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Lone Star Silicon Innovations LLC v. Nanya Technology Corp.

United States Court of Appeals, Federal Circuit

May 30, 2019

LONE STAR SILICON INNOVATIONS LLC, Plaintiff-Appellant
v.
NANYA TECHNOLOGY CORPORATION, NANYA TECHNOLOGY CORPORATION U.S.A., NANYA TECHNOLOGY CORPORATION DELAWARE, Defendants-Appellees LONE STAR SILICON INNOVATIONS LLC, Plaintiff-Appellant
v.
UNITED MICROELECTRONICS CORPORATION, UMC GROUP (USA), Defendants-Appellees

          Appeal from the United States District Court for the Northern District of California in No. 3:17-cv-04032-WHA, 3:17-cv-04033-WHA, Judge William H. Alsup.

          Timothy P. Maloney, Fitch, Even, Tabin & Flannery, Chicago, IL, argued for plaintiff-appellant. Also represented by David Allen Gosse, Nicole L. Little, Joseph F. Marinelli.

          Peter James Wied, Nixon Peabody LLP, Los Angeles, CA, argued for all defendants-appellees. Defendants-appellees Nanya Technology Corporation, Nanya Technology Corporation U.S.A., Nanya Technology Corporation Delaware also represented by Vincent K. Yip.

          Christopher Kao, Pillsbury Winthrop Shaw Pittman LLP, San Francisco, CA, for defendants-appellees United Microelectronics Corporation, UMC Group (USA). Also represented by Brock Steven Weber.

          Before O'Malley, Reyna, and Chen, Circuit Judges.

          O'Malley, Circuit Judge

         Lone Star Silicon Innovations LLC ("Lone Star") sued Appellees[1] for infringing various patents.[2] The district court concluded that Lone Star does not own these patents and therefore lacks the ability to assert them. In re Lone Star Silicon Innovations LLC, No. 3:17-cv-03980-WHA, 2018 WL 500258, at *1 (N.D. Cal. Jan. 20, 2018). We agree with the district court that Lone Star cannot assert these patents on its own. But the district court should not have dismissed this case without considering whether Advanced Micro Devices, Inc. ("AMD"), the relevant patentee, should have been joined. Its failure to address this issue was legally erroneous in view of Federal Rule of Civil Procedure 19 and our case law. We therefore vacate the district court's dismissal and remand for further proceedings consistent with this opinion.

         I. Background

         A. The Patent Transfer Agreement

         The asserted patents were originally assigned to AMD, which later executed an agreement purporting to transfer "all right, title and interest" in the patents to Lone Star. The transfer agreement, however, imposes several limits on Lone Star. For example, Lone Star agreed to only assert the covered patents against "Unlicensed Third Party En-tit[ies]" specifically listed in the agreement. J.A. 2025; J.A. 2032. New entities can only be added if Lone Star and AMD both agree to add them. J.A. 2025; J.A. 2048. If Lone Star sues an unlisted entity, AMD has the right-without Lone Star's approval-to sublicense the covered patents to the unlisted target. J.A. 2028; J.A. 2032. AMD can also prevent Lone Star from assigning the patents or allowing them to enter the public domain. J.A. 2026 ("Any assignment of an Assigned Patent in violation of this Section 2.6 shall be void ab initio."); J.A. 2027 (explaining that if Lone Star intends to stop paying maintenance fees for a covered patent it must "notify AMD of its decision" and "assign the Abandoned Patent to AMD or to a Person selected by AMD in AMD's sole discretion if requested by AMD . . . ."). AMD and its customers can also continue to practice the patents, J.A. 2027, and AMD shares in any revenue Lone Star generates from the patents through "monetization efforts." J.A. 2029.

         B. District Court Litigation

         Lone Star sued Appellees, who are all listed as Unlicensed Third Party Entities in the transfer agreement, in successive infringement actions filed between October 2016 and December 2016. In each case, Lone Star alleged, among other things, that AMD transferred "all right, title, and interest" in the asserted patents to Lone Star. See, e.g., J.A. 2621. But it took Lone Star nearly a year after filing suit to produce the transfer agreement. Once it did, Appellees filed motions to dismiss their respective suits under Federal Rule of Civil Procedure 12(b)(1). J.A. 3913 (Nanya); J.A. 351 (UMC).

