WiAV Solutions LLC v. Motorola, Inc.

MEMORANDUM OPINION

This matter is before the Court on Defendant’s Motion to Dismiss (Docket No. 146). For the reasons set forth below, the motion will be granted.

BACKGROUND

On July 14 2009, WiAV Solutions LLC (“WiAV”) filed this action against Motorola, Inc., Nokia Corp, Nokia Inc., Palm, Inc., Personal Communications Devices LLC, Personal Communications Devices Holdings LLC, Sharp Corp., Sharp Elec *641 tronics Corp., Sony Ericsson Mobile Communications AB, Sony Ericsson Mobile Communications (USA) Inc. and UTStarcom, Inc. 1 WiAV also named Mindspeed Technologies, Inc. (“Mindspeed”) as the Defendant patent owner. Of the nine patents at issue in the suit, seven are currently assigned to Mindspeed (the “Mindspeed Patents”). 2 On November 13, 2009, all of the remaining Defendants, save Sony Ericsson Mobile Communications AB (the “Defendants”), filed a Joint Motion to Dismiss (Docket No. 146) for lack of standing. The Mindspeed Patents are the subject of the Defendants’ Motion to Dismiss. The facts relevant to the Motion to Dismiss follow.

On September 18, 1998, Rockwell International Corporation (“Rockwell”), through its subsidiary Rockwell Semiconductor Inc. (“Rockwell Semiconductor”) filed four patent applications. (Def. Mem. at 2.) Those patents ultimately issued as the '573, '814, '992, and '493 patents. (Id.) Subsequent to the issuance of those patents, Rockwell Semiconductor changed its name to Conexant Systems, Inc. (“Conexant”). On November 30, 1998, Conexant filed a patent application which ultimately issued as the '606 and '578 patents. (Id.) Thus, in 1998 Rockwell was the beneficial owner of six of the seven patent applications which eventually became the Mindspeed Patents. (Id.)

A. The Rockwell-Conexant Agreement

In January 1999, Rockwell and Conexant entered into a distribution agreement (the “Rockwell-Conexant Agreement”) as part of a spin-off of Conexant. (Def. Mem. at 2.) The Rockwell-Conexant Agreement assigned all patents, patent applications, and other intellectual property relating to Rockwell’s semiconductor business to Conexant. (Id.) The application for the seventh and final Mindspeed Patent, the '841 patent, was filed in July 1999, but under the terms of the agreement, it was assigned to Conexant. (Id.) Thus, Conexant was the assignee off all seven of the Mind-speed Patents.

Additionally, under the terms of the Rockwell-Conexant Agreement, Conexant granted Rockwell licenses to Conexant’s intellectual property and the right to sublicense that intellectual property to Rockwell affiliates in connection with a sale of Rockwell’s business related to the intellectual property. 3 (Def. Ex. A at § 3.11(b).) Finally, Rockwell was granted an option to acquire a license in the Mindspeed Patents *642 in any field of use not a part of Rockwell’s business at the time of the Roekwell-Conexant Agreement. 4 (Id. at § 3.11(f).)

B. The Conexant-Skyworks Agreement

On January 8, 2003, Conexant and its subsidiary, Skyworks, entered into a license agreement (the “Conexant-Skyworks Agreement”). Section 2.1(a) of the Conexant-Skyworks Agreement granted Skyworks an “exclusive” license over the Mindspeed Patents in the field of Wireless Handsets. 5 (Def. Ex. C at § 2.1(a).) This license was subject to any preexisting ficenses and subject to all rights reserved by Conexant in Section 2.1(d).

In Section 2.1(d), Conexant reserved the right to “make, have made, use, offer to sell, export, and import Conexant Products in the field of Wireless Handsets” and to license any of the above rights to its subsidiaries and joint development partners. 6 (Id at § 2.1(d)(i).) The Conexant^Skyworks Agreement further provided that any license granted by Conexant to Mind-speed may include the right to grant sublicenses to Mindspeed’s subsidiaries and joint development partners. 7 (Id. at § 2.1(d)(iii).)

