Noting that the patent license expressly granted Ridge the exclusive right to make, use, and sell . . . , the Federal Circuit instead focused its attention “first and foremost” on “the Agreement’s failure to transfer Cold Chain’s right to sue to Ridge.”
Introduction
In Ridge Corp. v. Kirk National Lease Co., Truck & Trailer Parts Solutions, Inc., and Altum LLC, No. 2024-1138 (Fed. Cir. Aug. 1, 2024) (“Decision”), the United States Court of Appeals for the Federal Circuit vacated the district court's entry of a preliminary injunction, holding that plaintiff and patent licensee “Ridge” could not file and maintain a patent infringement suit without joining the patent owner as a necessary party. The patent, U.S. Patent No. 9,151,084 (“the ’084 patent”), was owned by third-party Cold Chain LLC.
In granting Ridge’s preliminary injunction motion , the district court denied the defendants’ motion to join Cold Chain as a necessary party. On appeal, the Federal Circuit vacated both the district court’s denial of joinder and its award of preliminary relief, finding that Cold Chain retained substantial rights in the ’084 patent under the license agreement, thereby preventing Ridge from suing in the absence of Cold Chain.
The Parties & Their Dispute
The ’084 patent is directed to insulated overhead doors used in commercial truck trailers. Plaintiff Ridge is an engineering and manufacturing company specializing in advanced composites for use in trucks and trailers. Cold Chain exclusively licensed the ’084 patent to Ridge.
Defendant Altum manufactures reinforced thermoplastic products. Defendant Kirk performs maintenance on commercial trucks and trailers and sells overhead trailer doors that use panels manufactured by Altum.
Ridge sued Kirk and Altum in the United States District Court for the Southern District of Ohio, alleging infringement of the ’084 patent. Two days later, the district court granted Ridge's motion for a temporary restraining order, halting the defendants’ manufacture, use, and sale of the accused overhead trailer doors. Ridge subsequently moved for a preliminary injunction.
While Ridge’s motion for a preliminary injunction was pending, the defendants moved to join Cold Chain, arguing that as the ’084 patent owner and licensor, it was a necessary and indispensable party to the lawsuit. The defendants asserted that Cold Chain had retained substantial rights in the patent and thus needed to be part of the litigation to ensure complete adjudication of all rights in the patent.
Rejecting those assertions, the district court granted Ridge’s preliminary injunction motion and denied the defendants’ motion to join Cold Chain, determining that Cold Chain had transferred all substantial patent rights to Ridge. The defendants immediately appealed both rulings to the Federal Circuit.
The Federal Circuit's Analysis
The Federal Circuit interpreted the terms of the ’084 patent license de novo while applying the Sixth Circuit’s abuse of discretion standard to the district court’s decision denying joinder of Cold Chain. Decision at 6 (citing Keweenaw Bay Indian Community v. Michigan, 11 F.3d 1341, 1346 (6th Cir. 1993); Young v. Nationwide Mutual Insurance Co., 693 F.3d 532, 536 (6th Cir. 2012)). The issue presented on appeal was whether Ridge, as exclusive licensee, held all substantial rights to the ’084 patent, thus allowing it to sue for infringement without joining Cold Chain.
Under 35 U.S.C. § 281, only a “patentee” may file a suit for patent infringement. The term “patentee” includes successors in title to the patentee by assignment, but not mere licensees. See Univ. of S. Fla. Rsch. Found., Inc. v. Fujifilm Med. Sys. U.S.A., Inc., 19 F.4th 1315, 1319 (Fed. Cir. 2021). However, if the patent license transfers all substantial rights in the patent to a licensee, then the license is considered “tantamount” to an assignment. See Univ. of S. Fla., 19 F.4th at 1319-20. To determine whether all substantial rights have been transferred, courts “ascertain the intention of the parties [to the license agreement] and examine the substance of what was granted.” Alfred E. Mann Found. for Sci. Rsch. v. Cochlear Corp., 604 F.3d 1354, 1358–59 (Fed. Cir. 2010) (citations omitted).
At the outset of its analysis, the Federal Circuit took care to note that “Section 281 is ‘simply a statutory requirement; it does not ‘implicate standing or subject-matter jurisdiction.’” Decision at 6 n.1 (quoting Univ. of S. Fla., 19 F.4th at 1319 n.1). This clarification distinguished the Federal Circuit’s treatment of Section 281 in this case from its prior precedent, holding that in the absence of a “patentee” as required by the statute, a court lacked subject matter jurisdiction or power to adjudicate the case. See Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225, 1235-36 (Fed. Cir. 2019). Since Lone Star, the Federal Circuit has aligned its analysis of “statutory standing” with Supreme Court precedent holding that “so-called ‘statutory standing’ defects do not implicate a court’s subject matter jurisdiction.” Id. at 1235 (citing Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 n.4 (2014)).
