A123 Systems, Inc. (“A123”) appeals from the final decision of the United States District Court for the District of Massachusetts denying A123’s motion to reopen and dismissing its declaratory judgment action against Hydro-Quebec (“HQ”).
A123 Sys., Inc. v. Hydro-Quebec,
Background
A123 filed suit in the District of Massachusetts on April 7, 2006, seeking a declaration of noninfringement and invalidity with respect to two patents, U.S. Patents 5,910,382 (“the '382 patent”) and 6,514,640 (“the '640 patent”) (collectively, “the patents in suit”), assigned to the Board of Regents, The University of Texas System (“UT”) an(j licensed to HQ. Both patents are entitled, “Cathode Materials for Secondary (Rechargeable) Lithium Batteries,” and both claim a genus of lithium-based cathode materials. Claim 1 of the '640 patent, the broadest representative claim, reads as follows:
1. A cathode in a rechargeable electrochemical cell, said cell also comprising an anode and an electrolyte, the cathode comprising a compound of the ordered or modified olivine structure having the formula:
LixM^d+1+q+loD^Q^XOd)
wherein:
M is a cation of a metal selected from the group consisting of Fe, Mn, Ti, Ni or mixtures thereof;
*1216 D is a metal having a +2 oxidation state selected from the group consisting of Mg2+, Ni2+, Zn2+, Cu2+, and Ti2+;
T is a metal having a +3 oxidation state selected from the group consisting of Al3+, Ti3+, Cr3+, Fe3+, Mn3+, Ga3+, Zn3+, and V3+;
Q is a metal having a +4 oxidation state selected from the group consisting of Ti4+, Ge4+, Sn4+, and V4+;
R is a metal having a +5 oxidation state selected from the group consisting of V5+, Nb5+, and Ta5+;
X comprises Si, S, P, V, or mixtures thereof;
0<x< 1; and
0<d, t, q, r<l, where at least one of d, t,
q, and r is not 0.
On August 14, 2006, HQ moved to dismiss A123’s declaratory judgment suit. HQ argued, inter alia, that UT was a necessary and indispensable party because, pursuant to UT and HQ’s Patent License Agreement, UT had transferred to HQ less than all substantial rights in the patents in suit, granting HQ only an exclusive field-of-use license. HQ further alleged that UT could not be joined as a defendant based on its entitlement to Eleventh Amendment sovereign immunity. A month later, on September 11, 2006, HQ and UT jointly initiated an infringement suit against A123, among others, in the Northern District of Texas.
After A123 successfully requested a reexamination of both patents, the Texas action was stayed and the Massachusetts court dismissed A123’s declaratory judgment action without prejudice to either party to reopen within thirty days following the termination of the reexaminations. A123 filed a timely motion to reopen the case on June 11, 2008. HQ opposed the motion, arguing that reopening the case would be futile based on the arguments made in its earlier motion to dismiss.
On September 28, 2008, the district court denied A123’s motion to reopen, yielding jurisdiction over A123’s declaratory judgment suit to the later-filed suit in Texas in light of its conclusion that A123’s first-filed action, if reopened, would be subject to imminent dismissal for failure to join a necessary party.
A123 Sys.,
A123 appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
Discussion
A123 advances multiple arguments on appeal. A123 first challenges the district court’s determination that UT had not transferred all substantial rights in the patents in suit to HQ, and thus that UT was a necessary party to A123’s declaratory judgment suit. A123 also challenges the district court’s decision that UT could not be joined because it had not waived Eleventh Amendment immunity in the Massachusetts district court. Finally, A123 argues that the district court failed to expressly determine whether UT, even *1217 if a necessary party, was also an indispensable party under Federal Rule of Civil Procedure 19 (“Rule 19”). We address each argument in turn.
I. Necessary Party
Under long-standing prudential standing precedent, an exclusive licensee with less than all substantial rights in a patent, such as a field-of-use licensee, lacks standing to sue for infringement without joining the patent owner.
Int’l Gamco,
A123 challenges the district court’s conclusion that UT had not transferred all substantial rights in the patents in suit to HQ in light of what A123 casts as HQ’s own actions and representations to the contrary. Specifically, A123 contends that in an earlier lawsuit to enforce the patents against third party Valence Technology, Inc. (“Valence”) and in a letter threatening A123 with suit for infringement, HQ held itself out as an exclusive licensee of the technology claimed in the '382 and '640 patents and as having the right to sublicense the technology and to enforce the patents. A123 also argues that HQ’s attempted enforcement of the patents against Valence without joining UT similarly indicates that HQ had acquired all substantial rights in the patents from UT. According to A123, the district court failed to consider any of this evidence.
