Case Information
*2 Before MAYER, RADER, and PROST, Circuit Judges.
PROST, Circuit Judge.
Plaintiff-Appellant Sicom Systems Ltd. (“Sicom”) appeals the dismissal of its infringement action against Agilent Technologies, Inc. (“Agilent”), Tektronix, Inc. (“Tektronix”), and LeCroy Corporation (“LeCroy”) (collectively “Appellees”) by the United States District Court for the District of Delaware. Sicom Sys. v. Agilent Techs., No. 03- *3 1171-JJF (D. Del. Sept 30, 2004). On appeal, Sicom argues that the district court erred in concluding that Sicom did not qualify as an “effective patentee” and therefore lacked standing under the Patent Act to sue for infringement of U.S. Patent No. 5,333,147 (“the ’147 patent”) in this action. Because we hold that the assignor, “Her Majesty the Queen in Right of Canada as represented by the Minister of Defence, Canada” (“Canada”), did not convey all substantial rights in the patent to Sicom despite its conveyance to Sicom of the exclusive right to sue for commercial infringement, we affirm.
I. BACKGROUND
The ’147 patent, entitled “Automatic monitoring of digital communication channel conditions using eye patterns,” claims a type of digital signal transmission channel monitor. The patent issued on July 26, 1994, and was assigned to Canada. On January 19, 1998, Sicom executed a license agreement, covering the ’147 patent, with the Canadian government (“Agreement”). The inventors of the ’147 patent are founding members of Sicom who developed the technology through their own research in connection with a contract with the Canadian government. Under the Agreement, Canada retained legal title to the ’147 patent and reserved the rights to: (1) continue operating under the patented technology; (2) veto proposed sublicenses; (3) grant contracts to further develop the ’147 patent; (4) sublicense any improvements or corrections developed by Sicom; and (5) sue for infringement of the ’147 patent except for “commercial infringement actions.” Additionally, Sicom could not assign its rights without Canada’s approval, nor bring suit without first notifying Canada.
On January 15, 2003, Sicom filed its first action for infringement of the ’147
patent against Agilent, LeCroy, and Tektronix. Canada declined to take part in the
*4
litigation and Appellees jointly filed a motion to dismiss this first action on the ground
that Sicom lacked standing to bring the suit. On November 20, 2003, the district court
granted Appellees’ first motion to dismiss, concluding that Canada had retained
substantial rights to the patent to a degree sufficient to bar Sicom from commencing an
action for infringement without the Canadian government. On December 18, 2003,
Sicom appealed that decision to this court, but withdrew that appeal on January 1,
2004. Sicom Sys. v. Agilent Techs.,
On December 19, 2003, Sicom and the Canadian government executed an amendment to their Agreement (“the Amendment”) granting Sicom the exclusive right to sue for commercial infringement of the ’147 patent. Specifically, the Amendment granted to Sicom: (1) the exclusive right to “initiate commercial infringement actions” related to the patent; (2) an extension of the term of the Agreement to coincide with the term of the patent; and (3) an extension of Sicom’s right to initiate commercial infringement actions after expiration of the patent. Sicom then filed a second suit on December 30, 2003 against Appellees, who subsequently filed a second motion to dismiss on February 20, 2004.
The district court issued an order granting Appellees’ motion to dismiss on September 30, 2004, dismissing the case with prejudice and thereafter issued a Memorandum Opinion on October 5, 2004. Sicom Sys. v. Agilent Techs., No. 03-1171- JJF (D. Del. Oct. 5, 2004) (“Sicom”). In its opinion, the district court concluded that “Sicom does not possess the substantial rights necessary to be an ‘effective patentee’ for purposes of granting Sicom standing to sue for infringement of the ’147 patent.” Id., slip op. at 3-4.
The court was not persuaded that the Amendment granting Sicom “the exclusive right to sue for commercial infringement” of the ’147 patent in the United States was sufficient to establish that Sicom had all of the substantial rights in the patent necessary to have standing in this suit. Id., slip op. at 4. “[T]his expansion of rights,” according to the court, “does not grant Sicom the exclusive rights necessary to transform its license into an assignment.” Id. “The qualifier of ‘non-commercial infringement’ contained in the Amendment coupled with the provisions of Article 11, cl. 2 of the Agreement, still give Canada the right to sue for any alleged infringement which is not commercial,” id., and “Canada may still be able to pursue non-commercial customers of Defendants like governmental entities, the military and universities, thereby creating multiple risk of litigation over the same patent, a result which is inconsistent with a genuine exclusive right to sue.” Id.
