his examples so the earliest one on the bottom of the slide is from the four inventors to their employer pre-scale semiconductor there's a heading in the middle assigners it lists the foreign vendors the assignee lists them at the bottom the conveyance is the type of transaction so here's uh here that's assignment of the signors interest at the top is the reel and frame number which is what you'd use if you wanted to travel to the patent office in alexandria virginia and physically look up the the assignment document i don't think people are doing that too much these days among the other transactions that i didn't copy onto this slide the patent is used as a security interest a few times as part of a large portfolio then those are released freescale merges into nxp so that has to be listed as a transaction the other one that's on the slide is the assignment from nxp to vlsi so that's the current owner and the plaintiff against intel so for all of these transactions there's a link to the relevant document you can look up and see the actual assignment or security interest agreement or whatever so that's that's what the registration is uh the next question is why why does the patent office do this why why are we keeping track of these records the problem that is trying to solve is inconsistent assignments so party a transfers a patent to party b then party a turns around and assigns the same patent to party c so who should get the patent b or c so when assignments are public records then if party c does its due diligence and looks up the patent it will find out the party a has already assigned the patent to party b and therefore not go through with the transaction the the default rule is that the first assignee wins so that's uh so if nobody does any registrations that's that's what happens so in in this scenario that means b wins over c but the registration system can change that outcome so there's there's three requirements that that c the later assignee has to fulfill in order to win over the earlier assignee to win over b so first the assignment to c has to be for valuable consideration so c has to be giving something to a in exchange for the patent second c cannot have notice of the assignment b so if c knows about the assignment to b then it's not really fair to let c swoop in at that point and kind of steal the pattern out from under b third the assignment to b is is not recorded before the assignment to c occurs or within three months so to re to restate that another way b is safe if b either records the assignment with the patent office before the later assignment to c or if b records the assignment within three months so whether c records the assignment uh whether the later assignee records the assignment doesn't really matter here it's just about whether b is recording it in time so hearing those requirements uh hearing those requirements you might think hey could this have saved stanford in the case that we talked about earlier so to to remind you of the facts holiday signed an agreement that did not immediately transfer his rights to stanford then signed an agreement that did immediately transfer his rights to cetus and later signed an assignment to stanford so the first assignment doesn't really do anything in our in our pattern here but the second the assignment to see this is therefore the earlier assignment this and then the assignment to stanford that they did after the patent the after the application was filed that's uh makes stanford the later assigning so ro roches b stanford is c um so the court focuses on the notice prong of that three-part test and doesn't really discuss the other two prongs for the for the first prong for valuable consideration receiving employment in response for an assignment is generally considered sufficient so stanford was probably fine there um cetus did not record anything with the patent office so that that's why the third prong didn't really factor into it so in in terms of the second prong in terms of notice uh the court did not find that stanford actually knew about the agreement that holiday signed with cetus but uh stanford still had uh either constructive notice or inquiry notice or both so basically stanford should have known about the agreement so they're treated as though they did know about it a couple of facts that the court thought were important merrigan the co-inventor and the director of the lab he was the one who told hold me to go to cetus and the other two inventors uh also signed agreements with cetus related to other things like a materials transfer agreement and stuff that other things that had clauses related to intellectual property um so with that background knowledge merrigan and katzenstein should have considered and inquired about hold me signing something with cetus merrigan and katzenstein are stanford employees so if they know something then then stanford knows it so that's so uh stanford fails on the notice prong and because of that you revert to the default rule so cetus is the earlier assignee so cetus wins here again okay so let's let's do some takeaways for registration so first if you receive an assignment of a patent you should record the assignment with the path this does need to be said because it's not a requirement if you don't register your assignment it is still a valid assignment but the benefit is to prevent some later assignee from kind of swooping in and getting the patent out under you second you should record the assignment within three months for the registration to stop a later assignee it either has to be before the later assignment occurs or within three months you don't know when any later assignment might occur so you should use the three months safe harbor third you can structure these documents so that you're not revealing too much so remember that these are public records so whatever is in the documents that you send to the patent office is available for anybody to read that includes competitors or parties that might be across from you in a negotiation so what you see in the left side of the slides is the patent assignment