Federal Circuit further defines when patent licensees may bring infringement suits

In Aspex Eyewear, Inc. v. Miracle Optics, Inc., the Federal Circuit addressed who has the power to bring a claim for infringement of a patent when the patent holder has granted an exclusive license under the patent to another company that will end before the patent expires. In order for a licensee to have the right to sue under a patent, there must be a transfer of \'all substantial rights\' to the licensee effectively making the licensee the owner of the patent. Courts determine this by looking at the intent of the parties as well as the substance of the rights conferred by the agreement.Contour Optik is the assignee of a patent involving use of magnetic studs on traditional eyeglass frames to more securely hold an attachment, such as sunglasses, onto the frame. Contour entered into an agreement with Chic Optic, in which Chic was granted the exclusive right to make, use, and sell glasses under the patent, the first right to bring infringement actions, the right to retain any damages awarded, and a virtually unlimited right to sublicense its rights to a third party. The agreement was signed in 2001, and would end either in 2003 or 2006, depending on whether Chic opted to extend the agreement. The patent, however, would not expire until 2017. The district court held that this agreement was sufficient to transfer \'all substantial rights\' to Chic, and therefore Contour did not have standing to bring an infringement suit under the patent.The Federal Circuit disagreed, stating that the \'essential issue regarding the right to sue on a patent is who owns the patent.\' The court found dispositive the fact that the agreement was set to terminate in 2006, which was before the patent would expire. According to the court, because Chic's rights spanned \'only a limited portion of the patent term, it simply did not own the patent,\' and therefore the right to sue remained with Contour.This case, along with another recent case, Sicom Systems Ltd. v. Agilent Technologies, Inc., have shown that parties must be very meticulous when drafting patent license agreements. Even if the parties intend the agreement to provide the licensee with the right to sue for infringement of the patent, if substantial rights are retained by the patent owner, the Federal Circuit will likely find that the patentee retains the right to sue, notwithstanding contrary language in the agreement.For the complete decision, visit http://fedcir.gov/opinions/04-1265.pdf


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