PerkinElmer Health Sciences, Inc. v. Agilent Technologies, Inc.

Filing 62

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: " In accordance with the foregoing, defendant's motion to dismiss (Docket No. 6 ) is DENIED and plaintiff's motion to amend the Complaint (Docket No. 33 ) is ALLOWED.So ordered." (Moore, Kellyann)

United States District Court
District of Massachusetts
________________________________
)
PERKINELMER HEALTH SCIENCES,
)
INC.,
)
Plaintiff,
)
)
Civil Action No.
v.
)
12-10562-NMG
)
AGILENT TECHNOLOGIES, INC.,
)
Defendant.
)
________________________________ )
MEMORANDUM & ORDER
GORTON, J.
PerkinElmer Health Sciences, Inc. (“PerkinElmer”) alleges
that Agilent Technologies, Inc. (“Agilent”) is infringing two
patents pertaining to the analysis of charged ions, for which
PerkinElmer holds an exclusive license.

Defendant has moved to

dismiss the case while plaintiff seeks leave to file an amended
complaint.
For the reasons that follow, defendant’s motion to dismiss
will be denied, and plaintiff’s motion for leave to file an
amended complaint will be allowed.1

1

Agilent also moved on September 20, 2012, for a stay of
these proceedings pending a reexamination by the United States
Patent and Trademark Office (“the PTO”) of the patentability of
the uses of the patents at issue that PerkinElmer claims were
infringed. The Court retains that motion under advisement,
pending the filing of defendant’s answer to the Amended
Complaint.
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I.

Facts
In May 1989, three researchers working at Yale University

(“Yale”) applied for a patent pertaining to the analysis of
charged ions.

The United States Patent and Trademark Office

(“the PTO”) issued United States Patent No. 5,130,538 (“the ‘538
Patent”) to those three researchers in July, 1992.

The PTO

issued two related patents, United States Patent Nos. 5,686,726
(“the ‘726 Patent”) and 5,581,080 (“the ‘080 Patent”), to the
same researchers in December, 1996 and November, 1997
respectively.

All three patents were subsequently assigned to

Yale, which continues to hold them.
In March 1997, Yale granted an exclusive license of the ‘538
Patent and any subsequently issued, related patents (“the License
Agreement”) to Analytica of Branford, Inc. (“AoB”) and its
successors.

Under that agreement, Yale retained the right to use

the Patents for non-commercial purposes, to participate in
infringement actions brought by AoB and to sue an alleged
infringer if, after providing notice to AoB, AoB declined to sue.
The License Agreement otherwise granted AoB an exclusive, worldwide license for the life of the patents.

The specific rights

included the “sole right” to use the Patents for commercial
purposes, to sublicense the patents and to sue, defend or settle
any infringement action, bearing all the expenses and retaining
all recoveries resulting from those suits.

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Also in March 1997, AoB granted a non-exclusive license to
sell products based upon the Patents (“the Sublicense Agreement”)
to Hewlett-Packard Company (“HP”).

HP, in turn, assigned its

rights under the Sublicense Agreement to its subsidiary,
defendant Agilent Technologies.

Agilent made royalty payments to

AoB for the right to manufacture several devices that made use of
that technology, including

mass spectrometers.

AoB merged with and into PerkinElmer in 2009.

As successor-

by-merger, PerkinElmer became the licensee under the License
Agreement and the licensor under the Sublicense Agreement.

On

June 28, 2011, however, Agilent informed PerkinElmer that it
would no longer make royalty payments under the Sublicense
Agreement because the ‘726 and ‘080 Patents were allegedly
invalid due to double-patenting.

Agilent subsequently declined

to make royalty payments.
II.

Procedural History
PerkinElmer filed a two-count complaint on March 28, 2012

alleging that Agilent willfully and materially breached the
Sublicense Agreement when it failed to make royalty payments in
June 2011 and continues to infringe the ‘726 and ‘080 Patents by
manufacturing products that make use of those patents.
PerkinElmer seeks a declaration that Agilent is infringing,
damages and injunctive relief.
Agilent moved to dismiss the Complaint under Fed. R. Civ. P.

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12(b)(1) on June 11, 2012, on the grounds that PerkinElmer lacks
standing to sue Agilent
rights to the patent.

because it does not own all substantial
The Court heard argument on Agilent’s

motion on August 14, 2012, at the same time it entered a
scheduling order.
On October 2, 2012, PerkinElmer moved to amend the Complaint
in order (1) to add a breach of contract claim and (2) to revise
its factual allegations to reflect the fact that Agilent is a
successor in interest to the license agreement at issue in the
case, rather than an original party.
III. Motion to Dismiss
Because federal courts are considered courts of limited
jurisdiction, “federal jurisdiction is never presumed.” Viquiera
v. First Bank, 140 F.3d 12, 16 (1st Cir. 1998). Instead, “the
party invoking the jurisdiction of a federal court carries the
burden of proving its existence.” Murphy v. United States, 45
F.3d 520, 522 (1st Cir. 1995).
Accordingly, a defendant may move to dismiss an action based
on lack of federal subject matter jurisdiction pursuant to Fed.
R. Civ. P. 12(b)(1) by challenging either the sufficiency of the
jurisdictional facts alleged or by controverting the accuracy of
the same. Valentin v. Hospital Bella Vista, 254 F.3d 358, 363
(1st Cir. 2001).

