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Archived updates for Monday, January 30, 2006

Fixed-Term Exclusive License Not an Assignment for Standing

In Aspex Eyewear, Inc., et al. v. Miracle Optics, Inc (Fed. Cir. January 10, 2006) the court found that a termination provision in an agreement between Contour and Chic precluded finding that the agreement was an assignment. It therefore concluded that Contour was the owner of the ’747 patent when the original complaint was filed, and thus it had standing to sue.

According to the opinion by Circuit Judge Lourie,

[T]the dominant factor in the Contour/Chic agreement on which we differ with the district court’s otherwise well-reasoned opinion is the provision limiting the term of the license. Chic’s rights, however substantial in other respects, are unquestionably valid for only a limited period of time, ending no later than March 16, 2006. As of March 16, 2006, Contour, absent an amendment of the agreement, will regain all of the rights under the ’747 patent that it had previously transferred to Chic. It is thus the unquestioned owner of the patent, and, whatever rights Chic had up until 2006, it is clear that Chic never had all substantial rights to the patent, i.e., it never was the effective owner of the patent. Barring the ’747 patent being found invalid or unenforceable, as of March 16, 2006, Chic will have possessed its rights for approximately five years, in contrast to Contour’s sole and exclusive rights for
the remainder of the patent term. Chic never had effective ownership of the ’747 patent. It was not a situation in which Chic had an exclusive license with all substantial rights that was only defeasible in the event of a default or bankruptcy, or some other condition subsequent. By having rights for only a limited portion of the patent term, it simply did not own the patent. It was merely an exclusive licensee without all substantial rights. The ’747 patent was never assigned; it was exclusively licensed for only a fixed period of years, which does not meet the all substantial rights standard. Thus, we hold that the Contour/Chic agreement was a license, not an assignment, and Contour was the owner of the patent when the complaint was filed and entitled to sue.

Our conclusion that the termination provision in the Contour/Chic agreement precludes a finding that the agreement was an assignment is consistent with the policy concerns that we expressed in Vaupel. In Vaupel, while considering the importance of an agreement’s right to sue provision, we noted the public policy in favor of preventing multiple lawsuits on the same patent against the same accused infringer. 944 F.2d at 875-76. That policy favors finding Chic not to be the effective owner of the ’747 patent. If we were to consider Chic the assignee of the patent under the Contour/Chic agreement, as appellants recognize, it is possible that Chic could assert that patent against an accused infringer during the term of the agreement without Contour’s participation in the lawsuit, and Contour could later assert the patent against the same accused infringer once the agreement expired. After all, the six-year limitation on damages could encompass a period when Chic, according to the district court's holding, and Contour both had rights to sue under the patent.

The cases cited by appellees in its argument that a reversionary interest alone should not compel us to conclude that the Contour/Chic agreement is a license, and not an assignment, are readily distinguishable. As we have stated, this case involves more than a reversionary clause. Moreover, none of the cases that appellees cite, Vaupel, 944 F.2d at 874 (termination provision triggered only in the case of bankruptcy), Prima Tek II, 222 F.3d at 1378-79 (agreement provided for one-year renewals, but otherwise, the agreement did not contain a fixed termination date), or Waterman, 138 U.S. at 261 (patentee could regain rights to the patent by paying off a mortgage), addressed an agreement with a definite termination date, as is the case here. On the contrary, in each of the agreements in appellees’ cited cases, the term of the agreement existed potentially for the life of the respective patents, and it was presumable that the transferred patent would never return to the assignor. That is not the case here.

We therefore vacate the district court’s decision that Contour lacked standing to bring this action in view of our conclusion that Contour was the owner of the ’747 patent when the original complaint was filed.

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