WOLFSON, District Judge:
Presently before the Court is a motion by Defendant All-luminum Products, Inc., doing business as Rio Brands ("Defendant" or "Rio Brands"), for partial judgment on the pleadings under Rule 12(c), or alternatively, for partial summary judgment. Defendant asks the Court to dismiss Plaintiff Trendx Enterprises, Inc.'s ("Plaintiff" or "Trendx") patent infringement claim (Count I) because Plaintiff failed to join the patent owner of the patents-in-suit and Plaintiff by itself lacks sufficient interest in the patents to bring this
In addressing Defendant's Motion to Dismiss, this Court must accept Plaintiff's allegations contained in the Complaint as true. See Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 457 (3d Cir.2003); Dayhoff, Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir.1996). Thus, the facts recited below taken from the Complaint do not represent this Court's factual findings.
Plaintiff alleges that Defendant infringes the following four patents: U.S. Patent No. 5,120,016 (the '016 patent); No. 5,575,234 (the '234 patent); No. 5,813,163, (the '163 patent); and No. 5,941,191 (the '191 patent) (collectively the "patents-in-suit" or "T-Bar patents"). The patents relate to technology that secures poles, umbrellas, rods, or similar objects to a structure, such as a deck or dock, without screws, nails, glue, or other means that may damage the deck or dock surface. Compl., ¶ 10. Plaintiff Trendx manufactures and markets products that utilize the T-Bar patents under the name "Deckster." Id. ¶¶ 9, 11. In particular, Trendx manufactures and sells devices "designed to be a receptacle for various items (i.e. Tiki torches, flag poles, market umbrellas, etc.) so they could be securely held to a deck or dock." Id. ¶ 11. Trendx alleges that Rio Brands has marketed and continues to market infringing devices also under the "Deckster" name. Id. ¶ 34.
The question before me is whether Trendx has standing to bring a claim for infringement. Trendx admits it does not own the patents at issue. Dysar Products, Inc. and Edward Dysarz (collectively "Dysarz") own the patents.
Dysarz has a history with both Trendx and Rio Brands. Dysarz first licensed the T-Bar patents to Trendx through two agreements, one in 1999 and one in 2000, which gave Trendx the exclusive right to manufacture, market, or sell products containing the patented technology, excluding all marine products. Compl., ¶ 8. Dysarz retained the right to its technology as applied to marine products, such as fishing rod holders. Id. Trendx paid Dysarz royalties in exchange for its license. Id. Shortly after signing its license with Dysarz, Trendx entered into a sublicense agreement with Rio Brands. Id. ¶¶ 15, 16. Then in September 2005, Dysarz terminated its agreement with Trendx. Id. ¶ 21. Because this ended Trendx's right to sublicense, Rio Brand no longer had rights to the patented technology. Id. Less than a year later, in August 2006, Dysarz and Trendx renegotiated a licensing agreement, again limited only to nonmarine products. Id. ¶ 23. Although Trendx notified Rio Brands that it had reacquired rights to the patents, they did not enter into a new sublicense. Id. ¶ 24.
In September 2006, Dysarz contacted Rio Brands to discuss past royalties from September 2005 through August 2006. Compl., ¶ 28. These conversations continued without success and in July 2008, Rio
Two issues arise from these facts: (1) does Trendx's status as licensee give it standing to sue on these patents and (2) what effect, if any, does the settlement between Dysarz and Rio Brands have on this action.
The standard that a court applies on a motion for judgment on the pleadings pursuant to Rule 12(c) is the same standard that a court applies in deciding a motion to dismiss pursuant to Rule 12(b)(6). Turbe v. Government of Virgin Islands, 938 F.2d 427, 428 (3d Cir.1991); see also Spruill v. Gillis, 372 F.3d 218, 223 n. 2 (3d Cir.2004). When reviewing a motion to dismiss, courts "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008) (internal citations and quotations omitted). In Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court clarified the 12(b)(6) standard. Specifically, the Court "retired" the language contained in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 561, 127 S.Ct. 1955 (quoting Conley, 355 U.S. at 45-46, 78 S.Ct. 99). Instead, the factual allegations set forth in a complaint "must be enough to raise a right to relief above the speculative level." Id. at 555, 127 S.Ct. 1955. As the Third Circuit has stated, "[t]he Supreme Court's Twombly formulation of the pleading standard can be summed up thus: `stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element. This `does not impose a probability requirement at the pleading stage,' but instead `simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955).
