Following closely on the heels of Morrow, et al. v. Microsoft Corp. (See this issue) and Propat Int’l Corp. v. RPost, Inc., (See IP Update Vol. 10, No. 1), U.S. Court of Appeals for the Federal Circuit has again refused to find standing in a case involving a purported exclusive licensee of a patent attempting to bring an infringement suit in its own name without joining the patent owner. Int’l Gamco v. Multimedia Games, Inc., Case. No. 07-1034 (Fed. Cir., Oct. 15, 2007) (Rader, J.).
International Gamco (Gamco) possessed an "exclusive enterprise license" (a combination of an exclusive territorial license and an exclusive field of use license). The Federal Circuit concluded that an exclusive enterprise licensee, like a field of use licensee, does not hold all substantial rights in the licensed patent within the licensed territory and therefore the licensee did not have standing to sue without joining the patent owner.
Gamco executed an Asset Purchase Agreement with International Game Technology (IGT), by which Gamco assigned the patent in suit to IGT, but reserved for itself rights to sublicense the patent in the New York State Lottery Market and to sue for infringement in that market. Later, Gamco and IGT entered an additional agreement under which IGT granted Gamco the "exclusive" right to sublicense the patent for "the lawful operation of lottery games authorized by the New York State Lottery in the state of New York." This modification also gave Gamco exclusive rights to sue "for the past, present, and future infringement of the Patent, within the Territory." Gamco then amended its existing complaint against Multimedia Games alleging infringement of the patent.
Multimedia Games moved to dismiss Gamco’s amended complaint for lack of standing. The trial court concluded that Gamco held an "exclusive enterprise" license—a hybrid between a territorial license and a field of use license. "Rather than being restricted only to a geographic area or only to specific kinds of conduct Gamco’s rights are restricted to the operations of the New York State Lottery, an enterprise of the State of New York." The trial court then held that Gamco had standing to sue, but certified the question for appeal. The nature of the license was not certified for appeal.
The Federal Circuit held that Gamco did not have standing to sue without the patent owner, noting that the single infringing act of offering New York State Lottery games might subject the infringer to multiple suits, e.g., suit by Gamco under its "enterprise license" for the "lottery" games and a separate suit by IGT or some other game-specific licensee for other games. In reaching its decision, the Court distinguished territorial exclusive licenses, noting that such exclusive licenses exclude "all other persons, even the patentee, from [infringing the patent] within the district." The Court did not reach the question of whether Gamco could participate in the suit if it joined the patent owner.
Practice Note: While the practice of dividing the enforcement and licensing rights in the same patent among different parties has recently become popular from a business and/or tax perspective, the Federal Circuit is only now addressing the legal effects of these arrangements. The Court’s repeated decisions denying standing to licensees that do not have legal title to the patents they seek to enforce casts doubt on the value and viability of such arrangements.
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