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Federal Circuit Says Licensee Can’t Sue on its Own: USFRF v. FujiFilm Medical

Dec.01.2021

Last week, the U.S. Court of Appeals for the Federal Circuit publicly released[1]  an opinion further clarifying the standard for determining a licensee’s right to sue for patent infringement on its own. See Univ. of S. Florida Rsch. Found., Inc. v. FujiFilm Med. Sys. U.S.A., Inc. In particular, the decision clarifies that if a license does not explicitly transfer the right to sue, the licensee may not have the right to sue on its own. This decision may impact how patent owners structure and phrase their license agreements going forward, particularly in the university research space, where universities often reserve key rights to their licensed patents.

In this case, the inventors assigned all rights in the invention to the University of South Florida (“USF”), which in turn transferred certain rights to the University of South Florida Research Foundation (“USFRF”) through a license agreement. The license agreement stated that “USF and USFRF desire to cooperate in the development, protection, and commercial exploitation of the said invention.” The license was silent on the transfer of the right to sue. This omission was pivotal in the Court’s determination that USFRF lacked the statutory right under 35 U.S.C. § 281 to sue on its own.

The Court explained that a patent owner may transfer all substantial rights in a patent, in which case the transfer is tantamount to an assignment to the licensee, who may then maintain an infringement suit in its own name. While the Federal Circuit has never established a complete list of the rights that must be examined to determine whether the parties intended a transfer of all substantial rights, it reiterated several considerations, including:

  • “the nature and scope of the licensor’s retained right to sue accused infringers,” which the Court called “the most important factor in determining whether an exclusive license transfers sufficient rights to render the licensee the owner of the patent”
  • “the exclusive right to make, use, and sell”
  • “the scope of the licensee’s right to sublicense”
  • “the nature of license provisions regarding the reversion of rights to the licensor following breaches of the license agreement”
  • “the right of the licensor to receive a portion of the recovery in infringement suits brought by the licensee”
  • “the duration of the license rights granted to the licensee”
  • “the ability of the licensor to supervise and control the licensee’s activities”
  • “the obligation of the licensor to continue paying patent maintenance fees”
  • “the nature of any limits on the licensee’s right to assign its interests in the patent”

Here, an important fact was that the license did not explicitly transfer the right to sue for infringement, but instead was silent on that right. The Court held that the agreement’s silence indicated USF’s intent to reserve the right, not to transfer it. The fact that USF and USFRF had agreed to allocate damages between them also weighed against a conclusion that USF transferred all substantial rights. The Court acknowledged that the license transferred “significant rights” to USFRF and that the duration of the license was substantial, but nonetheless held “USF retained enough important rights to conclude that USF did not transfer all substantial rights in the patent.”

The Court did not agree, however, with the district court’s holding that USFRF lacked constitutional standing. On that issue, the Court found that “constitutional standing is satisfied when a party holds at least one exclusionary right” and that USFRF had at least one exclusionary right in the patent at the time it filed suit. The Court remanded for further proceedings, including to determine whether USF may be joined as a party to satisfy the statutory requirement. 

This decision provides the relevant framework for analyzing whether all substantial rights are transferred under Federal Circuit law. The decision, therefore, may significantly impact how patent owners, particularly universities, choose to structure and phrase their license agreements going forward. The case reinforces that when a patent owner retains key rights—particularly the exclusive right to make, use, and sell, and rights to enforce the patent against accused infringers—or is silent on those rights, the licensee may lack the statutory right to sue on its own. Each license agreement must, of course, be evaluated based on its specific terms and the intentions of the parties.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Anne Elise Herold Li
Partner – New York
Phone: +1 212.895.4279
Email: ali@crowell.com
Robert B. Kornweiss
Counsel – New York
Phone: +1 212.803.4045
Email: rkornweiss@crowell.com

[1] The Federal Circuit decided this case in a sealed opinion dated October 22, 2021 and released the public version of the opinion last week.