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Archived updates for Wednesday, October 17, 2007

Mixed Territorial and Field of Use License Does Not Provide Standing to Sue

In International Gamco, Inc., et al. v. Multimedia Games, Inc. (October 15, 2007), the Federal Circuit held that an "exclusive enterprise license" (an amalgam of an exclusive territorial license and an exclusive field of use license), like a field of use licensee, does not grant all substantial rights in the licensed patent that would otherwise provide standing to sue for infringement where the license agreement at issue included these terms:

License. Gamco shall be granted and IGT grants to Gamco the exclusive right and
license, within the Territory, to make, use, sell, and offer to sell, with the
right to sublicense others to make, use, sell, and offer to sell game system
networks covered by the ’035 Patent, with the proviso that IGT shall have the
right to approve any sublicense offered by Gamco, which approval shall not be
unreasonably withheld . . . .

According to the opinion by Circuit Judge Rader,

In this case, Gamco’s exclusive enterprise license conveys both a territorial license and a field of use license. Because the “Territory” of the license includes both geographic (the NYSL-authorized sites) and field of use (“lottery games”) restrictions, Gamco’s “exclusive” rights must meet both conditions. The problem of a multiplicity of lawsuits arising from an exclusive field of use license is not cured by adding a geographic restriction. As discussed above, a field of use license, like the license in Pope, apportions the subject matter of a patent. Thus, an exclusive field of use licensesubjects an infringer to suit by multiple parties because the license has split the patented subject matter amongst various parties.

In this case, Gamco’s exclusive enterprise license limits its rights to lottery games, but the ’035 patent extends beyond that limitation. For example, a single infringing game system at an NYSL-authorized site could offer blackjack, keno, mahjong, and lottery games.1 Thus, the single infringing act of offering NYSL games might subject the infringer to suit by Gamco for the lottery games, and separately by IGT or some other game-specific licensee for the other games. This example also shows the potential of suits among licensees or between the licensee and licensor. For example, the hypothetical infringer’s keno game could conceivably lead to a squabble over whether keno was a "lottery game" under Gamco’s license. Divvying up the rights in the ’035 patent along subject matter rather than geographic lines would "permit several monopolies to be made out of one" in a manner not specifically sanctioned by the Patent Act.

These multiplicity problems in the event that an exclusive enterprise licensee could sue without joining its licensor were foreseen by the Supreme Court in Pope. In Pope, as in this case, the license only conveyed rights to a subset of the patented subject matter. For that reason, as in this case, the conveyance posed a threat of multiple suits based on the same allegations of infringement. This court therefore holds that Gamco lacks standing to sue in its own name without joining IGT. As an exclusive enterprise licensee, Gamco does not hold all substantial rights in the full scope of the ’035 patent. Therefore, this court reverses the district court’s denial of defendant Multimedia’s motion to dismiss Gamco’s complaint.

Dubitante Senior Circuit Judge Friedman was unconvinced that the district court erred in permitting Gamco to maintain its patent infringement suit without joining its licensor:
This court may be correct that field-of-use exclusive licensees pose a significantly greater likelihood of multiple lawsuits than geographically limited assignments do. It seems to me unlikely, however, that there would be a serious danger of such multiplicity, in the circumstances of this case. It also might seem anomalous for this court to rely on Supreme Court dicta in Pope while simultaneously distinguishing the seemingly inconsistent view of this court in its 1988 Textile Products case as dicta. Textile Prods v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998)[referring to Justice Rader's conclusion that "The Textile case did not feature any field of use licenses. In fact, the Textile plaintiff did not even purport to be an assignee. In Textile, this court concluded that the plaintiff was a non-exclusive licensee without standing to pursue a claim for patent infringement against the licensor/purchaser and a third-party provider. Id. at 1485."]
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