agreement for the vlsi patent that i used as an example earlier this is what transferred the patent along with several other patents from nxp to vlsi the entire agreement that's on file is is this page plus a two-page appendix listing the patents being transferred so ing to this assignment what nxp got in exchange for the patents was good and valuable consideration the receipt and adequacy of which is hereby acknowledged so there there's another document out there somewhere that's not on file with the patent office that is going to have a dollar amount for how much these patents sold for but not the one on file with the patent office so one way to do this is to execute an agreement to assign some patents on a specific future date in return for payments then on that date uh execute the actual assignment which says that the consideration was good enough but doesn't say what it was so then the earlier agreement to assign is not recorded it's not an actual assignment the later assignment is what's recorded okay so now we move on to our final topic which is standing so what what interests what interests in a patent give someone the ability to sue for infringement of that patent so i'll explain the the kind of black letter law first and then we'll cover a few cases to help illuminate what it actually means so standing depends on ownership of the patent and it depends on what rights to the patent have been licensed away so a licensee is someone who's been granted permission to has been granted some rights to a patent and an exclusive licensee has a license and that license says that the license or probably the owner of the patent cannot give anybody else permission to practice the patent but here's the categories of possible plaintiffs the owner can sue an exclusive licensee can sue if the owner is joined to the suit so the owner and these and the exclusive licensee are co-plaintiffs um non-exclusive licensees cannot be plaintiffs and the third possibility is that the that the owner granted an exclusive license that makes the exclusive licensee into the owner for all practical purposes so the license gave away so many of the rights surrounding the patent that the owner has basically nothing left the the language used by the courts for this is all substantial rights if a license gives away all substantial rights to the patent then the licensee has standing to sue alone and the owner does not if the license holds back at least one substantial right then the owner still has standing to sue alone and the licensee does not uh so the purpose of this rule is uh to kind of is to prevent two different plaintiffs suing the same defendant over the same path either the owner can sue a loan or the exclusive licensee can sue a loan but not both now what counts as all substantial rights uh is uh is a fact dependent inquiry if you want to know whether your license transfers all substantial rights you just kind of have to do some case law research find the cases with the most similar facts and see how they came out so the first case we'll talk about is keranos versus silicon storage technology a federal circuit decision from 2015 uh united module corporation here is the title holder to the patents being assertive in this case um keranos is an entity formed in february of 2010 in texas then six days after it's formed umc grants an exclusive license to karen house then four months after that karanos sues a whole bunch of defendants in the eastern district of texas this is back when you could slu could sue a whole bunch of defendants in the same suit where the only commonality is the patents ensue so umc is not a plaintiff one thing to keep in mind is that the eastern district of texas is considered a very plaintive friendly district so at this point in time is probably considered the most plaintiff-friendly district so if if umc were added as a plaintiff that might have provided a basis for transferring the case out of the eastern district so that's possible motivation here the district court found that karanos had standing and the federal circuit upheld that outcome the first reason is that is that the federal circuit uh gave was that the exclusive licensee the exclusive license gave the exclusive rights to sue to practice the patent and to grant sub licenses if the exclusive licensee has all those rights then that weighs pretty strongly in favor of finding that all substantial rights have been transferred second the license gave an exclusive right indicating a proprietary interest the court refers to this as a confidential provision of the license and doesn't actually say what the right was one of the citations mentions the obligation to maintain the patent so you have to periodically pay maintenance fees to the patent office to keep the patent in force and doing and doing that indicates that you've got a proprietary interest in the patent third there was a catch-all provision where umc promised to transfer any other rights needed to confer standing um the main argument by the defendants was pointing to some precedent that there shouldn't that there should be a different outcome because the patents were already expired when they were transferred when the license was executed so the federal circuit didn't agree on uh how to interpret that precedent so the the rules here are the same regardless of whether the patent is expired or unexpired so next next case is cycom vs agilent the inventors develop the patented technology here under contract from so the title holder to the patent is her majesty the queen and right of canada as represented by the minister of defense canada aka canada the inventors form a company that's that's what cycon is and they receive an exclusive license to the patents they sue agilent and a couple other defendants in the district of delaware uh the court dismisses the case without prejudice for lack of standing saying that they don't have all substantial rights so they go back to canada and then they get an amendment to the agreement and then they sue the same defendants again the court again comes to the conclusion that they don't have