Additionally, the court noted that “the Amendment does not expressly grant Sicom the right to sue for past infringement, and the Amendment is only effective as of the date it was signed.” Id. It noted that under Article 11, Clause (1) of the Agreement, [1] “Sicom’s right to sue is still limited despite the Amendment, in that Sicom (1) must notify Canada before bringing suit, (2) must consult with Canada for the *6 purpose of jointly determining the steps to be taken in the event of actual or threatened litigation, and (3) may not ‘make any admission of liability, nor offer or conclude settlement’ without the prior written consent of Canada.” Id., slip op. at 5.
The court also based its holding that Sicom lacked standing on “the restriction on Sicom’s right to assign,” id., namely, “the Agreement’s provision that Sicom cannot assign the ’147 patent without the written consent of Canada,” finding it to be a fatal reservation of the right by Canada. Id., slip op. at 6 (citing Article 2, Clause (9) of the Agreement). [2] It concluded that “[b]ecause Sicom’s ability to assign the patent is restricted, Sicom’s interest in the patent is limited to that of a licensee, and therefore, Sicom does not have standing to bring an infringement lawsuit.” Id.
Finally, the court addressed the issue of whether the action should be dismissed with prejudice. It noted that “Sicom has not contested Defendants’ assertion that any consequence of the exercise of the right and licence granted herein or in the event of infringement of licensed rights by others:
(a) the Licensee shall promptly inform the Licensor; (b) the Licensee shall not make any admission of liability nor offer or conclude a settlement regarding such claim without the prior written consent of the Licensor or as otherwise provided in Clause (2) of this ARTICLE;
(c) the Parties will, for the purpose of jointly determining the steps to be taken in the circumstances, consult with each other and give to one another, free of charge, information or advice;
(d) neither Party shall bind or commit the other Party to any course of action which involves liability for legal costs, expenses or damages unless jointly agreed upon in writing.
[2] Article 2, Clause (9) reads: Except as otherwise provided under this Agreement, the Licensee shall not, without the Licensor’s prior express written consent, assign, delegate, sub-license, pledge or otherwise transfer this Agreement, or any rights or obligations under it, to any person.
dismissal by the Court of this action should be with prejudice, because Sicom has twice attempted and twice failed to establish standing.” Id. The district court therefore granted Appellees’ motion to dismiss the action with prejudice. Thereafter, Sicom appealed.
This court has jurisdiction over this appeal under 28 U.S.C. § 1295(a)(1). II. DISCUSSION
A. Standard of Review
This court reviews jurisdictional questions, such as standing, de novo. Fieldturf
Inc. v. Sw. Recreational Indus., Inc., 357 F.3d 1266, 1268 (Fed. Cir. 2004). “In
determining whether a dismissal should have been with or without prejudice, this court
applies the law of the pertinent regional circuit . . . .” H.R. Techs., Inc., v.
Astechnologies, Inc., 275 F.3d 1378, 1383 (Fed. Cir. 2002). In the Third Circuit,
dismissal with prejudice is reviewed under an abuse of discretion standard. Anderson
v. Aylins,
B. Standing to Sue
1. The principal issue on appeal is whether the court erred in dismissing the case for lack of standing. Sicom argues that it had standing to sue for commercial infringement of the ’147 patent under the Agreement and the Amendment and maintains that whether an agreement is titled a “license” rather than an “assignment” is not dispositive. Instead, it submits that “actual consideration of the rights transferred is the linchpin in determining standing.” In this regard, Sicom argues that consideration of the rights transferred shows that Sicom holds all the substantial rights in the ’147 patent, *8 and that therefore, this court should determine that it had standing to sue Appellees. Specifically, pointing to its exclusive right to sue commercial infringers, Sicom argues that “[t]he grant of the right to sue infringers is particularly dispositive of the question of whether a licensee holds all substantial rights because the ultimate question is whether the licensee can bring suit on its own or whether the licensor must be joined as a party.”