When considering a sufficiency challenge, the

court applies the familiar Rule 12(b)(6) standard of review and

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must credit the plaintiff’s well-pled factual allegations and
draw all reasonable inferences from them in her favor. Sanchez ex
rel. D.R.-S. v. United States, 671 F.3d 86, 119 (1st Cir. 2012)
(citing Hospital Bella Vista, 254 F.3d at 363).

When defendant

controverts the accuracy of the pleadings, the plaintiff’s
jurisdictional averments are entitled to no presumptive weight.
Hospital Bella Vista, 254 F.3d at 363.
Agilent purports to controvert jurisdictional facts and the
Court therefore declines to afford PerkinElmer’s averments any
presumptive weight.
A.

Standing to Bring an Infringement Claim

Under the Patent Act, standing to litigate patent
infringement actions is limited to “the patentee to whom the
patent was issued” as well as “successors in title to the
patentee.” 35 U.S.C. §§ 281, 100(d).

Bare licensees typically

cannot sue for infringement without joining the patent owner (or
“patentee”), who holds the title to the patent in trust for the
licensee. Abbott Laboratories v. Diamedix Corp., 47 F.3d 1128,
1131 (Fed. Cir. 1995).

The presence of the patent owner serves

both to give the court jurisdiction and to enable the alleged
infringer to respond in one action to all claims of infringement
for his act. Id.
An exclusive licensee, however, is considered a successor in
title with standing to sue for patent infringement if the patent

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owner transferred “all substantial rights” to the patent under
the license agreement. Id. at 1132-33; Vaupel Textilmaschinen KG
v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 874 (Fed. Cir.
1991).
To determine whether all substantial rights were transferred
from the patentee to the licensee, courts review both what rights
were granted and what rights were retained under the license
agreement. Alfred E. Mann Found. For Scientific Research v.
Cochlear Corp., 604 F.3d 1354, 1360-61 (Fed. Cir. 2010).

Among

the rights relevant to a court’s analysis are
1)
2)
3)
4)
5)
6)
7)
8)
9)

the right to make, use and sell products or
services under the patent,
the scope of the licensee’s right to sublicense,
the nature of license provisions regarding the
reversion of rights to the licensor following
breaches of the license agreement,
the right of the licensor to receive a portion of
the recovery in infringement suits brought by the
licensee,
the duration of the license rights granted to the
licensee,
the ability of the licensor to supervise and
control the licensee’s activities,
the obligation of the licensor to continue paying
patent maintenance fees,
the nature of any limits on the licensee’s right to
assign its interests in the patent, and
the nature and scope of the exclusive licensee’s
and the licensor’s rights to bring suit against
alleged infringers.

See id. at 1360-61 (listing factors).

Of those factors, “the

nature and scope of the licensor’s retained right to sue accused
infringers is the most important.” Id. at 1361.
The decisions of the Federal Circuit in Vaupel and Abbott
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also serve as guideposts for determining whether substantial
rights were transferred.

In Vaupel, the Federal Circuit held

that an exclusive patent licensee had standing to sue for
infringement of the licensed patent where it acquired rights from
the patentee to bring lawsuits for infringement, the exclusive
right to make, use, and sell items practicing the patent and total
responsibility to incur costs arising from the pursuit of any
infringement action. 944 F.2d at 874.

Of the granted rights, the

“dispositive” grant was the right to sue, which was subject only
to the obligation to inform the patent owner. Id. at 875.
Although the patentee retained a veto right on sublicensing the
patent, a reversionary right in the event of bankruptcy and a
right to receive infringement damages, the Federal Circuit ruled
that none of those rights “was so substantial as to reduce the
transfer to a mere license or indicate an intent not to transfer
all substantial rights.” Id. at 875.
In contrast, the Federal Circuit held in Abbott that a
patent licensee did not have standing to sue for infringement
where the licensor’s retained rights included veto power over
assignments, the right to make, use, and sell products covered by
the patent for commercial purposes, the contingent right to
prosecute infringement actions and, critically, limitations on
the licensee’s authority to settle. 47 F.3d at 1132.

The Court

compared the retained rights in that case to those in Vaupel, and

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held that the licensor in Abbott “retained a significantly
greater interest in the patents than [the licensor] retained in
Vaupel.” Id.
B.

Application

The Court begins by reviewing the rights granted to AoB (now
PerkinElmer) and retained by Yale under the License Agreement.
That agreement granted PerkinElmer “a non-transferrable worldwide
exclusive license” in and to the patents, which included 1) the
right to sublicense to third-parties, 2) the “sole right” to
bring suit for infringement and to defend the patents against
claims of invalidity and 3) the rights to settle infringement
claims as it sees fit and to enjoy all the benefits gained from
litigation and settlement.
Among the rights Yale retained under the agreement are 1)
the right to litigate the patents if AoB declines to do so, 2)
the right to “participate through counsel” in any legal action
initiated by AoB, 3) the right “to make, use and practice” the
patented material for non-commercial purposes and 4) the right to
“terminate” the license agreement if AoB fails to make required
payments or becomes insolvent.
Looking first at significant rights identified in the Alfred
E. Mann Foundation case, the License Agreement appears to convey
most, if not all, substantial rights to PerkinElmer, who obtained
all commercial use rights and the right to sublicense the patents

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for commercial purposes, for the duration of the patents (or
until PerkinElmer could no longer pay royalties).