HQ responds that the district court did not commit clear error by finding, based on the declarations of HQ’s General Counsel and UT’s Associate Vice Chancellor, that HQ holds an exclusive license to some, but not all, fields of use under the patents in suit, mandating the legal conclusion that HQ holds less than all substantial patent rights. According to HQ, A123’s selective quotes from a prior litigation do not show that HQ had acquired all substantial rights, but rather are consistent with a field-of-use license. Nevertheless, HQ asserts, even if statements made by HQ could be read as suggesting it had acquired all substantial rights, such statements cannot affect or diminish UT’s actual retained rights in the patents.
We agree with HQ. Based on the evidence of record, the district court did not err in finding that HQ was a field-of-use licensee and thus in concluding that UT had not transferred all substantial rights to the patents to HQ. Both HQ’s General Counsel, Pierre Gagnon, and UT’s Associate Vice Chancellor testified to this effect. Specifically, Gagnon testified that HQ holds an exclusive license to two fields of use claimed in the patents in suit: (I) an exclusive license to manufacture, use, sell, import, and offer for sale rechargeable batteries with a solid electrolyte, gelled, plasticized or not plasticized, and (2) an exclusive and worldwide license to manufacture and sell lithium iron phosphate (“LiFeP04”) in bulk quantities for all applications, including, but not limited to, secondary batteries with polymer or liquid electrolytes. J.A. 246^17 (emphasis added). Gagnon further testified that UT retained the right to license other parties in all other patented fields of use, including (1) the production, use, and sale of rechargeable batteries, including those with *1218 lithium manganese, lithium titanium, and lithium nickel cathode material, having a liquid electrolyte and (2) the use of lithium iron phosphate with liquid electrolytes. J.A. 247 (emphases added).
The representations by HQ on which A123 relies are consistent with HQ being a field-of-use licensee. HQ’s first amended complaint in its lawsuit against Valence states that HQ obtained an “exclusive license to make, use and sell a significant portion of the field of technology described and claimed” in the patents in suit, including an “exclusive, worldwide license to manufacture LiFeP04 and sell LiFeP04 in bulk quantities for all applications of the technology,” and that these rights “are exclusive even as against UT.” J.A. 621-22. These statements unmistakably identify HQ’s license as less than a complete grant of rights under the patents, even if an exclusive grant of certain rights. HQ states that it received an exclusive license to a significant portion of the field of technology, not all fields of technology described and claimed in the patents. HQ also qualifies its statement that it has exclusive rights to “all applications of the technology” as limited to one cathode compound, lithium iron phosphate (ie., not lithium manganese, titanium, or nickel phosphate). Similarly, in its letter accusing A123 of infringement, HQ uses the label “exclusive licensee,” but it says nothing to indicate that its license is exclusive as to all fields of use. Accordingly, none of these statements contradicts Gagnon’s testimony.
But even if HQ had held itself out as having all substantial rights in the patents, such a unilateral representation could not alter the UT’s own rights in the patents. In determining ownership for purposes of standing, labels given by the parties do not control. Rather, the court must determine whether the party alleging effective ownership has in fact received all substantial rights from the patent owner.
Waterman,
In a related argument, A123 claims that the district court could not have determined that UT had not transferred all substantial rights in the patent to HQ without examining HQ and UT’s Patent License Agreement, as it alone is determinative of the rights transferred. A123 contends, therefore, that the district court abused its discretion in not granting A123’s requested discovery of the Agreement. The record, however, does not reflect that A123 in fact requested such discovery. A123 points to a footnote in its September 11, 2006, opposition brief to HQ’s motion to dismiss in which A123 states equivocally that “[¿j/f the Court deems further review of the agreement to be relevant to this motion, A123
would
respectfully request prompt discovery of it.” J.A. 436 (emphases added). Because A123 never requested discovery of the Agreement then or at any time prior to the district court’s ruling on A123’s motion to reopen, its argument that the district court
*1219
erred in not permitting discovery is waived.
Sage Prods., Inc. v. Devon Indus., Inc.,
In summary, we hold that because HQ had acquired less than all substantial rights in the patents in suit, UT is a necessary party to A123’s declaratory judgment action.
See Enzo,
II. Eleventh Amendment Sovereign Immunity
Although a necessary party, the district court held that UT could not be joined as a defendant because it had not waived Eleventh Amendment sovereign immunity in the Massachusetts suit.
A123 Sys.,
A123 does not dispute that UT is an arm of the State of Texas and is therefore entitled to Eleventh Amendment immunity.
