This appeal arose from a patent infringement suit brought by Prima Tek II, L.L.C., Highland Supply Corp., Highland Manufacturing and Sales Co., and Prima Tek I, L.L.C., against A-Roo Co. of Ohio and A-Roo Co. of Texas. Appellants A-Roo Co. of Ohio and A-Roo Co. of Texas appeal from the judgment of the United States District Court for the Southern District of Illinois, declaring the case to be exceptional under 35 U.S.C. § 285 due to litigation misconduct, and awarding attorney fees to Appellees. See Prima Tek II, LLC v. A-Roo Co., No. 97-869-DRH (S.D.Ill. Mar. 16, 1999) (Order). On appeal, Appellants argue that Appellees, all of whom are licensees of the patents in suit, lacked standing to sue for patent infringement in the district court without being joined by the patent owner, South-pac International, Inc. Because we agree that Appellees lacked standing to maintain an infringement suit in their own names, we reverse the decision of the district court awarding attorney fees to Appellees.
I
Appellees are licensees of six U.S. patents (“the patents”) relating to decorative flower pot sleеves.
Prima Tek I, itself unable to make, use or sell any products or processes covered by the patents, subsequently transferred those exclusive worldwide rights to Prima Tek II. The agreement between Prima Tek I and Prima Tek II included the same termination and enforcement clauses as the license from Southpac to Prima Tek I; however, it did not contain a prоvision that Prima Tek I would be bound by any judgment rendered against Prima Tek II. Pri-ma Tek II subsequently licensed to Highland Supply Corp. (“HSC”) and Highland Manufacturing and Sales Co. (“HMSC”) the right to make, use and sell patented products in the United States, Canada and Mexico. These licenses were subject to the right of Prima Tek II to grant additional licenses in the same territory in exchange for partial royalty payments to HSC and HMSC.
A-Roo Co. of Ohio and A-Roo Co. of Texas (collectively “A-Roo”) manufactured and sold various plant sleeve covers and flower pot containers in the United States. Appellees Prima Tek II, HSC, and HMSC (“the original plaintiffs”) brought suit against A-Roo in October 1997, alleging infringement of two of the six patents licensed to them by Southpac. The four remaining patents were later added to the suit on A-Roo’s motion.
A-Roo asserted several counterclaims, including an allegation that the patents were unenforceable due to inequitable conduct. Initially, A-Roo based its inequitable conduct counterclaim on the purported failure of the applicant, Mr. Weder, to disclose relevant prior art to the U.S. Patent and Trademark Office (“PTO”) during prosecution of the patents in suit. Later, A-Roo abandoned this position, claiming that it had mistakenly relied on a copy of the file history that contained a PTO printing error. Thereafter, A-Roo filed an amended answer and counterclaim, alleging that Mr. Weder had intentionally failed to make other required disclosures during prosecution of the patents in suit. The original plaintiffs moved for summary judgment on A-Roo’s counterclaims, which the district court granted.
A-Roo also filed two motions to dismiss the suit for lack of standing. First, A-Roo asked that the case be dismissed because the original plaintiffs lacked standing to sue for patent infringement in their own names without joining the patent owner. Second, A-Roo argued that neither HSC nor HMSC had any right to participate as co-plaintiffs because they were bare licensees, rather than exclusive licensees, of the patents in suit.
The district court denied A-Roo’s motions to dismiss. First, the court hеld that Southpac was not a necessary party because it had assigned all substantial rights in the patents to Prima Tek I. Second, the district court rejected A-Roo’s argument that HSC and HMSC were bare licensees and therefore had no right to participate in the case. The court concluded that the agreements between Prima Tek II and HSC and HMSC transferred sufficient rights in the patents to give HSC and HMSC standing to sue on their own behalf.
Although the district court rejected both of A-Roo’s standing arguments, the court held sua sponte that Prima Tek I was а “necessary party” to the patent infringement suit because the agreement between Prima Tek I and Prima Tek II did not contain a provision, as did the agreement between Southpac and Prima Tek I, that Prima Tek I would be bound by any judgment rendered against Prima Tek II. For
Shortly before trial, A-Roo filed a motion for judgment in which it conceded infringement of the patents in suit, agreed that the patents were not invalid, and agreed to a permanent injunction prohibiting it from manufacturing, selling, or using any infringing products. A-Roo’s motion was granted and the district court’s final decree entered on January 11,1999.
Following entry of the final decree, Ap-pellees moved to have the case declared exceptional under 35 U.S.C. § 285, citing litigation misconduct by A-Roo. The district court granted that motion, declaring the case exceptional on the grounds that A-Roo had engaged in vexatious litigation and litigation misconduct. In particular, the court found that A-Roo had misrepresented the basis for its original inequitable conduct counterclaim in answers to the original plaintiffs’ interrogatories and in the deposition of Scott Gilbert, president of A-Roo. The district court also found that A-Roo had engaged in “bad faith motion practice” by: (1) moving for a five-month extension of time within 30 days of the close of discovery; (2) filing an emergency motion six weeks after the close of discovery to extend all deadlines twelve months and continue the trial until January 2000; (3) moving to continue trial for three weeks to allow an additional attorney to participate; (4) requesting the court to reconsider the emergency motion to extend deadlines; and (5) moving for entry of judgment in favor of Appellees the day before trial was set to begin.
