Lone Star Silicon Innovations, LLC v. Nanya Tech. Corp. et al.

Docket 2018-1581, -1582
O’MALLEY, REYNA, CHEN
May 30, 2019

Brief summary: DC decision vacated and remanded since it should have considered whether assignee AMD should be joined as a necessary party.

Summary: Lone Star appealed DC decision that it cannot assert the patents-at-issue since it does not own those. The FC panel found that the DC should have considered “whether Advanced Micro Devices, Inc. (‘AMD’), the relevant patentee, should have been joined” in view of FRCP 19 and FC case law. The patents were transferred to Lone Star under an agreement “purporting to transfer ‘all right, title and interest’ in the patents” but “impos[ing] several limits on Lone Star” including an agreement “to only assert the covered patents against ‘Unlicensed Third Party Entit[ies]’ specifically listed in the agreement”, that “[n]ew entities can only be added if Lone Star and AMD both agree to add them”, that “[i]f Line Star sues and unlisted entity, AMD has the right-without Lone Star’s approval-to sublicense the covered patents to the unlisted target”, and that “AMD can also prevent Lone Star from assigning the patents or allowing them to enter the public domain.” In addition, the FC panel explains, “AMD and its customers can also continue to practice the patents…and AMD shares in any revenue Lone Star generates from the patents through ‘monetization efforts’”. The FC panel opinion explains that 35 U.S.C. § 281 “allows a ‘patentee’ to bring a civil action for patent infringement” (“the original patentee (whether the inventor or original assignee) and ‘successors in title’”), but “not…mere licensees” (AssymetRx, FC 2009 (“we examine the ‘totality’ of the agreement to determine whether a party other than the original patentee has established that it obtained all substantial rights in the patent”); Waterman, US 1891; Alred E. Mann, FC 2010; Morrow, FC 2007). The FC panel wrote that the DC “correctly recognized” that “the agreement ‘substantially curtail[s] Lone Star’s rights” (“the court must determine whether the party alleging effective ownership has in fact received all substantial rights from the patent owner” (Waterman, US 1891 (“[w]hether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions”); A123 Sys., FC 2010 (“whether the ‘totality’ of the transfer agreement reflects a transfer of all substantial rights in the asserted patents to Lone Star”)). The FC panel found the various terms of the agreement to be “fundamentally inconsistent with a transfer of all substantial rights” (e.g., consent requirement “ensures that AMD will always control how the patents are asserted”, requiring Lone Star “to assign the patents back to AMD…before abandoning” (Aspex, FC 2006)). “Lone Star alleged that it possesses the sort of exclusionary rights that confer Article III standing”, and the FC panel agreed, finding that to be “enough to confer standing at the pleadings stage” (WiAV, FC 2010; Lexmark, US 2014 (“whether a party possesses all substantial rights in a patent does not implicate standing or subject-matter jurisdiction”)). The FC panel also agreed with Lone Star that “even if it lacks all substantial rights in the patents, it should be given the opportunity to join AMD as a necessary party”. Therefore, the DC decision was vacated and remanded.

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Patrick Halloran

Pat has a Ph.D. in Microbiology and Immunology from The University of Health Sciences / The Chicago Medical School (now the Rosalind Franklin Institute (North Chicago, IL) (1994)). He also completed post-doctoral studies at The National Cancer Institute (1994-1996) where he developed novel approaches for gene therapy of melanoma. Pat has been an attorney (IL) since 1999 after graduating from Chicago-Kent College of Law, which was recently ranked as one of the top five law schools for Intellectual Property in the U.S. (U.S. News and World Report link). Pat also has a B.A. in Biology from Augustana College (Rock Island, IL; 1989) where he was on two NCAA Division III National Championship football teams (1985, 1986). He currently resides in Center Valley, PA.