         The district court granted Appellees' motions.[3] As the district court correctly explained, we have recognized three categories of plaintiffs in patent infringement cases. In re Lone Star, 2018 WL 500258, at *3. First, a patentee, i.e., one with "all rights or all substantial rights" in a patent, can sue in its own name. Id. Second, a licensee with "exclusionary rights" can sue along with the patentee. Id. And, finally, a licensee who lacks exclusionary rights has no authority to assert a patent (even along with the patentee). Id. The district court concluded that it only needed to address this first category "since Lone Star claims to be an 'assignee' and 'sole owner' of the patents-in-suit." Id. As the district court acknowledged, however, Lone Star had asked to join AMD so that, if Lone Star could not proceed alone, it could proceed along with AMD. Id. at *6.

         In determining whether the agreement between AMD and Lone Star transferred "all substantial rights" to the asserted patents, the district court examined the rights transferred to Lone Star and those retained by AMD. Id. at *3 ("Whether an agreement constitutes an assignment or license depends not on the 'labels' or 'bare formalities' of title transfer but on the 'substance of what was granted.'"). The district court focused on three aspects of the transfer agreement in particular: (1) AMD's ability to control how Lone Star asserts or transfers the patents, (2) Lone Star's inability to practice the patents, and (3) AMD's right to share in "monetization efforts." Id. at *3-5. The district court then compared the balance of rights here to previous cases where we have said agreements did or did not transfer all substantial rights. Id. Ultimately, the district court concluded that AMD did not transfer all substantial rights in the patents to Lone Star. Id. at *6.

         After it concluded that Lone Star could not sue in its own name, the district court dismissed the case. Id. And although it acknowledged that Lone Star had asked to join AMD, the district court concluded that doing so would "reward Lone Star for its litigation gimmick and unfairly prejudice defendants." Id. In particular, the district court emphasized that if AMD were joined it "would enjoy earlier filing dates for [its] claims than defendants would for any counterclaims for purposes of recovering damages." Id. (citing 35 U.S.C. § 286).

         Lone Star timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

         II. Discussion

         Lone Star argues that it possesses all substantial rights in the asserted patents and therefore can assert them in its own name. And, if it cannot, Lone Star maintains that it must be given an opportunity to join AMD as a plaintiff before this case is dismissed. Appellees argue that Lone Star does not possess all substantial rights and therefore lacks standing to bring suit and that the district court did not err in refusing to consider Lone Star's request to join AMD. We address these arguments below.

         A. All Substantial Rights

         Title 35 allows a "patentee" to bring a civil action for patent infringement. 35 U.S.C. § 281. The term patentee includes the original patentee (whether the inventor or original assignee) and "successors in title." 35 U.S.C. § 100(d). But it does not include mere licensees. See Asym-metRx, Inc. v. Biocare Med., LLC, 582 F.3d 1314, 1318-19 (Fed. Cir. 2009) (citing Indep. Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459 (1926)).

         If the party asserting infringement is not the patent's original patentee, "the critical determination regarding a party's ability to sue in its own name is whether an agreement transferring patent rights to that party is, in effect, an assignment or a mere license." Id. at 1319. In distinguishing between "an assignment" and a "mere license," we "examine whether the agreement transferred all substantial rights to the patents." Id. (internal quotation marks omitted). This inquiry depends on the substance of what was granted rather than formalities or magic words. See Waterman v. Mackenzie, 138 U.S. 252, 256 (1891) ("Whether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions."). For example, in previous cases we have reviewed how an agreement affected who could use, assert, license, or transfer the covered patents. Alfred E. Mann Found. For Sci. Research v. Cochlear Corp., 604 F.3d 1354, 1359 (Fed. Cir. 2010) (collecting cases). We have also considered whether the transferor retained reversionary rights in or ongoing control over the patents. Id. at 1360- 61. But our ultimate task is not to tally the number of rights retained against those transferred. See AsymmetRx, 582 F.3d at 1321. Instead, we examine the "totality" of the agreement to determine whether a party other than the original patentee has established that it obtained all substantial rights in the patent. Id.

         If a party cannot bring suit in its own name, it may still bring suit along with the patentee so long as it possesses "exclusionary rights." Morrow v. Microsoft Corp., 499 F.3d 1332, 1340 (Fed. Cir. 2007). In such a case, "the patentee who transferred these exclusionary rights is ...


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