In affirming that Twombly standards apply to all motions to dismiss, the Supreme Court recently explained the following
My threshold inquiry is whether Trendx may bring its infringement action based on patents owned by someone else. Trendx argues it has all essential rights to the patents-in-suit; Rio Brands argues that Trendx lacks sufficient standing and must join Dysarz.
The Patent Act allows a "patentee" civil remedies for patent infringement. 35 U.S.C. § 281. The Act defines "patentee" to include not only the person to whom the patent has issued, but successors in title to the patentee and their assignees. 35 U.S.C. § 100(d). Therefore, a suit for infringement must ordinarily be brought by a party holding "legal title" to the patent.
Nearly a century ago, the U.S. Supreme Court held that, as a general rule, an exclusive licensee must join the patent owner if it seeks to enforce the owner's patent in court: "Any rights of the licensee must be enforced through or in the name of the owner of the patent ..." Indep. Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 467-468, 46 S.Ct. 166, 70 L.Ed. 357 (1926); see also Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1377 (Fed.Cir.2000) ("[T]his 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."). The Federal Circuit has recognized an exception to this rule: "where the patentee makes an assignment of all substantial rights under the patent, the assignee may be deemed the effective `patentee' under 35 U.S.C. § 281 and thus may have standing to maintain an infringement suit in its own name." Prima Tek II, 222 F.3d at 1377 (citing Vaupel, 944 F.2d at 875); Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed.Cir.2000) (finding a company had standing because the company was, by virtue of two written agreements between the company and the inventor, the "de facto" owner of those patents).
Whether Trendx has been granted substantial rights under the patent must be determined within the context of what rights Dysarz actually granted to Trendx. The parties agree that Dysarz did not grant Trendx a complete license to its patents; Dysarz's license to Trendx was limited to nonmarine products. Compl., ¶ 23; Def. Brief, at 2; Pl. Opp., at 2. Dysarz specifically retained its rights for marine products. Section 1.01 of the license agreement between Dysarz and Trendx reads: "Subject to the terms of this License Agreement, LICENSOR [Dysarz] hereby grants to LICENSEE [Trendx] an exclusive license to develop, sell, manufacture and market said Devices that are not specifically of a marine nature." License Agreement, § 1.01, attached as Ex. B to Cunniff Declaration ("License Agmt"). The Third Whereas Clause reads, in part: "LICENSEE will not, however, use the Devices to manufacture, market, and sell a fishing pole holder, boat cleats and stand-offs or any other products that are specifically of a marine nature; LICENSOR retains these specific uses...." Id. at 1. In other words, Dysarz divided its rights to the patented articles based on the type of product each party would manufacture or sell.
Where a patentee parses its rights based on the "field of use," the Federal Circuit has held, relying on Supreme Court precedent, the patent owner must be joined because the licensee does not
Id. at 1277-78. Persuaded by the Supreme Court's reasoning, the Federal Circuit held: "this court's prudential standing requirement compels an exclusive licensee with less than all substantial rights, such as a field of use licensee, to join the patentee before initiating suit." Id. at 1278-79.
The Federal Circuit recently reaffirmed its holding: "Under long-standing prudential standing precedent, an exclusive licensee with less than all substantial rights in a patent, such as a field-of-use licensee, lacks standing to sue for infringement without joining the patent owner." A123 Sys. v. Hydro-Quebec, 626 F.3d 1213, 1217 (Fed.Cir.2010). In A123, the patentee granted a license to its patents related to lithium battery technology for a particular type of rechargeable battery and to sell batteries in bulk quantities; the patentee retained the remaining rights. Id. at 1218. Therefore, the patentee was a necessary party to the lawsuit. Id. at 1219. Trendx states that these cases are factually distinguishable. Pl. Opp., at 11, n. 5. But Trendx provides no analysis beyond this bald conclusion, other than two parenthetical comments discussing the patented technology at issue in International Gamco and A123 Sys. Many patent cases will involve significantly different technologies, but I am not convinced why this, by itself, is any reason to depart from precedent that is on point with a relevant legal issue before me.