all substantial rights and dismisses the case again this time with prejudice and so that's the posture that goes up to appeal at the federal circuit and so the federal circuit affirmed the district court here canada reserved several substantial rights for itself ing to the federal circuit uh it could practice the patent and cycom was given an exclusive right to sue for commercial infringement but it did not have any say over non-commercial infringement so for example if the infringer is a governmental entity rather than a private company part of the ability to enforce a patent is the ability to let someone keep infringing if you want so the court refers to that as the right to indulge infringements canada can choose to indulge non-commercial infringements and scicom doesn't have any say over that canada can also veto sub-licenses by cycom and canada can can contract with someone in order to further develop the technology so as so all of those kind of added up to being all substantial rights uh so the fact that cycom already tried to fix it once justified the district court's dismissal with prejudice if the district court had dismissed without prejudice that likely would have been affirmed as well because the standard here is abuse of discretion so the last case we'll talk about is lone star silicon innovations against nanya technology the patents at issue here started with amd amd executed a transfer agreement to lone star ing to the transfer agreement the patents are now assigned to lone star but the agreement gave a fair amount of control to amd the agreement had a list of potential defendants and if lone star sued a defendant that was not on that list amd could choose to give that defendant a sub license if lonestar wanted to assign the patents to another party amd could veto that and if lone star didn't want to pay the maintenance fees the patents would revert to amd so lone star went ahead and sued some of the parties that are on that list which included nanya the district court dismissed the case for lack of standing because lone star did not have all substantial rights and the district court did not allow lone star to join amd as a call plaintiff either so the federal circuit upholds the first conclusion that that they that lone star does not have all substantial rights but vacates uh the part about not being able to join amd so the district court here was right that lone star did not receive all substantial rights uh an important point here is that the labeling uh does not matter so there's no there's no magic words ing to the federal circuit so the fact that the agreement said that it was a transfer agreement and that the patents were being assigned to lone star did not control the outcome what matters is the substance of the agreement so what rates are given to lone star what rights does amd keep and amd kept quite a bit of control so in terms of enforcement amd could fatally undermine a suit against any defendant that was not on that list and in terms of alienation being able to transfer the patent away amd could veto any assignments of the past so those those rights are both very substantial rights um but the federal circuit vacated the dismissal and instructed the district court to decide whether amd could feasibly be joined so first whether a plaintiff has all substantial rights to a patent is a matter of statutory standing which was called prudential standing when i went to law school so it's not article three standing so it's not a constitutional issue um it's so it's not that the court has no power to deal with the case it's just that the requirements of some statute aren't being fulfilled so what the the upshot of that is that lone star should have had a chance to fix it and the way to fix it is was to join amd uh jointer is governed by rule 19 of the federal rules of civil procedure rule 19 does not give the court discretion it's mandatory if a party is necessary for a case to go forward and it is possible to join that party the court has to do it so the case was reminded was remanded to the district court to decide whether it was possible to join amd okay so if you're negotiating a license how does all of this inform your position so there are a lot of other factors at play in these types of negotiations so you know maybe the exclusive licensee is going to get something close to all substantial rights are going to get all substantial rights and maybe they won't you know that'll depend on probably depend on other considerations but so keep in mind that if a court decides that the exclusive licensee does not have all substantial rights the exclusive licensee cannot go back to the patentee and amend the agreements and have that applied retroactively to the suit so an amended agreement would apply starting at the date it was made but not going back in time so what you want to pay attention to right up front is the provisions in the license about what will happen in the event of litigation so is the license or obligated to do whatever needs to be done for the licensee to have standing you know including being obligated to join the suit if necessary if not are you confident that it will be possible to force the patent holder to join the suit under rule 19 so you know if it's if it's a private company located in the us then the answer is probably yes but a counter example to that would be state universities because they are part of the government of a state state universities have sovereign immunity and so the court would not be able to join them as a co-plaintiff so and this you know the the advice about paying attention to to what happens in litigation applies even if you think that the license grants you all substantial rights because you know maybe the court is going to disagree this this is again a is a fact dependent inquiry thank you for joining us for today's b2ip webinar beech and bieneman is a boutique intellectual property law firm based out of southeast michigan today's webinar recording will be posted to our youtube channel our website and across all of our social media once again thank you for joining us