Lack of Co-ownership for Terminally Disclaimed Patents May Doom a Lawsuit and Result in an Award of Attorneys’ Fees

Can lack of co-ownership for a terminally disclaimed patent render your otherwise well-founded infringement lawsuit baseless, requiring you to pay your adversary’s attorneys’ fees? At present, the answer may depend on the jurisdiction in which the case is litigated.

On July 25, 2019, Judge Savage, United States District Court for the Eastern District of Pennsylvania, held that the plaintiff had no Article III standing to assert patent infringement because it did not commonly own the two terminal disclaimer patents necessary to enforce the patents subject to the terminal disclaimers when it filed the lawsuit.¹  The Court further award defendant its reasonable attorneys’ fees incurred in litigating the standing issue. The next day, however, Judge Schroeder, United States District Court for the Eastern District of Texas, held that the lack of co-ownership for a terminally disclaimed patent alone does not impact a plaintiff’s Article III standing to enforce a patent in an infringement action.²  These two seemingly contradictory holdings highlight the importance of the common ownership requirement of terminally disclaimed patents in bringing a patent infringement action.

The judicially created doctrine of obvious-type double patenting prohibits claims in a second patent to issue where those claims are patentably indistinct over earlier claims such that the later claims would be obvious or anticipated in light of the earlier claim.³  The two justifications for the doctrine are (1) to prevent an unjustified extension of the life of the subsequent patent and (2) to prevent multiple suits by different assignees asserting infringement of essentially the same patented invention.⁴

To obviate an obvious-type double patenting issue, a patentee may file a terminal disclaimer, which “serves the statutory function of removing the rejection of double patenting, and raises neither presumption nor estoppel on the merits of the rejection.”⁵  When filing a terminal disclaimer, the patent holder disclaims the “portion of the second patent which would extend beyond the expiration of the first” and in doing so, “the patentee gives up any extension of patent protection that might have resulted.”⁶  A terminal disclaimer filed to obviate an obvious-type double patenting issue must “include a provision that any patent granted on that application … shall be enforceable only for and during such period that said patent is commonly owned with the application or patent which formed the basis for the judicially created double patenting.”⁷  The purpose of requiring common ownership between patents subject to a terminal disclaimer is to prevent harassment by multiple assignees.⁸ 

Whether a party has standing to sue in federal court is a question of federal law, and Article III standing, often referred to as “Constitutional standing,” must be present at the inception of the lawsuit and cannot be cured retroactively.⁹  The Federal Circuit has found that if a plaintiff lacked a “cognizable injury necessary to assert standing under Article III of the Constitution” where it “held no enforceable rights whatsoever in the patent at the time it filed suit,” that “such a defect in standing cannot be cured after the inception of the lawsuit.¹⁰

The Federal Circuit recently addressed Constitutional standing in the context of patent infringement actions brought by a licensee in Lone Star Silicon Innovations v. Nanya Tech. Corp.¹¹  In that case, the Federal Circuit confirmed that the question of whether a licensee possesses the requisite patent rights to bring an infringement suit, commonly referred to as “all substantial rights,” does not implicate “Constitutional standing” or subject matter jurisdiction.¹²  Instead, the Federal Circuit held whether a licensee holds “all substantial rights” is an issue of “statutory standing,” which differs from Article III standing that is derived from the Constitution.¹³

The Midwest Athletics and Fall Line cases once again raise the issue of Article III standing in patent infringement cases, this time in the context of terminal disclaimers. In both of those cases, the respective plaintiff did not commonly own an asserted patent with the terminal disclaimer patent(s) at the time of the filing of the complaint. The courts in those cases came to opposite conclusions on whether the plaintiff had Article III standing to bring the action.

In Midwest Athletics, the Eastern District of Pennsylvania relied on Federal Circuit precedent that held “to have standing to assert patent infringement under 35 U.S.C. §271, a plaintiff must demonstrate that it held enforceable title to the patent at the inception of the lawsuit.¹⁴  The Court concluded that because the asserted patents were not commonly owned with the terminal disclaimer patent, the plaintiff had no right to enforce the asserted patents at the inception of the lawsuit.¹⁵  As a result, the plaintiff lacked standing to bring the action.¹⁶  Further, the court awarded the defendant its attorneys’ fees because the plaintiff should have, among other things, confirmed common ownership of the patents before filing the lawsuit.¹⁷

In Fall Line, the Eastern District of Texas acknowledged that the Federal Circuit has held that to have Article III standing to bring a patent infringement action, “the plaintiff must demonstrate that it held enforceable title to the patent at the inception of the lawsuit.”¹⁸ The Court, however, distinguished enforceable title from enforceability in the context of terminal disclaimers stating that “holding enforceable title means that the owner has title that is superior to all others, whereas enforceability concerns equitable issues that may preclude or limit recovery.”¹⁹  The Eastern District of Texas went on to hold that “even if the [asserted patent] was unenforceable at the time of filing due to lack of common ownership with the [terminal disclaimer patent], Plaintiff still held enforceable title to the [asserted patent] and had standing to bring suit,” and cited to Abraxis Bioscience.²⁰