Trendx also argues it was not granted a field-of-use license, but that Dysarz's divvying up of its rights was "rather more akin to a geographic distinction." Pl. Opp., at 10. The Patent Act specifically allows for geographically-restricted assignments and the Supreme Court has held that exclusive territorial licensees need not join the licensor to maintain a suit for patent infringement. Waterman, 138 U.S. at 255, 11 S.Ct. 334. I am not persuaded by Trendx's argument. A geographic license is one where the parties divide up patent rights based on the location where those rights may be performed or enforced; for example, a licensor might retain the right to exclusively sell a patented product in New Jersey, while licensing the right to exclusively sell the product in New York. Plaintiff's argument would mean then that Dysarz retained a right to make, use, and sell patented products at sea, while it granted Plaintiff an exclusive license to make, use, and sell patented products on land. That plainly is not what the parties intended. Dysarz retained its patent rights as to marine products (which it could exercise anywhere) and granted Plaintiff a license to develop, sell, manufacture, and market non-marine products, which Plaintiff could exercise anywhere. Indeed, section 1.02 grants Trendx a worldwide scope to its licensed rights as Trendx itself recognizes. License Agmt, § 1.02; Pl. Opp., at 9 ("[Trendx's] exclusive license is without geographic restriction..."). This section would have no effect if I were to interpret this agreement as a geographic license. Further, the parties discuss their rights based on the type of product to be manufactured or sold, not where the right will be enforced. For example, the Third Whereas Clause reads,
Trendx also cites Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336 (Fed. Cir.2006), in support of its argument that it does have substantial rights. This citation is somewhat baffling as it is a case holding that a licensee, who held even more rights than Trendx, did not have substantial rights. There the Federal Circuit held that even though the patent owner had licensed: "(1) the exclusive right to make, use, and sell products covered by the patent; (2) the right to sue for infringement of the patent; and (3) a virtually unrestricted authority to sublicense its rights under the agreement" it still had not transferred all substantial rights and therefore it could bring suit in its own name because the license term was only for a limited period of time. Id. at 1342. Instead of assigning its rights by time, Dysarz did so by subject matter, and thus it remained owner of its patents for the same reasons as were articulated in Aspex Eyewear. Id. at 1343. Trendx additionally cites to Ciba-Geigy Corp. v. Alza Corp. and Surgical Laser Technologies v. Laser Industries, to argue that Dysarz's limited retention of rights as to marine products does not undermine Trendx's unrestricted use of the patents. But in Ciba-Geigy, the patent owner retained rights only to the extent it triggered a contract clause subject to a condition subsequent, which it never did. Ciba-Geigy Corp. v. Alza Corp., 804 F.Supp. 614, 631 (D.N.J.1992). And in Surgical Laser, the patent owner retained the rights only for a limited educational, non-commercial purpose. Surgical Laser Technologies v. Laser Industries, No. 91-3068, 1991 U.S. Dist. LEXIS 17191, at *7-9 (E.D. Pa Nov. 27, 1992). Neither factual situation applies here as Dysarz always maintained a significant commercial interest in its patents. Furthermore, I find that the types of license agreements at issue in Int'l Gamco and A123 Sys. are more factually apposite to the agreement between Dysarz and Trendx.
Nevertheless, even if Trendx were correct and the license at issue is not a field-of-use license, Trendx still does not have all substantial rights to the patents and therefore cannot enforce the patents solely in its name. To determine whether a license agreement has conveyed all substantial rights in a patent, a court must ascertain the intention of the parties and examine the substance of what was granted. Prima Tek II, 222 F.3d at 1378. In making this assessment, it is necessary to determine both what rights were granted and what rights were retained. Id.