*643 Additionally, the ConexanASkyworks Agreement granted Skyworks the exclusive right to license and assert the Mind-speed Patents as to Qualcomm in all fields of use. 8 (Id. at §§ 4.1(a), 4.2(a).)

C. The Conexant-Mindspeed Agreement

In June 2003, Conexant assigned the Mindspeed Patents to Mindspeed as part of an agreement (the “Conexant-Mindspeed Agreement”). Conexant reserved its right to sublicense the Mindspeed Patents to its subsidiaries and joint development partners. 9 (Def. Ex. B at § 5.03(b).)

D. The Skyworks-Qualcomm Agreement

In April 2005, Skyworks and Qualcomm entered into a license agreement (the “Skyworks-Qualcomm Agreement”) involving the Mindspeed Patents. 10 Under the terms of that agreement Skyworks granted Qualcomm the right to grant sub-licenses of the Mindspeed Patents to Qualcomm affiliates. 11

*644 E. The Skyworks-WiAV Agreement

In September 2007, Skyworks assigned its licensing rights under the Conexanb-Skyworks Agreement to WiAV (the “Sky-works-WiAV Agreement”). 12 (Def. Ex. D at § 2(a).) This assignment was subject to the preexisting licensing and sublicensing rights retained by Rockwell, Conexant, and Mindspeed and granted WiAV certain “exclusive” rights in the Mindspeed Patents. (Id.) Despite assigning its right under the Conexanb-Skyworks Agreement, Skyworks retained for itself the non-assignable right to license Qualcomm. (Def. Mem. at 3.) Finally, Skyworks agreed “not to grant any additional licenses and/or covenants not to sue under, or otherwise encumber, any [Mindspeed Patent] after the Effective Date.” (Def. Ex. D at § 5(a)(vii).)

F. The WiAV-Mindspeed Breach of Contract Suit

In September 2008, WiAV filed an action against Mindspeed for breach of contract. (Def. Mem. at 7.) A Settlement Agreement and Mutual Release entered into in that action provided that nothing in the settlement limited “the existing rights of either Mindspeed or WiAV to license or sublicense rights in the [Mindspeed] Patents within their permitted fields of use.” (Def. Ex. E at ¶ 19.) Mindspeed also acknowledged that “WiAV has the exclusive right to assert against any and all third parties claims (including counterclaims and cross-claims) of infringement of the [Mindspeed] Patents [ ] in the field of ‘Wireless Handsets.’ ” (Id. at ¶ 7(c).)

G.Licensing Through Sipro Lab

Sipro Lab Telecom (“Sipro”) is a licensing agent who administers a patent pool related to speech coding technology. (Def. Mem. at 10.) Sipro’s website identified Mindspeed as a licensor offering licenses as part of a patent pool for the G.729.1 speech coding standard, to which the Mindspeed Patents relate. (Def.Ex.G.) Specifically, the website reveals that licenses for the '573 and '493 patents are being offered through the patent pool. (Def.Ex.H.) Sipro’s G.729.1 Patent License Agreement excludes wireless applications from the patent pool it seeks to license, *645 but includes WLAN applications in the patent pool. 13

DISCUSSION

I. The Legal Standard

A motion to dismiss for lack of subject matter jurisdiction under the doctrine of standing is assessed pursuant to the principles of Fed.R.Civ.P. 12(b)(1). Of course, it is the burden of the party bringing a case to prove the existence of subject matter jurisdiction. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991). In assessing a motion to dismiss under Rule 12(b)(1) the court may consider evidence outside the pleadings without converting the motion to one for summary judgment. Velasco v. Gov’t of Indonesia, 370 F.3d 392, 398 (4th Cir.2004). Thus, the Court will consider the various agreements relating to the Mindspeed Patents in addressing the Motion to Dismiss.

Article III of the Constitution limits the power of the courts to the resolution of “cases” and “controversies.” U.S. Const., Art. Ill, § 2. To show that a case or controversy exists, a plaintiff must meet both constitutional and prudential standing requirements. Morrow v. Microsoft Corp., 499 F.3d 1332, 1338 (Fed.Cir.2007).