Because of what the court called “egregious” conduct, and because A-Roo “failed to use reasonable care in assessing the validity of defenses and claims they asserted,” the district court held that Appellees had shown by clear and convincing evidence that the case was exceptional under 35 U.S.C. § 285. See Prima Tek II, LLC v. A-Roo Co., No. 97-869-DRH, slip op. at 6 (S.D.Ill. Mar. 16, 1999) (Order). Accordingly, the district court awarded attorney’s fees and costs to Appellees in the amount of $368,093.06. See Prima Tek II, LLC v. A-Roo Co., No. 97-869-DRH, slip op. at 2 (S.D.Ill. Sep. 2,1999).
A-Roo appeals the district court’s judgment that this case was exceptional under 35 U.S.C. § 285 and the award of attorney fees and costs to Appellees. We have jurisdiction pursuant to 28 U.S.C. § 1295 (1994).
II
As a threshold issue, we must determine whether any of the Appellees in this suit had standing to maintain an infringement action against A-Roo withоut joining Southpac — the owner of all six patents in suit. If no party had standing in the district court, then jurisdiction is not proper on appeal. See U.S. Const. Art. Ill, § 2; Warth v. Seldin,
Standing to sue for patent infringement derives from the Patent Act,
Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing. The applicant, patentee, or his assigns or legal represеntatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States.
35 U.S.C. § 261 (1994). Section 261 recognizes, and courts have long held, that an exclusive, territorial license is equivalent to an assignment and may therefore confer standing upon the licensee to sue for patent infringement. See, e.g., Waterman v. Mackenzie,
Although an exclusive licensee may have standing to participate in a patent infringement suit, in some cases it must still be joined in suit by the patent owner. In Independent Wireless, the Supreme Court held that, where a patent infringement suit was brought by an exclusive licensee, the patent owner was an indispensable party who was required to be joined, either voluntarily as a plaintiff or involuntarily (by process) as a defendant, in order to satisfy the requirements of standing. See
As a general rule, this court continues to adhere to the principle set forth in Independent Wireless that a patentee should be joined, either voluntarily or involuntarily, in any infringement suit brought by an exclusive licensee. See, e.g., Abbott Labs.,
To determine whether a license agreement has conveyed all substantial lights in a patent, and is thus tantamount to an assignment, we must ascertain the intention of the parties and examine the substance of what was granted. See Vaupel,
A
A-Roo first argues that, because the license from Southpac to Prima Tek I covers less than the full term of the licensed рatents, the agreement cannot be relied upon to circumvent the joinder rule of Independent Wireless. We disagree with this reasoning. While it is true that the agreement is temporally limited to an initial two-year period followed by successive, renewable one-year periods, that fact alone does not deprive the licensee of standing to maintain a patent infringement suit in its own name. In Waterman v. Mackenzie, the Supreme Court held that, where a patent owner mortgaged her patent to secure a loan, the mortgagee — as equitаble owner of the patent during the loan period — had standing to sue for infringement without being joined by the patent owner. See
In Vaupel, we applied the Supreme Court’s reasoning in Waterman to a license agreement in which the patent owner retained a reversionary right in the patent. The agreement in question contained a termination clause whereby the license would terminate automatically if the licensee filed for bankruptcy or stopped production of the patented product. See Vaupel,
Like the agreement in Vaupel, the agreement between Southpac and Prima Tek I vests the patent owner with a rever-sionary right in the licensed patents. This is because the license automaticаlly terminates if the agreement is not renewed by Southpac, with all rights in the patents reverting back to Southpac. Significantly, the agreement does not specify a “hard” termination date beyond which the license cannot be renewed, cf. Moore U.S.A. Inc. v. Standard Register Co.,
A-Roo attempts to distinguish the license agreement in this case from that in Vaupel on the ground that Southpac — the licensor — effectively retained the ability to terminate the license at will, regardless of
Bell did not involve an action for patent infringement. Rather, it involved a suit for the refund of income taxes. The question before the Bell panel was whether certain payments received for the transfer of patent rights constituted proceeds from a sale, taxable as long-term capital gains, or from a license, taxable as ordinary income. The Court of Claims was not guided in its analysis by the patent statute, nor by the constitutional and prudential principles of standing. Rather, the court was guided entirely by the Internal Revenue Code and binding interpretations thereof, which provided specific guidelines governing the sale of capital assets. The court’s analysis focused primarily on the relative value of the patent rights in question-those received by the grantee versus those retained by the grantor — and gave no consideration to the issue of standing. Accordingly, we conclude that the holding in Bell is limited to the income tax context and has no bearing on the case at bar.
Having сoncluded that neither the termination clause nor the renewal cycle of the license agreement between Southpac and Prima Tek I required Southpac to be joined in this action, we turn now to A-Roo’s second argument.