See Tegic Comm’ns Corp. v. Bd. of Regents of Univ. of Texas Sys.,
In response, HQ argues that UT’s voluntary participation in the Texas infringement suit against A123 does not constitute a retroactive waiver of its Eleventh Amendment immunity in this separate action. Specifically, HQ points to this court’s decision in
Biomedical Patent Management Corp. v. California, Department of Health Services,
Again we agree with HQ. A123’s reliance on this court’s decision in
Genentech,
In
BPMC,
BPMC brought suit against the California Department of Health Services (“DHS”) in the Northern District of California, alleging infringement of U.S. Patent 4,874,693.
III. Indispensable Party
If a party is deemed necessary under Rule 19(a), but cannot be joined, then a court must consider whether that party is indispensable and dismissal appropriate under Rule 19(b).
Dainippon Screen Mfg. Co., Ltd. v. CFMT, Inc.,
[T]he court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed. The factors for the court to consider include:
(1) the extent to which a judgment rendered in the person’s absence might prejudice that person or the existing parties;
(2) the extent to which any prejudice could be lessened or avoided ...;
(3) whether a judgment rendered in the person’s absence would be adequate; and
(4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.
Fed.R.Civ.P. 19(b). Since joinder is an issue not unique to patent law, we apply the law of the regional circuit, here the First Circuit.
Katz v. Lear Siegler, Inc.,
A123 argues that the district court abused its discretion by not conducting an analysis under Rule 19. In addition to repeating its argument that UT is not a necessary party, A123 also argues that UT is a dispensable party, citing
In re Olympic Mills Corp.,
HQ responds that the district court did not rule under Rule 19, but rather it exercised its broad discretion to yield jurisdiction over A123’s first-filed declaratory judgment suit to a later-filed suit in which all the necessary parties were joined. But regardless, HQ asserts, UT is an indispensable party under Rule 19(b)’s four factors because (1) HQ, as a mere field-of-use licensee, cannot adequately represent UT’s rights in the patents; (2) the prejudice to UT cannot be lessened or avoided by fashioning an invalidity ruling that affects only HQ; (3) the nonjoinder may leave A123 subject to additional infringement claims by UT for fields of use not licensed by HQ; and (4) A123 has an adequate remedy by
*1221
counterclaiming for noninfringement and invalidity in the Texas action, where all the necessary parties are already joined. A123 also argues that Rule 19(b)’s first factor weighs conclusively in favor of dismissal when the absent party asserts sovereign immunity, citing
Republic of Philippines v. Pimentel,
The district court did not undertake a Rule 19(b) analysis in denying A123’s motion to reopen the case, basing its decision instead on its discretion to decline to exercise jurisdiction over a properly brought declaratory judgment suit in favor of a later-filed suit.
A123 Sys.,
The district court addressed Rule 19(b)’s first factor — “the extent to which a judgment rendered in the person’s absence might prejudice that person or the existing parties” — by finding that maintaining jurisdiction over the A123’s declaratory judgment suit posed a significant risk of prejudicing UT’s interests in the '382 and '640 patents.
A123 Sys.,
Dainippon,
upon which A123 relies, is distinguishable. In
Dainippon,
the absent party, CFMT, was incorporated by the patent owner, CFM, as a wholly owned, patent-holding company for its intellectual property, with CFM assigning its patents to CFMT and CFMT licensing them back exclusively to CFM.
Id.
at 1267-68. As such, the parties’ interests in the asserted patents were not just common, but identical. Accordingly, we held that CFMT’s interests in the patents were adequately represented by its exclusive licensee, finding it “highly relevant” that the absent party was just a holding company,
id.
at 1272-73, for “a patent should not be placed at risk of invalidation by the licensee without the participation of the patentee,”
Schwarz Pharma, Inc. v. Paddock Labs., Inc.
*1222
In addition to finding that UT would be prejudiced, the district court also implicitly found that a judgment rendered without UT would be inadequate, Rule 19(b)’s third factor. The court found that allowing a field-of-use licensee like HQ to sue or be sued alone “poses a substantial risk of multiple suits and multiple liabilities against an alleged infringer for a single act of infringement.”
A123 Sys.,
Finally, the district court considered A123’s interest in having a forum to litigate its defenses to claims of infringement
(■i.e.,
an adequate remedy if the action is dismissed for nonjoinder), finding that because UT has waived immunity to suit in Texas, A123 may assert counterclaims for a declaration of noninfringement and invalidity in that action.
A123 Sys.,
Conclusion
For the foregoing reasons, we affirm the district court’s decision denying A123’s motion to reopen and thus dismissing A123’s declaratory judgment suit.
AFFIRMED.
Notes
With regard to Rule 19(b)’s second factor— “the extent to which any prejudice could be lessened or avoided” — the accused infringer here has not suggested any alternative that would reduce the prejudice to UT.