INTELLECTUAL TECH LLC, Plaintiff-Appellant v. ZEBRA TECHNOLOGIES CORPORATION, Defendant-Appellee
2022-2207
United States Court of Appeals for the Federal Circuit
May 1, 2024
JAMES PERKINS, Cole Schotz P.C., Dallas, TX, argued for plaintiff-appellant. Also represented by TIMOTHY J.H. CRADDOCK, GARY SORDEN.
WILLIAM R. PETERSON, Morgan, Lewis & Bockius LLP, Houston, TX, argued for defendant-appellee. Also represented by KARON NICOLE FOWLER, JAMES JOHN KRITSAS, AMANDA SCOTT WILLIAMSON, Chicago, IL; BRENT A. HAWKINS, San Francisco, CA.
Before PROST, TARANTO, and HUGHES, Circuit Judges.
PROST, Circuit Judge.
Intellectual Tech LLC (“IT“) appeals from a decision of the United States District Court for the Western District of Texas dismissing all its claims against Zebra Technologies Corporation (“Zebra“) for lack of constitutional standing. Intell. Tech LLC v. Zebra Techs. Corp., No. 6:19-cv-628, 2022 WL 1608014 (W.D. Tex. May 20, 2022) (”Opinion“). For the reasons below, we reverse and remand.
BACKGROUND
In 2019, IT asserted U.S. Patent No. 7,233,247 (“the ‘247 patent“) against Zebra. J.A. 67. The complaint alleged, among other things, that IT “is the owner and assignee” of the ‘247 patent. Compl., Intell. Tech LLC v. Zebra Techs. Corp., No. 6:19-cv-628 (W.D. Tex. Oct. 22, 2019), ECF No. 1 ¶ 7. Zebra first moved to dismiss the complaint for lack of standing, and the district court denied the motion. J.A. 300. Subsequently, Zebra moved for summary judgment of no subject-matter jurisdiction based on IT‘s purported lack of constitutional and statutory standing. J.A. 309. The district court considered this a renewed motion to dismiss, granted the motion based on its determination that IT lacked constitutional standing, and dismissed all claims without prejudice. Opinion, 2022 WL 1608014.
IT is the wholly owned subsidiary of OnAsset Intelligence, Inc. (“OnAsset“). Rule 7.1 Corporate Disclosure Statement, Intell. Tech LLC v. Zebra Techs. Corp., No. 6:19-cv-628, (W.D. Tex. Oct. 22, 2019), ECF No. 2. Here, the history of OnAsset‘s agreements with a lender, Main Street Capital Corporation (“Main Street“), provides important background regarding IT‘s creation and its legal interest in the ‘247 patent. We first outline these agreements and then describe the underlying district court decision.
I
In 2011, OnAsset granted Main Street a security interest in its patents—including the ‘247 patent, which was assigned to OnAsset at the time—as part of a loan agreement. J.A. 229-39 (2011 Patent and Trademark Security Agreement); J.A. 477-89 (Security Agreement); J.A. 399-466 (Loan Agreement). The terms gave Main Street certain rights that it could exercise upon OnAsset‘s default of the loan. In 2013, Main Street notified OnAsset that it was in default. J.A. 510-12.
Subsequently, in 2017, OnAsset and Main Street entered into a forbearance agreement. J.A. 162. At the same time, IT was formed as OnAsset‘s subsidiary, and OnAsset assigned the ‘247 patent to IT. J.A. 283-85; J.A. 184. In turn, IT entered into a joinder agreement to the loan agreement between OnAsset and Main Street. J.A. 211. And IT entered into its own patent and trademark security agreement with Main Street, granting Main Street a security interest in the ‘247 patent like OnAsset had. J.A. 249 (2017 Patent and
IT agrees with the district court‘s assessment that the 2011 and 2017 patent and trademark security agreements have “mirrored” terms. See Appellant‘s Br. 11 n.1 (citing Opinion, 2022 WL 1608014, at *3). As a result, Main Street‘s default rights at the time the complaint was filed in 2019 were the same whether assessed based on OnAsset‘s 2013 default (where IT‘s assignment from OnAsset was subject to these rights) or IT‘s own 2018 default. We follow the parties’ and district court‘s convention of citing the 2011 agreement throughout.
Turning to the pertinent provisions, section 4 of the patent and trademark security agreement provides:
4. Debtor‘s Use of the Patents and Trademarks. Debtor shall be permitted to control and manage the Patents and Trademarks, including the right to exclude others from making, using or selling items covered by the Patents and Trademarks and any licenses thereunder, in the same manner and with the same effect as if this Agreement had not been entered into, so long as no Default exists.
J.A. 232.
In the event of a default, section 6 provides options that Main Street can elect to exercise:
6. Remedies. While a Default exists, Secured Party may, at its option, take any or all of the following actions:
(a) Secured Party may exercise any or all remedies available under the Loan Agreement.