In response, Appellees argue that the district court correctly held that Sicom did not have standing to sue for infringement of the ’147 patent because Sicom is not the owner of the patent, the licensor of the patent, or the holder of all substantial rights of the patent. Instead, Appellees argue, Sicom is a mere licensee of the patent, where the licensor, Canada, retained the substantial rights to the patent. Appellees ask this court to affirm the district court’s decision dismissing the action for lack of standing.
2.
Standing to sue is a threshold requirement in every federal action. Pfizer, Inc. v.
Elan Pharms. Research Corp.,
Under 35 U.S.C. § 100, therefore, “[t]he owner of a patent or the owner’s
assignee can commence an action for patent infringement, but a licensee alone
cannot,” Calgon Corp. v. Nalco Chem. Co., 726 F. Supp. 983, 985 (D. Del. 1989),
unless the licensee holds “all substantial rights” in the patent, H.R. Techs., 275 F.3d at
1384.
[3]
A nonexclusive license confers no constitutional standing on the licensee to
bring suit or even to join a suit with the patentee because a nonexclusive licensee
suffers no legal injury from infringement. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d
1538, 1552 (Fed. Cir. 1995); Ortho, 52 F.3d at 1031. An exclusive licensee receives
more rights than a nonexclusive licensee, but fewer than an assignee. An example of
an exclusive licensee is a licensee who receives the exclusive right to practice an
invention but only within a given limited territory. Rite-Hite, 56 F.3d at 1552 (citing
Indep. Wireless Tel. Co. v. Radio Corp. of Am.,
3.
This court has addressed the issue of whether an agreement transfers all or
fewer than all substantial patent rights in five recent cases. See Intellectual Prop. Dev.,
Inc. v. TCI Cablevision of Cal., Inc.,
1128 (Fed. Cir. 1995); Vaupel, 944 F.2d 870; see also H.R. Techs., 275 F.3d 1378;
Mentor H/S, Inc. v. Med. Device Alliance,
In Intellectual Property, this court determined that Intellectual Property
Development, Inc. (“IPD”) was an exclusive licensee, not an assignee, having fewer
than all substantial rights in the patent at issue.
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.
Id. Regarding the remaining sub-licensees, this court held that “[s]ince the remaining Appellees, 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.” Id. at 1382.
In Textile Products, this court affirmed the district court’s dismissal for lack of
standing. This court determined that the agreement transferred less than all substantial
rights in the patent to the licensee, Textile Productions, Inc., because it did not clearly
manifest a promise by the patent owner, Mead Corporation, to refrain from granting to
anyone else a license in the area of exclusivity.
In Abbott Laboratories, this court determined that the transfer of certain patent
rights to Abbott constituted an exclusive license of fewer than all substantial patent
rights. In that case, Diamedix reserved the right to make and use the patented products
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for its own benefit and the right to sell those products to parties with whom Diamedix
had pre-existing contracts.
4.
In this case, we must assess the Agreement at issue, weighing the rights in the
patent transferred to Sicom against those retained by Canada, to determine whether
Canada assigned all substantial rights in the patent, or fewer than all such rights.
Canada granted Sicom a license of the ’147 patent under the Agreement. Sicom is a
“sole” licensee, which the Agreement defines as having “the right to be the only
licensee” of the patent. However, Canada has reserved for itself the right to continue
operating under the patented technology, as well as a multitude of other rights,
including: the right to veto Sicom’s reassignment of its rights or proposed sublicenses;
the right to levy additional royalties or other consideration; the right to grant contracts
and sub-contracts to further develop the invention claimed in the patent; and the right to
offer sublicenses under any improvements or corrections developed by Sicom. See
Calgon,
We agree with Sicom that an important substantial right is the exclusive right to sue for patent infringement. Calgon, 726 F. Supp. at 986. This right is substantial because the right to sue is the means by which the patentee exercises “the right to exclude others from making, using, and selling the claimed invention.” Vaupel, 944 F.2d at 875.
