Court rules that exclusive licensee did not have standing to enforce patents where patent owner retained rights to non-commercial, educational use of the patents

A recent case from the Northern District of Texas illustrates several issues that licensees should consider when licensing patents from universities and other research institutions.  In Resonant Sensors Inc. v SRU Biosystems, Inc., No. 3:08-cv-1978-M, the University of Texas System Board of Regents issued an exclusive license to Resonant Optics Inc. (“ROI”) for the commercialization of two patents relating to a certain biosensor technology.  ROI sued SRU Biosystems, Inc. for infringement of the patents, and in response SRU challenged ROI’s standing to bring suit without joining the Board of Regents as a plaintiff in the case.

In its opinion, the court first reviewed a substantial body of Federal Circuit caselaw holding that a patent licensee can sue others for infringement alone (i.e., without the patent holder) only if the license agreement transfers “all substantial rights” in the patent to the licensee.  As examples, the court discussed prior cases where exclusive licenses were held not sufficient to support licensee standing.  Those cases included situations where the license agreement (i) required the licensee to first obtain the patent holder’s consent to the litigation, or (ii) allowed the licensor to prevent renewal of the license agreement after a certain period of time. 

In the ROI case, the court found that the exclusive license agreement was not sufficient to give ROI standing to sue under the patents.  Elements of the agreement that the court found relevant to its decision were:

  • the Board of Regents retained the right to bring suit if the licensee (ROI) failed to do so within 6 months;
  • the Board of Regents retained rights to non-commercial, educational use of the patents;
  • the Board of Regents retained the right to terminate the license upon a determination that ROI had not sufficiently commercialized the patents, or upon ROI’s filing for bankruptcy;
  • the agreement only allowed ROI to grant sublicenses to those whose operations ROI controls; and
  • the Board of Regents owns all improvements relating to the patents.

This case suggests that exclusive licensees of patents owned by research institutions should carefully review the license agreements and consider whether the agreement truly provides the licensee with the right to sue others for infringement.  If the institution retains any rights under the patents, the licensee may consider negotiating a requirement that the institution participate in enforcement actions at the licensee’s request  — and possibly licensee’s expense, expecially if the licensee is entitled to the recovery secured in such an action.

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