(b) Secured Party may sell, assign, transfer, pledge, encumber or otherwise dispose of the Patents and Trademarks.
(c) Secured Party may enforce the Patents and Trademarks and any licenses thereunder, and if Secured Party shall commence any suit for such enforcement, Debtor shall, at the request of Secured Party, do any and all lawful acts and execute any and all proper documents required by Secured Party in aid of such enforcement.
J.A. 232.
In turn, section 3(j) provides mechanisms for Main Street to exercise its rights. Specifically, it states:
3. Representations, Warranties and Agreements. Debtor represents, warrants and agrees as follows:
...
(j) Power of Attorney. To facilitate Secured Party‘s taking action under subsection (i) and exercising its rights under Section 6, Debtor hereby irrevocably appoints (which appointment is coupled with an interest) Secured Party, or its delegate, as the attorney-in-fact of Debtor with the right (but not the duty) from time to time while a Default exists to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by Debtor under this Section 3, or, necessary for Secured Party, while a Default exists, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third
party. Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Loan Agreement as provided therein and the payment and performance of all Obligations.
J.A. 230-32 (emphasis in original). Zebra has not pointed to evidence that Main Street has elected to exercise any rights under section 6 or taken any action as attorney in fact under section 3(j).1
II
Zebra moved to dismiss for lack of standing under
Zebra renewed its standing arguments in the form of a motion for summary judgment for lack of subject-matter jurisdiction. Zebra primarily argued that OnAsset‘s initial default in 2013 triggered an immediate transfer of exclusionary rights to Main Street such that OnAsset had no exclusionary rights to assign IT as of the 2017 assignment agreements. J.A. 316.
The district court rejected this primary argument, concluding that default gave Main Street the right “to enforce, ‘sell, assign, transfer, pledge, encumber or otherwise dispose of the ‘247 patent,” but it did not “automatically divest OnAsset of title to the ‘247 patent.” Opinion, 2022 WL 1608014, at *3 (quoting J.A. 232 (2011 Patent and Trademark Security Agreement, section 6)). Nonetheless, the district court granted Zebra‘s motion as to constitutional standing—which the court restyled as a renewed motion under
Next, the court rejected “IT[‘s] request[] that it be afforded the opportunity to cure any defects in constitutional standing by joining Main Street or substituting it under
IT moved for reconsideration. J.A. 581-82. The court denied IT‘s motion, largely reiterating the reasoning it outlined in its initial decision. Intell. Tech LLC v. Zebra Techs. Corp., No. 6:19-cv-628, 2022 WL 3088572 (W.D. Tex. Aug. 3, 2022). The court summarized its understanding of the relevant law as follows: “a patent title holder can deprive itself of exclusionary rights by vesting a third party with a right to assign or sublicense the patent (even if the third party never exercises those rights).” Id. at *2. The court acknowledged that “IT may be correct that it is more accurate to say that, on default, Main Street has an unfettered right to license and/or assign the ‘247 patent in IT‘s name.” Id. at *3 (emphasis in original). However, the court considered its analysis “completely unaffected by this” purported agency-based distinction. Id.
IT timely appealed. J.A. 611. We have jurisdiction under
DISCUSSION
I
Article III standing determinations are reviewed de novo. Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359, 1363 (Fed. Cir. 2010). Standing requires: (1) an injury in fact; (2) traceability; and (3) redressability. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992). The only meaningful dispute raised by the circumstances here relates to the injury-in-fact requirement.2 An injury in fact is an “actual or imminent” “concrete and particularized” “invasion of a legally protected interest.” Id. at 560. This requirement is mandatory at the inception of the lawsuit and carries through the case, requiring the plaintiff to prove it “with the manner and degree of evidence required at the successive stages of the litigation.” Id. at 561.
The interpretation of an unambiguous contract is a legal issue, and we review the district court‘s interpretation de novo. Gonzalez v. Denning, 394 F.3d 388, 392 (5th Cir. 2004). It is undisputed that Texas law applies to the
agreements at issue here. See Appellant‘s Br. 8; Appellee‘s Br. 8. Under Texas law, contracts are read as a whole to give meaning to the parties’ intent as expressed in the writing, and an agreement is considered ambiguous only where the language of the contract is subject to two or more reasonable interpretations or meanings. Gonzalez, 394 F.3d at 392; see also Frost Nat‘l Bank v. L&F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (concluding that an agreement is not ambiguous where, “after the pertinent rules of construction are applied, the contract can be given a definite or certain legal meaning“).
II
The only question before us is whether IT demonstrated the irreducible constitutional minimum of an injury in fact. All that requires here is that IT retained an exclusionary right—i.e., infringement would amount to an invasion of IT‘s legally protected interest. Under the only reasonable reading of the patent and trademark security agreement, IT still retained at least one exclusionary right, even in view
Before going further, it is perhaps just as important to frame what is not at issue on appeal here. We need not determine whether IT‘s legal interest in the ‘247 patent was sufficient to meet the “patentee” requirement of
Prior to our case law‘s acknowledgement of this jurisdictional and substantive distinction, many of this court‘s opinions had improperly melded the injury-in-fact inquiry with the
We now turn to the only question on appeal, whether IT had an exclusionary right in the ‘247 patent when the complaint was filed. The answer is a clear yes.