There is no

indication that Yale retained a right to supervise any of
PerkinElmer’s activities.

The only limitations on PerkinElmer’s

rights that could interfere with its standing to bring suit are
1) Yale’s right to bring suit against alleged infringers if
PerkinElmer chooses not to and 2) the limitation on assignment of
the License Agreement.
The first limitation is sufficiently distinct from the
limitation on the right to sue in Abbott that it does not detract
from the rights transferred to PerkinElmer.

As with the licensee

in Vaupel but unlike the licensee in Abbott, PerkinElmer was
granted the “sole right” to initiate, manage, settle and enjoy
the rewards of patent infringement litigation.

Yale retained the

limited right to participate through counsel but cannot supervise
PerkinElmer’s litigation efforts.

Moreover, Yale’s retained

right to sue an infringer if PerkinElmer chooses not to, a right
not implicated here because PerkinElmer elected to sue, can be
circumvented by the granting of a royalty-free sublicense to the
alleged infringer by PerkinElmer. See Speedplay, Inc. v. Bebop,
Inc., 211 F.3d 1245, 1251 (Fed. Cir. 2000) (licensor’s retained
right to sue is “illusory” where licensee can negate by “granting
the alleged infringer a royalty-free sublicense”).

In Vaupel,

the Federal Circuit found the licensee’s similar exclusive and

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unfettered rights to sue and sublicense “dispositive” of the
standing issue. 944 F.2d at 875-76.
On the other hand, the License Agreement forbids PerkinElmer
from assigning its rights under the patent, one of the factors
weighed heavily by the Federal Circuit in Abbott. 47 F.3d at
1132-33; see also Intellectual Prop. Dev., Inc. v. TCI
Cablevision of Cal., Inc., 248 F.3d 1333 (Fed. Cir. 2001)
(“[L]imits on a transferee’s assignment rights weigh in favor of
finding that an agreement constitutes a transfer of fewer than
all substantial rights in a patent.”).
The Federal Circuit has yet to decide whether an exclusive
licensee with the unfettered rights to sue and sublicense but
lacking the right of assignment has “all substantial rights” in
the transferred patents.

While it has ruled that an assignment

right limited by a consent requirement does not override an
exclusive licensee’s unfettered right to sue, Unique Coupons,
Inc. v. Northfield Corp., 12 F. App’x 928, 934 (Fed. Cir. 2001)
(unpublished), that limitation is relatively minor compared to
the prohibition of assignment in this case.
While a close call, the Court finds the License Agreement
here analogous to the one at issue in Vaupel, i.e. that
PerkinElmer has acquired “all substantial rights” under the
patent.

The assignment limitation is circumscribed by

PerkinElmer’s ability to sublicense its rights and monetize its

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ownership interests in the patents.

That fact, coupled with the

broad language of the License Agreement which grants PerkinElmer
otherwise unfettered rights to use the Patents and to sue and
settle claims without Yale’s supervision demonstrates that
Agilent and other possible defendants need only respond to
actions brought by PerkinElmer.

Accordingly, PerkinElmer has

standing to pursue this claim and Agilent’s motion to dismiss on
that ground will be denied.
IV.

Motion to Amend the Complaint
Plaintiff seeks leave of the Court to amend its complaint

pursuant to Fed. R. Civ. P. 15(a)(2), whereby a court “should
freely give leave when justice so requires.”

District courts

enjoy “significant latitude in deciding whether to grant leave to
amend.” U.S. ex rel. Gagne v. City of Worcester, 565 F.3d 40, 48
(1st Cir. 2009).

Reasons for denying leave include undue delay

in filing the motion, bad faith or dilatory motive, repeated
failure to cure deficiencies, undue prejudice to the opposing
party and futility of amendment. Id.

Amendment is futile when

the amended complaint would still fail to survive a motion to
dismiss. See Adorno v. Crowley Towing and Transp. Co., 443 F.3d
122, 126 (1st Cir. 2006).
Defendant opposes plaintiff’s proposed amendment solely on
the grounds that plaintiff lacks standing to sue for any claim.
Resolution of the preceding issue renders that argument moot.

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Further, PerkinElmer’s motion to amend was filed prior to the
expiration of the November 15, 2012 deadline for amending the
pleadings set by the Court and is, therefore, timely filed.
Accordingly, that motion will be allowed.
ORDER
In accordance with the foregoing, defendant’s motion to
dismiss (Docket No. 6) is DENIED and plaintiff’s motion to amend
the Complaint (Docket No. 33) is ALLOWED.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated January 8, 2013

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