A patent is a sanctioned monopoly and the essence of a patentee's right is to exclude others from making, using, or selling what is claimed. Vaupel, 944 F.2d at 875. If the patent owner licenses this right of exclusion, in full, to another, then that party may sue without joining the owner. See Prima Tek II, 222 F.3d at 1379-80 ("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."); Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1552 (Fed.Cir.1995) ("To be an exclusive licensee for standing
Notably absent from Trendx's rights, even in its purportedly exclusive sphere of nonmarine products, is the ability to exclude others from practicing the patent. Whether a patentee has conveyed an exclusive right to sue is "particularly dispositive" in determining if all substantial rights have been licensed to the patentee. Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1132 (Fed.Cir.1995) (analyzing case law and finding the question of whether the "exclusive right to sue for infringement" is "particularly dispositive" of whether a party had obtained substantial rights). The license does not explicitly grant Trendx an outright right to sue. Rather, it provides: "If there is any claimed or apparent infringement of the patented Devices by any third party, whether discovery of said claimed or apparent infringement is by LICENSEE or LICENSOR, both parties agree they shall notify the other in writing within 15 days of receiving such information at which time LICENSOR and LICENSEE agree to jointly discuss, assess and determine an agreeable coarse [sic] of action that complies with the spirit and intention of this License Agreement." License Agmt, § 5.03. Contrary to Plaintiff's argument, this language does not convey an exclusive right to sue. All it requires is that the parties discuss any possible or pending infringement actions. Dysarz retains its right to sue unless the agreement provides otherwise. See Textile Prod., 134 F.3d at 1485 (finding that patentee retained right to license to third parties when agreement was silent on the subject).
Moreover, I must consider not only whether Trendx had the power to sue, but also whether the agreement "divests the licensor of that same right." See Delano Farms Co. v. Cal. Table Grape Comm'n, 655 F.3d 1337, 1342 (Fed.Cir.2011). Even if Dysarz envisioned Trendx being able to initiate a lawsuit, the agreement does not preclude Dysarz from doing the same. See IpVenture, Inc. v. ProStar Computer, Inc., 503 F.3d 1324, 1325 (Fed.Cir.2007) ("Thus all entities with an independent right to enforce the patent are indispensable or necessary parties to an infringement suit."). Dysarz's independent power to bring suit is evidenced by its lawsuit
Trendx also argues that because it had an exclusive right to sublicense the patents-in-suit, it could nullify any attempt by Dysarz to sue an alleged infringer by sublicensing that party, thereby rendering any retained right-to-sue by Dysarz illusory. Trendx relies on the Federal Circuit's language in Speedplay, Inc. for support. There the court said that the patentees' "right to sue an infringer if Speedplay does not is illusory, because Speedplay can render that right nugatory by granting the alleged infringer a royalty-free sublicense." Speedplay, Inc., 211 F.3d at 1251. But the court's discussion was in the context of a license agreement that explicitly granted Speedplay the sole right to enforce the patents. Id. And the patentees' retained right to sue was triggered if Speedplay failed to take action for three months; only then could the patentees sue in their own name. Id. Here Trendx does not have the sole right to enforce the patents and the license agreement appears to forestall any situation where Trendx could render Dysarz's right illusory because it requires the parties to discuss any infringement action beforehand. See License Agmt, § 5.03. Nor am I convinced that Trendx actually has an exclusive unfettered right to sublicense the patents, as did Speedplay. The Trendx agreement only provides: "Whereas LICENSEE may desire to sublicense others ... to maximize the patents potential and/or compliment [sic] its existing product line that are not specifically of a marine nature, LICENSEE agrees to supply LICENSOR with a letter that states the material elements of any executed agreement with a SUBLICENSEE ..." License Agmt, § 1.03. And in the subsequent section, the parties agree that Dysarz will not contact any party that Trendx is in negotiations with as this is best to "obtain the best prices and highest royalties." Id. § 1.04. This suggests that Dysarz was free to enter into negotiations with any company not negotiating with Trendx and also that it retained a right to sublicense its patents. This language also suggests that the parties were not contemplating royalty-free sublicenses, another significant distinction from the facts presented in Speedplay, Inc. Similarly, Trendx relies on Ciba-Geigy Corp., but there too, the court found the licensor had granted the licensee "the sole right" to enforce the patent at issue. Ciba-Geigy Corp., 804 F.Supp. at 631 ("[T]his agreement granted the licensee the sole right to sue for past present and future infringement.") (emphasis added). Such a clear granting of an exclusive right is lacking in Trendx's agreement with Dysarz.