First, based on our assessment of the patent and trademark security agreement as a whole, we reject Zebra‘s argument that the agreement granted Main Street exclusive licensing rights upon default. Nothing in the agreement indicates that, without further action by Main Street, the mere triggering of Main Street‘s options under section 6 and mechanisms under section 3(j) automatically deprived IT of all its rights under section 4. Because we reject this exclusive-rights argument based on our interpretation of the agreement alone, we need not assess whether IT would have constitutional standing under that reading of the agreement.
Next, we conclude that IT retained exclusionary rights even though Main Street had the non-exclusive ability to license the ‘247 patent.4 A patent owner has exclusionary rights sufficient to meet the injury-in-fact requirement even where, without more, it grants another party the ability to license. See Uniloc USA, Inc. v. Motorola Mobility LLC, 52 F.4th 1340, 1345 (Fed. Cir. 2022) (observing but not holding that “[p]atent owners and licensees do not have identical patent rights, and patent owners arguably do not lack standing simply because they granted a license that gave another party the right to sublicense the patent to an alleged infringer“); see also id. at 1351 (Lourie, J., additional views) (“The grant of a non-exclusive license with the right to sublicense, as here, gives the licensee the right to sublicense others. But the patentee still retains the right to sue unlicensed infringers.“).5
Zebra relies heavily on this court‘s opinion in WiAV, as the district court did in its opinion, to support its argument that Main Street‘s non-exclusive ability to license stripped IT of all exclusionary rights. However, WiAV is not instructive here.
In WiAV, the court asked whether the plaintiff was an exclusive licensee (an entity that received an exclusionary right as part of a license) or bare licensee (an entity that received only “a promise from the patentee that the patentee will not sue the licensee for practicing the patented invention“). 631 F.3d at 1265. And, even through that lens, which is distinct from the situation at issue here, the court still rejected the notion that “the licensee must be the only party with the ability to license
The licensee-versus-patentee distinction between WiAV and this case is critical. A patent owner has exclusionary rights as a baseline matter unless it has transferred all exclusionary rights away.6 In contrast, a licensee ordinarily obtains freedom from suit but does not necessarily obtain an interest in preventing others from practicing the patent. As a result, in the licensee context, questions about other entities’ ability to license can provide a reasonable proxy for understanding the extent of rights a licensee received as part of the license—i.e., whether the license granted exclusionary rights or mere freedom from suit. Those same questions do not provide a reasonable proxy for understanding whether a patent owner retains at least one exclusionary right or whether it has transferred all exclusionary rights away. As Judge Lourie explained in his additional views in Uniloc, the issue of patent owner‘s exclusionary rights is “incorrectly dealt with ... as one of determining what is an exclusive license.” 52 F.4th at 1351 (Lourie, J., additional views).
We need not enumerate the exclusionary rights afforded by a patent or fully define their scope here. Instead, it is sufficient to conclude that Main Street and IT‘s shared ability to license while a default existed did not divest IT, the patent owner, of all exclusionary rights. Cases that have evaluated a patent owner‘s rights support this conclusion. For example, in Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1342-43 (Fed. Cir. 2006), this court concluded that the patent owner had not transferred away all of its rights where the rights it granted to a third party, including an unfettered right to sublicense (among many other rights), were given “for only a limited portion of the patent term.” See also Alfred E. Mann Found. for Sci. Rsch. v. Cochlear Corp., 604 F.3d 1354, 1361 (Fed. Cir. 2010) (concluding that the patent owner had not transferred away all rights, even under an exclusive license with rights to sublicense, where the patent owner retained the right to sue). Further, in the context of patent co-owners, which share exclusionary rights, we have concluded that an individual co-owner has Article III standing. See AntennaSys, Inc. v. AQYR Techs., Inc., 976 F.3d 1374, 1378 (Fed. Cir. 2020). In sum, IT still suffers an injury in fact from infringement even if IT and Main Street can both license the patent.
In addition to its arguments about licensing, Zebra also argues that the clause in section 6 of the patent and trademark security agreement that granted Main Street the option to “sell, assign, transfer, pledge, encumber or otherwise dispose of the” ‘247 patent, J.A. 232, divested IT of all exclusionary rights. We disagree on this point as well.
CONCLUSION
Main Street‘s default rights under the patent and trademark security agreement did not deprive IT of all exclusionary rights. Thus, the district court incorrectly determined that IT could not demonstrate that infringement of the ‘247 patent amounted to an injury in fact. Because IT has constitutional standing, we reverse and remand.
REVERSED AND REMANDED
COSTS
Costs to IT.