If either case is appealed to the Federal Circuit, the question would be “whether lack of co-ownership of terminally disclaimed patents is an Article III standing issue or a statutory standing issue.” When the Federal Circuit does decide the issue, it will be determining the strength of the language that “the owner hereby agrees that any patent so granted on the instant application shall be enforceable only for and during such period that it and the prior patent are commonly owned,” which is recited in most terminal disclaimers. If a nunc pro tunc assignment of a terminal disclaimer patent could cure the standing defect, then such assignment would mitigate the strength of the enforceability language in a terminal disclaimer. Because the Federal Circuit guidance on standing in Lone Star Silicon Innovations, Abraxis Bioscience, and Paradise Creations are not on point regarding terminal disclaimers, there is a lack of clarity on the effects of terminally disclaimed patents.

To avoid the uncertainty of the answer to the standing question, practitioners should not overlook the importance of looking to the assignment history of asserted patents and the relationships among assignees in a patent family that are subject to terminal disclaimers when preparing for patent litigation.

¹ Midwest Athletics and Sports Alliance LLC v. Ricoh, USA, Inc., 2-19-cv-00514 (PAED 2019-07-25, Order) (Hon. Timothy J. Savage) (The court granted defendant’s motion for judgment on the pleading that plaintiff lacked standing to assert infringement because plaintiff did not own the associated terminal disclaimer patents when it filed the suit.).
2 Fall Line Patents, LLC v. Zoe’s Kitchen, Inc. et al., 6-18-cv-00407 (TXED 2019-07-26, Order) (Hon. Robert W. Schroeder, III) (The court denied defendant’s motion for judgment on the pleading that plaintiff lacked standing to assert infringement because plaintiff did not own the associated terminal disclaimer patent when it filed the suit.).
³ In re Hubbell, 709 F.3d 1140, 1145 (Fed. Cir. 2013).
⁴ Id.
⁵ Quad Env. Tech. Corp. v. Union Sanitary Dist., 946 F.2d 870, 873 (Fed. Cir. 1991).
⁶ Ortho Pharm. Corp. v. Smith, 959 F.2d 936, 940 (Fed. Cir. 1992).
⁷ 37 C.F.R. § 1.321(c)(3).
⁸ In re Hubbell, 709 F.3d at 1145.
⁹ Keene Corp. v. United States, 508 U.S. 200, 207, 124 L. Ed. 2d I 18, 113 S. Ct. 13 2035 (1993) citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n. 4-5, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992).
¹⁰ Paradise Creations, Inc. v. UV Sales Inc., 315 F.3d 1304, 1308-10 (Fed. Cir. 2003).
¹¹ Lone Star Silicon Innovations v. Nanya Tech. Corp., 2018-1581 (Fed. Cir. May 30, 2019).
¹² Id. at 18.
¹³ Id.
¹⁴ Midwest Athletics, 2-19-cv-00514 at p. 4 citing Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359, 1364 (Fed. Cir. 2010); Paradise Creations, Inc. v. UV Sales, Inc., 315 F.3d 1304, 1309 (Fed. Cir. 2003).
¹⁵ Id. at p. 6.
¹⁶ Id.
¹⁷ Id. at pp. 6-9. For months, the defendant asserted that plaintiff did not own the terminal disclaimer patents, and requested evidence to the contrary. Id. at pp. 6-7. The court twice instructed plaintiff to withdraw the claims if it did not own the terminal disclaimer patents, and warned plaintiff that it would impose costs if it continued pursuing them without ownership of the necessary patents. Id. at p. 8. The court found that plaintiff ignored these instructions and warnings, which lead to unnecessary motion practice and caused undue delay. Id. at pp. 8-9.
¹⁸ Fall Line Patents, 6-18-cv-00407 at p. 6 citing Paradise Creations, 315 F.3d at 1309.
¹⁹ Id.
²⁰ Id. at pp. 7-8 citing Abraxis Bioscience, 625 F.3d at 1364. The Abraxis Bioscience case, which is relied on in both the Midwest Athletics and Fall Line, did not involve terminal disclaimers, but explained that a plaintiff had no standing to bring an infringement action when there was no appropriate written assignment at the it filed the complaint and that a nun pro tunc assignment could not cure this defect. Abraxis Bioscience, 625 F.3d at 1366. The Abraxis Bioscience case cites to Paradise Creations which held that “the plaintiff must demonstrate that it held enforceable title to the patent at the inception of the lawsuit” to assert standing. Paradise Creations, 315 F.3d at 1309-310. However, the Paradise Creations case also did not involve terminal disclaimers.