B
A-Roo argues that the agreement between Southpac and Prima Tek I cannot be considered a transfer of all substantial rights in the patents because Prima Tek I’s rights extend “only to the extent necessary for [Prima Tek I] to grant a license to Prima Tek II.” According to A-Roo, althоugh the agreement purports to grant Prima Tek I the right to make, use and sell the patented products, those rights were never actually conveyed to Prima Tek I. Instead, Prima Tek I received, at most, a “license to license” which A-Roo claims falls short of transferring “all substantial rights” in the patents. We agree.
A patent represents the legal right to exclude others from making, using, selling, or offering to sell a patented invention in the United States, and from importing the invention into the United States. See 35 U.S.C. § 154 (1994). Implicit in the right to exclude is the ability tо waive that right, i.e., to license activities that would otherwise be excluded, such as making, using and selling the patented invention in the United States. Those activities, of course, may be subject to further limitations such as governmental restrictions or “blocking” patents.
In evaluating whether a particular license agreement transfers all substantial rights in a patent to the licensee, we pay particular attention to whether the agreement conveys in full the right to exclude others from making, using and selling the patented invention in the exclusive territory. See, e.g., Abbott Labs.,
Absent the right to exclude others from making, using and selling the patented inventions, Prima Tek I’s asserted role as “effective patentee” is doubtful. We are further troubled by the fact that the agreement gives Prima Tek I virtually no control over the ability to sub-license the patents.
A licensee’s right to sub-license is an important consideration in evaluating whether a license agreement transfers all substantial rights. In Vaupel, we held that a “sub-licensing veto,” which required the licensee to obtain written consent of the patent owner for all sub-licenses, was only “a minor derogation from the grant of rights” and thus did not deprive the licensee of standing to sue in its own name.
Unlike the agreement in Vaupel, the agreement in this case goes far beyond a mere “sub-licensing veto.” Instead of simply allowing the patent owner to approve or disapprove sub-licenses, the agreement in this case requires that Prima Tek I execute a sub-license to Prima Tek II and to no one else. Furthermore, because the rights granted by Southpac to Prima Tek I are circumscribed by the sub-license to Prima Tek II, the agreement effectively nullifies all of Prima Tek I’s exclusive territorial rights in the patents. Cf. Watson v. United States,
C
Appellees maintain that Southpac is not a necessary party to this suit because the policy underlying the rule of Independent Wireless, i.e., that an accused infringer should not be subject to multiple suits on the same patent, would not be undercut in this case by allowing Prima Tek I to sue in its own name. This is so, according to Appellees, because Southpac has expressly agreed to be bound by any judgment rendered in an action to which Prima Tek I is a party. Essentially, Aрpellees assert that Southpac’s agreement to be bound is sufficient to confer standing on Prima Tek I to sue on its own behalf. We disagree.
Express covenants may, of course, regulate the duties between the licensor and licensee to implement the rights of the parties. However, a contract cannot change the statutory requirement for suit to be brought by the “patentee.” By the same token, a right to sue clause cannot negate the requirement that, for co-plaintiff standing, a licensee must have beneficial ownership of some of the patentee’s proprietary rights. A paten-tee may not give a right to sue to a party who has no proprietary interest in the patent.
Just as a “right to sue” clause cannot confer standing on a bare licensee, neither can a patent owner’s -agreement to be bound by judgments against a licensee circumvent the rule of Independent Wireless that the patent owner must ordinarily join, in аny infringement action, an exclusive licensee who possesses less than all substantial rights in the patent. To hold otherwise would be to allow a patent owner to effectively grant a “hunting license,” solely for the purpose of litigation, in the form of a pro forma exclusive license, e.g., covering only a minuscule territory. The Supreme Court long ago disapproved of such arrangements. See Crown Die & Tool,
D
Finally, in a post-appeal motion, Appellees argue that this court has the authority, under Fed. R.App. P. 27, to join Southpac as an indispensable party in order to correct stаnding and, thus, preserve jurisdiction. See Appellees’ Motion to Join Additional Party-Appellee at 5-6, Prima Tek II v. A-Roo Co., No. 99-1581 (filed June 12, 2000) (citing Mullaney v. Anderson,
Ill
Because the agreement between South-pac and Prima Tek I did not convey to Prima Tek I all substantial rights in the patents in suit, we conclude that Prima Tek I did not have standing to sue in its own name. Since the remaining Appel-lees, Prima Tek II, HSC and HMSC, all derived their ownership interests in the patents from Prima Tek I, they too lacked standing to sue in the district court without being joined by the patent owner.
For the reasons stated above, we deny Appellees’ motion to join Southpac as a party-appellee.
COSTS
No costs.
REVERSED AND VACATED
Notes
. U.S. Patent Nos. 5,581,938, 5,617,703, 5,687,845. 5,740.657. 5.740.658. and 5.758.-472.
. A "blocking patent” is an earlier patent that must be licensed in order to practice a later patent. This often occurs, for instance, between a pioneer patent and an improvement patent.
. We express no opinion as. to whether HSC or HMSC have standing to participate in this suit; that is, whether they are bare licensees or exclusive licensees of the patents.