Turning to the substance of the patent license, the Federal Circuit explained that “‘the exclusive right to make, use, and sell, as well as the nature and scope of the patentee’s retained right to sue accused infringers are the most important considerations in determining whether a license agreement transfers sufficient rights to render the licensee the owner of the patent.’” Decision at 8 (quoting Univ. of S. Fla., 19 F.4th at 1320). Noting that the patent license expressly granted Ridge the exclusive right to make, use, and sell under the ’084 patent, the Federal Circuit instead focused its attention “first and foremost” on “the Agreement’s failure to transfer Cold Chain’s right to sue to Ridge.” Decision at 8.
In doing so, the court determined that although the license gave both Cold Chain and Ridge the right to initiate a patent infringement suit, Ridge must defer to Cold Chain whenever Cold Chain wished to sue in its own capacity. Id. Ordinarily, a licensor’s retention of the right to sue in that way “‘precludes a finding that all substantial rights were transferred to the licensee,’ unless the licensor’s right to sue ‘is rendered illusory by the licensee’s ability to settle licensor-initiated litigation by granting royalty-free sublicenses to the accused infringers.’” Decision at 9 (quoting Alfred E. Mann, 604 F.3d at 1361 (emphasis added)).
Such a situation arose in Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000), where the patent license permitted the licensee to grant royalty-free sublicenses without the licensor’s consent. There, the Federal Circuit held that the licensor’s retained right to sue was merely illusory in view of its exclusive licensee’s ability to effectively immunize any accused infringer from suit. Id. at 1251. Unlike the exclusive licensee in Speedplay, Ridge’s sublicensing rights were conditional, limited to sublicensees who agreed to purchase Ridge’s overhead doors and conditioned on Ridge’s payment of a 5% royalty on those sales. The Federal Circuit thus concluded that “Ridge’s right to sublicense is ‘fettered’ and . . . ‘does not render illusory [Cold Chain’s] right to sue accused infringers.’” Decision at 9 (quoting Alfred E. Mann, 604 F.3d at 1362).
Ridge nonetheless argued that like the patent licensor in McNeilab, Inc. v. Scandipharm, Inc., No. 94-1508, 1996 WL 431352 (Fed. Cir. July 31, 1996), Cold Chain was in no way obligated to sue infringers and therefore retained no “substantial” right to sue.
According to the Federal Circuit, however, Ridge misread the facts in McNeilab because far from imposing no obligation to sue, the license in that case effectively negated the licensor’s right to sue. Decision at 9. In the present case, Cold Chain retained not only the right to sue but also the right of first refusal to sue, demonstrating both its retained rights in and control over the patent. Id. By comparison, the Federal Circuit noted that it had previously rejected an exclusive licensee’s ability to sue in its own capacity “even where the licensee had the right of first refusal in suing alleged infringers.” Id. at 9-10 (quoting AsymmetRx, Inc. v. Biocare Med., LLC, 582 F.3d 1314, 1316–17, 1320–21 (Fed. Cir. 2009) (emphasis added)).
Finally, Ridge relied on the patent license’s language stating that “(v) Licensee shall retain final control over any major strategic decisions and/or settlement of any such action,” to argue that Ridge itself controlled the right to sue, not Cold Chain. The Federal Circuit disagreed, interpreting this clause as applicable only when Ridge initiated an infringement action or when both parties cooperatively initiated a joint action. Decision at 10-11. This language thus does not apply when Cold Chain initiates litigation independently, which it has the right to do under the agreement. Id. The Federal Circuit therefore concluded that “[b]ecause the Agreement did not convey all substantial rights in the ’084 patent to Ridge, Ridge is not a ‘patentee’ under 35 U.S.C. § 281.” Id. at 11 (quoting Diamond Coating Tech., LLC v. Hyundai Motor America, 823 F.3d 615, 621 (Fed. Cir. 2016)).
Undaunted, Ridge submitted a Rule 28(j) letter following oral argument, featuring a “nunc pro tunc” amendment to the license agreement, presumably to clarify Ridge’s exclusive right to sue. The Federal Circuit disregarded this submission as it was not part of the appellate court record. The court nevertheless explained that nunc pro tunc amendments ordinarily do not cure Section 281 defects regarding a party’s status as a “patentee” at the time the suit was filed. Id. at 12 n.3 (citing Diamond Coating, 823 F.3d 618-19, 621). The “cure” to such defects is joinder of the licensor. Decision at 12 n.3 (citing Intell. Tech LLC v. Zebra Techs. Corp., 101 F.4th 807, 814 (Fed. Cir. 2024)). Without further comment, the Federal Circuit deferred ruling on the issue, explaining that on remand, “[t]he district court is the proper forum for addressing this new evidentiary development in the first instance.” Decision at 12.
Conclusion
The Federal Circuit concluded that the district court erred in its determination that Cold Chain had transferred all substantial patent rights to Ridge. The retention of significant rights by Cold Chain, particularly the right of shared control over litigation and the right of first refusal in initiating suit, indicated that Cold Chain was a necessary party to the lawsuit. The Federal Circuit accordingly vacated the district court’s grant of the preliminary injunction and denial of joinder, remanding the case for further proceedings consistent with its opinion.
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