Exclusive licensee of patent’s co-owner is not an exclusive licensee of “all substantial rights” in the patent

A recent case from the Southern District of California highlighted the hurdles that patent licensees often need to overcome when enforcing a patent against third parties. 

In EBS Automotive v Illinois Tool Works (S.D. Cal. 1/4/11), plaintiff MOC Products Company asserted that defendant Illinois Tool Works (ITW) infringed a patent to which MOC held an exclusive license.  However, the patent was jointly owned by two parties, and MOC received its “exclusive” license from only one of those parties.   ITW moved to dismiss MOC’s patent infringement claim, arguing that MOC would have standing only if it held an exclusive license from both patent holders. 

The court granted ITW’s motion and dismissed MOC’s claim.  The court explained that

Plaintiffs in patent infringement suits fall into three categories for standing purposes: those that can sue in their own name alone; those that can sue as long as the patent owner is joined in the suit; and those that cannot even participate as a party to an infringement suit.

The court broke down the three categories as follows:

  • patent owners and recipients of “all substantial rights” in a patent may sue in their own name alone;
  • exclusive licensees who have fewer than all substantial patent rights must join the patent owner or assignee in any patent infringement suit; and
  • non-exclusive licensees “cannot even participate as a party to a suit.”

Although MOC held an exclusive license, it received the license from only one of the joint owners.   This meant that MOC could not preclude the co-owner from practicing the patent or licensing it to others.   Without this right to exclude, the court held that MOC was a “bare licensee” for standing purposes, and the court dismissed MOC’s claim.

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