CAFC Vacates Dismissal for Failure to Consider Joinder

Last week, the United States Court of Appeals for the Federal Circuit issued an opinion in Lone Star Silicon Innovations LLC v. Nanya Technology Corp. et al., Nos. 2018-1581, -1582 (May 30, 2019). Lone Star sued for infringement of various patents originally assigned to Advanced Micro Devices, Inc. (“AMD”). AMD had executed an agreement purporting to transfer “all right, title and interest” in the patents to Lone Star. But the agreement imposed several limits on Lone Star, including limitations on who Lone Star could sue for infringement without AMD’s consent and on Lone Star’s ability to assign the patents. The defendants moved to dismiss under FRCP 12(b)(1), asserting lack of subject matter jurisdiction on grounds that Lone Star did not own the asserted patents. The district court dismissed the cases. Lone Star appealed. 

On appeal, the Federal Circuit first addressed Lone Star’s rights in the patents. The Court explained it has recognized three categories of plaintiffs in patent cases: (1) a patentee, i.e. one with “all rights or all substantial rights” in a patent, which can sue in its own name; (2) a licensee with “exclusionary rights,” which can sue with the patentee; and (3) a licensee without exclusionary rights, which cannot sue at all. Examining the totality of the agreement between Lone Star and AMD, the Court agreed with the district court that it did not transfer all substantial rights in the patents to Lone Star. The Court focused on the agreement’s restrictions on enforcement and alienation, and concluded Lone Star is not the patentee and, therefore, cannot assert the patents in its own name.

The Court next addressed the district court’s decision to dismiss, rather than allow Lone Star to join AMD as a plaintiff. The Court concluded that Lone Star possesses exclusionary rights in the patents, and therefore has Article III standing to sue. The Court noted the distinction between the constitutional standing requirements of Article III and the statutory standing requirements of 35 U.S.C. § 281 (establishing when a party may obtain relief under the patent laws). Noting that the Supreme Court in Lexmark recently clarified that statutory standing defects do not implicate subject-matter jurisdiction, the Court held the district court had to consider joinder of AMD as a necessary party under FRCP 19 before dismissing the case. Because it did not, the Court vacated and remanded the case with instructions to do so.

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