Nor does the fact Dysarz and Trendx labeled their agreement as an "exclusive license" actually give Trendx exclusive rights to the patent. "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." Waterman, 138 U.S. at 256, 11 S.Ct. 334; Vaupel, 944 F.2d at 875 ("[T]he use of the term `exclusive license' in the [transfer agreements] is not dispositive; what the documents in fact recite is dispositive."). Here the legal effect of the license was not to give Trendx an exclusive right to exclude others from making, using, or selling the patented technology. Rather, it was a grant from Dysarz to Trendx of the right to develop, sell, manufacture, and market the patented
Trendx argues that if I find that Dysarz is a necessary party, then Trendx should be granted leave to amend rather than having Count I dismissed. Pl. Opp., at 15. Rio Brands disagrees. Def. Reply, at 7. Other courts that have addressed this issue have found themselves compelled to dismiss the claims because the Federal Circuit has said that it is necessary to join the patentee before initiating the lawsuit:
Road Sci., L.L.C. v. Cont'l Western Transp. Co., No. 09-2023, 2009 WL 4928373, at *5, 2009 U.S. Dist. LEXIS 122262, at *13-14 (E.D.Cal. Dec. 14, 2009); see also Univ. of Pittsburgh v. Varian Med. Sys., No. 07-0491, 2008 WL 1909208, at *2-3, 2008 U.S. Dist. LEXIS 36098, at *7-8 (W.D.Pa. Apr. 30, 2008) (analyzing the same language and dismissing Plaintiff's action because it did not join a necessary party before initiating its action), vacated on other grounds by 569 F.3d 1328, 1334 (Fed.Cir.2009).
For the foregoing reasons, Defendants' Motion to Dismiss is GRANTED. An order
Moreover, beyond these equitable concerns, Rio Brands appears to have an after-acquired license to the '016 patent. The Patent Act states: "An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage." 35 U.S.C. § 261; Heidelberg Harris, Inc. v. Loebach, 145 F.3d 1454, 1456 (Fed.Cir.1998) ("[The defendant was] a bona fide purchaser of a license under the asserted patent and therefore is not subject to suit for infringement of the patent."). And while Dysarz did not license the two other Settled Patents, (the '234 patent and the '163 patent) — instead covenanting not to sue Rio Brands on those patents — some courts have found privity between a patent holder and a licensee when the patent holder has already sued on licensed patents, thereby binding the licensee to the patent holder's lawsuit. Erbamont, Inc. v. Cetus Corp., 720 F.Supp. 387, 394-395 (D.Del.1989) ("There is a strong possibility that both the Erbamont-Farmitalia and Erbamont-Erbamont N.V. relationships fall within this definition because both Farmitalia, by its license agreement, and Erbamont N.V., by its representations to defendants, claim a concurrent interest in the '124 patent."); Arcade, Inc. v. 3M, No. 96-0359, 1997 U.S. Dist. LEXIS 21687, at *22 (E.D. Tenn. June 10, 1997) ("BBCo is in privity with Arcade by virtue of their exclusive licensing agreement."); see also Gardiner v. Virgin Islands Water & Power Authority, 145 F.3d 635, 642 (3d Cir.1998) ("[P]arties in privity are bound by rulings made in their absence"). In other words, Trendx might be considered a virtual party should Rio Brands raise an issue of res judicata. But as Trendx correctly notes, the settlement between Dysarz and Rio Brands did not involve the '191 patent, so these concerns would have no bearing should Trendx join Dysarz and bring an action for infringement based on that patent alone.