To demonstrate constitutional standing, the plaintiff must allege “personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to be redressed by the requested relief.” Id. at 1338-39 (citing Hein v. Freedom From Religion Found., Inc., 551 U.S. 587, 127 S.Ct. 2553, 2555-56, 168 L.Ed.2d 424 (2007)). Often, as here, standing turns on the nature of the claim asserted and the statutory provision on which the claim rests. Morrow, 499 F.3d at 1339.

A “patentee” is entitled to bring a “civil action for infringement of his patent.” 35 U.S.C. § 281. A “patentee” includes not only the patentee to whom the patent was issued but also “the successors in title to the patentee.” 35 U.S.C § 100(d). A patent grant “bestows the legal right to exclude others from making, using, selling, or offering to sell the patented invention,” and this right to exclude “is the legal interest created by statute.” Morrow, 499 F.3d at 1339. Constitutional injury occurs “when a party performs at least one prohibited action with respect to the patented invention that violates these exclusionary rights.” Id. Exclusionary rights are thus the hallmark of standing in a patent suit. 14

The courts have delineated two types of plaintiffs that have constitutional standing to sue for patent infringement. First, a party who holds all rights or “all substantial rights” under a patent has standing to bring suit in its own name. Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed.Cir.1998). Second, a licensee has standing to sue if its license is *646 exclusive and the patent owner is joined as a party. Id.

A third category of plaintiff, a bare licensee, “has no standing at all.” Id. This category of plaintiff “hold[s] less than all substantial rights to the patent and lack[s] exclusionary rights under the patent.” Morrow, 499 F.3d at 1340. The mere existence of a “right to sue” provision within the plaintiffs license “cannot, of its own force, confer standing on a bare licensee.” Textile Prods., 134 F.3d at 1485.

II. WiAV’s Constitutional Standing

Whether or not WiAV has standing to sue turns on whether WiAV is an exclusive licensee or a bare licensee. 15 An exclusive license is a “license to practice the invention ... accompanied by the patent owner’s promise that others shall be excluded from practicing it within the field of use wherein the licensee is given leave.” Textile Prods., 134 F.3d at 1484. “Determining whether a licensee is an exclusive licensee or a bare licensee is a question of ascertaining the intent of the parties to the license as manifested by the terms of their agreement and examining the substance of the grant.” Id. It is the substance of the arrangement that controls, not the use of the word “exclusive.” Id.

A licensee who was granted an exclusive license subject to prior, nonexclusive licenses has standing as an exclusive licensee. See Intellectual Prop. Dev., Inc. v. TCI Cablevision of California, Inc., 248 F.3d 1333 (Fed.Cir.2001) (holding that a licensee had an exclusive license even though the license was granted subject to a prior nonexclusive license); Abbott Labs, v. Diamedix Corp., 47 F.3d 1128 (Fed.Cir. 1995) (holding that a licensee had an exclusive license when the license was granted subject to eight non-exclusive licenses and the assignee’s right to make, use, and sell products that exploited the patents); Hill Phoenix, Inc. v. Systematic Refrigeration, Inc., 117 F.Supp.2d 508, 512-13 (E.D.Va.2000) (“The Federal Circuit has never stated that the licensee must have the right to exclude all others. If a patentee grants a second license that is subject to a prior-existing, nonexclusive license, but otherwise provides the second license with the right to exclude all others except the prior licensee, then the subsequent licensee has proprietary rights sufficient to confer standing.”) Under this rule, the mere fact that WiAV was granted its license subject to preexisting licenses does not strip WiAV of an exclusive license, and consequently, standing. Indeed, if all that the prior licensees retained were non-exclusive licenses, WiAV would have standing under this line of cases.

