Last Week in the Federal Circuit (October 5-9): A Tangled Knot of Patent Ownership and Required Parties

Last week was court week, and as we noted in our video insights, the Federal Circuit was very busy hearing arguments (not many were cancelled). Given that, it is perhaps no surprise that there weren’t many precedential opinions. Below we provide our usual weekly statistics and our case of the week—our highly subjective selection based on whatever case piqued our interest.

Precedential opinions: 1

Non-precedential opinions: 9

Rule 36: 5

Longest pending case from argument: Ecoservices, LLC v. Certified Aviation Services, No. 19-1602 (184 days).

Shortest pending case from argument (non-Rule 36): Exmark Manufacturing Company v. Briggs & Stratton Corp., No. 19-1878 (154 days).

Case of the week: AntennaSys, Inc. v. AQYR Technologies, Inc., No. 2019-2244 (Oct. 7, 2020).

Panel: Judges O’Malley, Bryson, and Reyna, with Judge O’Malley writing the opinion.

You should read this case if: you have a patent-owner joinder issue (or you’re the sort of person who slows down to look at an accident on the other side of the road).

This case has all the hallmarks of a law school exam. The plaintiff-appellant patent owner briefed this appeal as a straightforward claim construction dispute—in district court, it had received an unfavorable claim construction ruling and then effectively conceded non‑infringement so it could appeal. The Federal Circuit thought there were antecedent questions that needed to be answered first, but weren’t. Judge O’Malley’s opinion for the Court starts by saying, “[t]here is little more frustrating for a district court judge than to have the parties jointly lead you down a wrong, and possibly unnecessary, path. That is what occurred here.” (Once a district court judge herself, she may know a thing or two about that.)

In its simplest form, this case involves plaintiff patent owner AntennaSys suing for patent infringement. But the case is far from that simple: AntennaSys did not own the patent alone. It had only a ½ interest, with one of the defendants (Windmill) originally owning the other ½ interest. And Windmill (not AntennaSys) originally possessed the exclusive rights in the patent under a license, so long as it met certain sales requirements (which it did not). The license required Windmill to create an LLC (GBS Positioner) to hold Windmill’s patent and license interests. Given that AntennaSys ended up in a dispute with Windmill, things obviously didn’t work out. AntennaSys sued Windmill’s wholly owned subsidiary, AQYR, for infringement of the patent that Windmill (or perhaps GBS Positioner) partially owned. And AntennaSys also raised state law claims against Windmill based on Windmill’s alleged failure to pay royalties.

If you’re confused, maybe this will clear things up:

  • AntennaSys is the plaintiff, has a ½ patent interest, and is suing AQYR for infringement and Windmill for failure to pay royalties.
  • AQYR is a defendant owned by Windmill.
  • Windmill is a defendant and has (or had) a ½ patent interest.
  • GBS Positioner is not in the lawsuit, but maybe has Windmill’s ½ patent interest.

Or maybe not.

To unravel things, the Federal Circuit recited some basic principles: under 35 U.S.C. § 262, patent co‑owners are essentially at each other’s mercy. One co-owner can extinguish another co‑owner’s ability to seek infringement damages by granting a license. And an action for patent infringement must join as plaintiffs all co-owners (subject to a couple exceptions). Finally, the Court noted that a non-consenting co-owner can never be involuntarily joined in an infringement action (although on this point, Judge O’Malley stated that she disagreed with this rule but was bound by Federal Circuit precedent).

The problem, the Court noted, was that these issues were threshold considerations (before you get to claim construction and infringement) and were not developed by the parties in the district court, and they were potentially intertwined with other issues. So the Court decided its best course was to let the district court deal with them in the first instance on remand. For several paragraphs, the Court noted some of these issues, which included:

  • Did Windmill waive its right as a co-owner not to join the suit against its subsidiary AQYR?
  • Did AQYR have a license (express or implied) from Windmill to practice the patent as a defense to infringement?
  • What role does GBS Positioner play? And if GBS Positioner owns Windmill’s interest then why wasn’t GBS Positioner an indispensable party to the litigation?

Finally, the Court noted that if plaintiff’s infringement claim ends up being dismissed on remand, then the district court would lack subject matter jurisdiction over the state-law royalty claims. Applying settled law, the Court rejected plaintiff’s argument that whenever a state-court cause of action requires a court to engage in claim construction, the cause of action necessarily arises under the Patent Act. The Court noted that, if that were enough to support federal subject matter jurisdiction, “we would find jurisdiction in any case implicating a patent law issue.”