Article III standing can differ from the statutory requirements of 35 U.S.C. § 281 in patent cases. In certain instances, a secured creditor can obtain rights that become actionable only upon default, which may include the ability to license or enforce a patent. However, these rights may not necessarily correspond to patent ownership. Because Article III standing must exist when a case is filed, parties planning to file a complaint should consider the issue carefully beforehand. The precedential decision of Intellectual Tech LLC v. Zebra Techs. Corp.[1] illustrates this scenario.
OnAsset granted a security interest in U.S. Patent No. 7,233,247 to Main Street Capital Corporation (“Main Street”) as part of a loan agreement.[2] Several years later, OnAsset formed Intellectual Tech LLC (“IT”) as its subsidiary and assigned the same patent to IT,[3] which then granted a security interest in the patent to Main Street.[4] Subsequently, OnAsset and IT each defaulted on their respective agreements,[5]which afforded Main Street the option to sell, assign, transfer, and/or enforce the patent.[6]
IT later sued Zebra Technologies (“Zebra”) for infringing the patent.[7] The district court granted Zebra’s motion to dismiss for lack of Article III standing, determining that Main Street’s right to license deprived IT of all its exclusionary rights, even if those rights were not exercised.[8]
On appeal, the Federal Circuit emphasized that Article III standing is a jurisdictional requirement not curable by joinder and, in contrast,[9] whether a party qualifies as a “patentee”[10] under 35 U.S.C. § 281 is not a jurisdictional requirement[11] and is curable by joinder.[12] In reversing the lower court’s ruling, the Federal Circuit found that (1) the triggering of Main Street’s unexercised option to assign did not automatically deprive patent owner IT of all its rights,[13] and (2) the shared ability to license while a default existed did not divest IT of all exclusionary rights, noting that IT still suffers an injury-in-fact from infringement even if Main Street and IT can both license the patent.[14] The Federal Circuit concluded that, because Main Street did not exercise any options under the agreements, IT was not presently divested of all exclusionary rights.[15]
For further information, read our more detailed client alert.
*****
[1] Intellectual Tech LLC v. Zebra Techs. Corp., No. 2022-2207 (Fed. Cir. May 1, 2024).
[2] See Intellectual Tech LLC, 2022-2207, slip op. at 3.
[3] See id.
[4] See id.
[5] See Intellectual Tech LLC, 2022 WL 1608014, at *3–4.
[6] See id., at *3. See also Sections 3(j), 6(b), and 6(c) of the Agreements.
[7] See Intellectual Tech LLC, 2022 WL 1608014, at *1.
[8] See id., at *7.
[9] See Intellectual Tech LLC, 2022-2207, slip op. at 9.
[10] See id. See also 35 U.S.C. § 100(d).
[11] See Intellectual Tech LLC, 2022-2207, slip op. at 10.
[12] See id., at slip op. at 11.
[13] See id., at slip op. at 11–12.
[14] See id., slip op. at 14.
[15] See id., slip op. at 16.