61 F. Supp. 3d 421
D. Del.2014Background
- Clouding IP (purchaser) and Symantec executed a Patent Purchase Agreement (PPA) and Assignment transferring “all rights, title, and interest” in 14 patents to Clouding, but the transfer was expressly “subject to” license and other reservations in the Agreement.
- Symantec retained a variety of rights under the PPA: rights to make/use/sell and sublicense, retained prior license protections, a retained right to pursue certain suits or repurchase patents in some circumstances, and control/consent rights over Clouding’s assignments and licensing in specified situations.
- Clouding filed multiple patent-infringement suits naming various defendants (Google, Amazon, Rackspace, EMC, HP, AT&T, Citrix, Dropbox, SAP, Verizon, etc.). Defendants moved to dismiss for lack of subject-matter jurisdiction, arguing Clouding lacks standing.
- Defendants advanced two main arguments: (1) Clouding was not transferred all substantial rights in the patents and thus cannot sue alone; (2) the assignment is void as champertous (the court did not reach champerty because it disposed of the case on standing).
- The court held Clouding had constitutional standing but lacked prudential standing because it did not possess all substantial rights; therefore Clouding could not sue in its own name and the suits were dismissed for lack of subject-matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Clouding holds formal legal title to the patents | PPA and Assignment conveyed “all rights, title, and interest” so Clouding is legal titleholder | Transfer language was subject to express reservations and license; substantive rights retained show no full assignment | No — formal legal title not transferred because conveyance was subject to substantial retained rights |
| Whether Clouding has “all substantial rights” so it may sue alone | Even if not formal titleholder, Clouding received all substantial rights (effective patentee) | Symantec retained key rights (make/use/sell, sublicense, right to sue/repurchase, veto/consent, share of recovery, maintenance/reversion) so Clouding lacks all substantial rights | No — Clouding did not receive all substantial rights; Symantec retained sufficient rights to require its joinder |
| Effect of Symantec’s retained right to bring or control suits | Clouding: retained rights to litigate suffice; any Symantec right is illusory given Clouding’s sublicensing power | Defendants: licensor’s retained right to sue and reversion/repurchase undermines licensee’s exclusivity and ownership | Held for Defendants: retained suit/reversion rights are important and weigh against transfer of all substantial rights |
| Limits on Clouding’s assignment and sublicensing powers | Clouding: recording and labels show assignment; it can license/assign as needed | Defendants: consent/restrictions and reversion rights materially limit alienability and sublicensing, indicating retained ownership | Held for Defendants: restraints on alienation and licensing support finding fewer than all substantial rights transferred |
Key Cases Cited
- Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379 (Fed. Cir. 2002) (regional-circuit law governs Rule 12(b)(1) jurisdictional review)
- Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971 (Fed. Cir. 2005) (analysis of whether retained rights show transfer of fewer than all substantial rights)
- Alfred E. Mann Found. for Scientific Research v. Cochlear Corp., 604 F.3d 1354 (Fed. Cir. 2010) (factors to assess transfer of all substantial rights)
- Abbott Labs. v. Diamedix Corp., 47 F.3d 1128 (Fed. Cir. 1995) (retained licensor rights to make/use/sell and to sue can preclude finding of assignment)
- Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538 (Fed. Cir. 1995) (assignment vs. license: what interests constitute an assignment)
- Morrow v. Microsoft Corp., 499 F.3d 1332 (Fed. Cir. 2007) (patentee holding all exclusionary rights may sue in its own name; otherwise joinder may be required)