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Written - July 15, 2019
Author: John B. Hudak
In Lone Star Silicon Innovations LLC v. Nanya Technology Corp., Nos. 2018-1581, -1582 (Fed. Cir. May 30, 2019) the Federal Circuit decided on a previous ruling—decided by the Northern District of California—as to whether Lone Star Silicon Innovations LLC (“Lone Star”) had the right to sue Nanya Technology Corporation (“Nanya”) for patent infringement without the involvement of Advanced Micro Devices, Inc. (“AMD”). The patents in question were originally assigned to AMD. Then, AMD made a transfer agreement to assign the patents to Lone Star. The Federal Circuit decided that Lone Star did not have standing to sue on its own, without AMD, because the transfer agreement—from AMD to Lone Star—did not give Lone Star all substantial rights in the patents. Id at 3, 7.
The Federal Circuit decided on the issue of whether all substantial rights were transferred by reviewing: (a) language in the transfer agreement which broadly stated “all right, title and interest” in the patents were transferred; and (b) the “totality” of the transfer agreement including: (i) Lone Star’s rights to enforce the patents; (ii) Lone Star’s ability to alienate the rights of the patents; (iii) a secured portion of Lone Star’s “monetization efforts” being allocated for AMD; and (iv) AMD and its affiliates “ability to make, use, and sell products practicing the patents.” Id at 8-14.
There was a full analysis of the transfer of rights. In a smaller part of the analysis—although significant to potential parties who might try to creatively circumvent the requirement of the transfer of all substantial rights—the Federal Circuit responded to one of Lone Star’s arguments from case briefing, where Lone Star argued that a broad conveyance existed even though AMD retained certain rights. In that argument, Lone Star asked the court to view the retained rights by AMD as a “contractual promise from Lone Star back to AMD rather than a limit on which rights were transferred.” Id at 9. In response, the Federal Circuit stated that there was no case law to support that distinction. Id. The Federal Circuit stated that “the substance of the transaction is what matters and the substance of this transfer agreement gave AMD important rights in the patents. The relevant question here is whether AMD’s rights, however retained or reacquired, include any substantial rights.” Id.
In conclusion, in this decision the Federal Circuit rejected an argument from an assignee plaintiff that all substantial rights were transferred, where the assignee plaintiff argued that the rights were first assigned and then the assignee later contracted back some rights to the assignor. Therefore, if an assignee wants to have the ability to enforce a patent on their own, the assignee needs to obtain all substantial rights to the patent, which are not later contracted away.
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