Limits on Rights of Exclusive Patent Licensees

The Federal Circuit recently issued an opinion that once again reminds us that the word “exclusive” in a patent license does not necessarily mean that the licensee has all substantial rights in the patent. 

In International Gamco, Inc. v. Multimedia Games, Inc., the Court cited prior caselaw for authority that an exclusive territorial license — i.e., a license granting all substantial rights to a patent for activities that occur within a defined geographic area — gives the licensee standing to sue others for infringement of the patent within the territory without joining the patent holder in the action.  However, the Court also held that a patent license which is limited by a field of use — even if the license is exclusive within the field and also limited to a territory — does not enable the licensee to sue without joining the patent holder.  In International Gamco, the licensee was restricted to using licensed technology in the field of lottery games.  Accordingly, the Court held that the patentee could not sue others for infringement unless the patent holder also participated in the suit.

The Court’s reasoning for the decision included statements that a field of use license does not confer “all substantial rights” under the patent upon the licensee, and an accused infringer could be subject to multiple suits by multiple licensees. 

The lesson for licensees is that if enforcement of licensed patent rights is important, then the license agreement must either (1) avoid any field of use limitations, or (2) include affirmative obligations for the patent holder to be joined in infringement actions at the request of the licensee.

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