Although Sicom does have an exclusive right to sue for commercial infringement under the Agreement and the Amendment, it is also true that a single infringer could be *15 vulnerable to multiple suits for any non-commercial infringement. The scope of Sicom’s right to sue is limited to “initiating commercial infringement actions.” Therefore, Sicom’s exclusive right to sue for “commercial” infringement does not signify that Sicom has the exclusive right to sue for all infringement. Indeed, Canada specifically retains the right to sue for “non-commercial” infringement. Similarly, Sicom does not have the ability to indulge infringement outside of the “commercial” sphere. See Abbott Labs., 47 F.3d at 1132 (noting that the licensee “does not enjoy the right to indulge infringements, which normally accompanies a complete conveyance of the right to sue”).
We find unpersuasive Sicom’s response that it is not suing Appellees’ customers,
nor suing for non-commercial infringement, and that this court should not consider risks
that are outside the scope of the facts in this case. Sicom’s focus on the parties in suit
is misplaced where this court has established that the intention of the parties to the
Agreement and the substance of what was granted are relevant factors in determining
whether all substantial rights in a patent were conveyed. See Prima Tek II, 222 F.3d at
1378. Additionally, we find that Sicom, in other respects as well, has failed to show that
it has all substantial rights under the patent. For instance, Sicom does not have the
right to settle litigation without the prior written consent from Canada, nor does Sicom
have the right to sublicense without Canada’s prior approval or to assign its rights. See
Intellectual Prop.,
*16 Moreover, Canada made further reservations. Under the Agreement, it reserves the rights to: grant contracts and sub-contracts to develop the ’147 patent further; offer sublicenses under any improvements or corrections that Sicom develops; veto any sublicense; and levy additional royalties or other consideration. See Prima Tek II, 222 F.3d at 1380 (noting that the right to sublicense is an important consideration in determining whether a license agreement transfers all substantial rights). Finally, Canada specifically retained legal title to the ’147 patent under the Agreement, which states that “[t]itle to all rights of ownership in the Licensed Intellectual Property are and shall remain with the Licensor.”
In light of Canada’s right to permit infringement in certain cases, the requirement
that Sicom consent to certain actions and be consulted in others, and the limits on
Sicom’s right to assign its interests in the patent, we hold that the Agreement transfers
fewer than all substantial rights in the patent from Canada to Sicom. See Calgon, 726
F. Supp. at 986. Accordingly, we affirm the district court’s order dismissing Sicom’s
complaint. We stress the principle set forth in Independent Wireless requiring that a
patent owner be joined in any infringement suit brought by an exclusive licensee having
fewer than all substantial rights.
C. Dismissal with Prejudice
On appeal, Sicom additionally argues that the district court abused its discretion in dismissing the case with prejudice. Sicom points out that “[d]ismissal for lack of standing is usually without prejudice.” Sicom submits that dismissal with prejudice is inappropriate here because Sicom is able to cure any defect in its standing “through negotiations with the Canadian government.”
In response, Appellees point out that Sicom failed to “raise this argument in the district court, despite an opportunity to do so.” Appellees therefore argue that “Sicom’s failure to raise this argument in the district court constitutes a waiver of that argument on appeal.” They argue that “Sicom should not be permitted to obtain yet another minor amendment to its license and bring yet another lawsuit.”
We conclude that the district court did not abuse its discretion by dismissing this case with prejudice. First, as the district court noted, this action was Sicom’s second suit that was dismissed for lack of standing. Second, as the district court noted, “Sicom has not contested Defendants’ assertion that any dismissal by the Court of this action should be with prejudice, because Sicom has twice attempted and twice failed to establish standing.” Sicom, slip op. at 6. Although Sicom correctly argues that dismissal with prejudice is generally inappropriate where the standing defect can be cured, Sicom already had a chance to cure the defect and failed. See Textile Prods., *18 134 F.3d at 1485. Accordingly, we affirm, holding that the district court was within its discretion to dismiss the case with prejudice.
CONCLUSION
We affirm the district court’s order granting Appellees’ motion to dismiss and dismissing the case with prejudice.
AFFIRMED
Notes
[1] Article 11, Clause (1) reads: In the event of any threatened or actual suit against the Licensee regarding an intellectual property infringement claim from any third party in
[3] At least one exception exists where “an exclusive licensee that does not
have all substantial rights does have standing to sue in his own name when ‘necessary
to prevent an absolute failure of justice, as where the patentee is the infringer, and
cannot sue himself.’” Textile Prod., lnc. v. Mead Corp.,