However, a licensee is not exclusive if others retain the right to grant additional licenses, even when the right to sublicense is limited only to subsidiaries and affiliates. Textile Prods., 134 F.3d at 1484; See Medtronic Sofamor Danek USA, Inc. v. Globus Med., Inc., 637 F.Supp.2d 290, 306 (E.D.Pa.2009) (holding that a licensee did not have an exclusive license when another entity “expressly reserved for itself the right to [] grant manufacturing licenses to its subsidiaries, parents, commonly owned entities, and affiliates.”); Raber v. Pittway Corp., 1992 WL 219016, at *3 (N.D.Cal.1992) (holding that a licensee’s interest was not exclusive when the licensor retained the right to grant sublicenses to its subsidiaries); But see Advanced Tech. Incubator, Inc. v. Sharp Corp., 2009 WL 2448156 (E.D.Tex. July 6, 2009) (holding that a licensee did have standing when the license was grant *647 ed subject to prior licenses. 16 ). Here, the various agreements between the licensees and assignees of the Mindspeed Patents show that Rockwell, Conexant, Mind-speed, and Qualcomm all retain the right to grant new licenses in the field of wireless handsets. And, while these rights are limited to sublicensing to subsidiaries, affiliates, and joint development partners, those limitations do not alter WiAV’s rights, or lack thereof, over the Mind-speed Patents. Because at least four entities retain a right to grant sublicenses on the Mindspeed Patents, WiAV’s claim of exclusivity is defeated and WiAV must be categorized as a bare licensee.

Moreover, the Defendants contend that Skyworks also has an interest in the Mind-speed Patents that destroys WiAV’s claim of exclusivity. Under the Conexant-Skyworks Agreement, Skyworks retained the exclusive right to license the Mindspeed Patents to Qualcomm in all fields of use. This right was assignable only with the consent of Conexant. Here, there is no evidence that Conexant granted its consent for Skyworks to assign this right, nor any evidence that Conexant transferred its right to consent in the Conexant-Mindspeed Agreement. 17 Because Conexant neither gave its consent nor transferred its right to consent, Skyworks could not transfer its exclusive right to license Qualcomm and instead, retains that right to this day. 18 This further weakens WiAV’s claim of exclusivity.

Finally, in addition to Rockwell, Conexant, Mindspeed, Qualcomm, and Skyworks’ right to sublicense the Mindspeed Patents, it appears that Sipro may have the authority to license two of the Mindspeed Patents (the '573 and '493 patents). 19 Despite excluding “Wireless Applications” from the license, WLAN technology 20 is not excluded from the license. According to the Defendants, some of the accused products in this action have WiFi capability. (Def. Reply at 14.) Because Sipro has the right to grant licenses for at least the WiFi application of two of the patents, WiAV’s argument regarding exclusivity is, again, further weakened. 21

*648 Despite the clear law to the contrary, WiAV argues that the Court should adopt a new legal principle that, if a grantor retains a limited right to sublicense, it does not defeat exclusivity. According to WiAV this rule will avoid the situation, present here, in which no one has standing to assert the patents. That argument runs counter to well-settled decisions of the Federal Circuit defining the controlling principles of standing in this field. It is not the office of district courts to refashion those rules merely because a licensee did not appreciate the effect of those settled principles at the time it was contracting for its rights. The time for WiAV to have addressed the concern it raises now was at the time of contracting. If, at that time, no viable contracting alternatives existed to give WiAV the right of exclusivity it wanted, then perhaps the contract would not be entered. Whatever the business consequences may have been, the failure to sort them out at the time of contracting presents no justification for changing the settled law of standing. Because WiAV can alleviate the standing issue through contracting, and because it runs against well-settled legal principles, the Court declines to adopt the rule suggested by WiAV.

In summation, at least four entities, and possibly as many as six, retain the right to sublicense the seven patents at issue. The retention of the right to sublicense by even one of these entities is sufficient to destroy WiAV’s claim that is has an exclusive license. Thus, WiAV is not an exclusive licensee, but rather a bare licensee which lacks constitutional standing to assert claims for infringement of U.S. Patent Nos. 6,104,992; 6,256,606; 6,385,573; 6,507,814; 6,633,841; 7,120,578; and 7,266,493. Because WiAV lacks constitutional standing, the Court need not address matters of prudential standing. 22

CONCLUSION

For the reasons set forth above, the Defendants’ MOTION TO DISMISS (Docket No. 146) is granted.

It is so ORDERED.