Apple, Inc. v. Motorola, Inc. et al

Filing 173

ORDER denying 154 Motion to Stay Pursuant to Fed. R. Civ. P. 19 by Plaintiffs Apple and Granting 166 Motion for Leave to File Supplemental Authority by Defendants. Signed by District Judge Barbara B. Crabb on 10/3/2011. (voc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - APPLE, INC. and NeXT SOFTWARE, INC.,
f/k/a NeXT COMPUTER, INC.,
Plaintiffs,

OPINION and ORDER
10-cv-662-bbc

v.
MOTOROLA, INC. and
MOTOROLA MOBILITY, INC.,
Defendants.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - On August 15, 2011, Google, Inc. announced its intention to acquire Motorola
Mobility Holdings, Inc. Google and Motorola signed a merger agreement that governs the
parties’ conduct between the time of their agreement to merge and the consummation of the
merger, which must be approved by various government bodies. Plaintiffs Apple Inc. and
NeXT Software, Inc. have filed a motion to stay the present patent infringement case under
Fed. R. Civ. P. 19, contending that defendant Motorola Mobility, Inc., a wholly owned
subsidiary of Motorola Mobility Holdings, Inc., has lost prudential standing to assert its
infringement counterclaims as a result of the pending acquisition by Google. (Defendant
Motorola, Inc. has not raised any patent infringement counterclaims in this suit. Thus, I use

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“defendant” in this order to refer only to Motorola Mobility, Inc.) Additionally, plaintiffs
contend that Google cannot be joined as a party because it has no ownership rights in the
patents and thus, has no constitutional standing. Plaintiffs request that the entire case be
stayed for the next several months until the acquisition is final and it is clear which entity
will control the patents defendant is asserting in this case.
Because I conclude that defendant has standing to bring patent infringement claims
without joining Google as a party, I will deny the motion. I will grant defendants’ motion
for leave to file supplemental authority in opposition to plaintiffs’ motion.

(The

supplemental authority is an order issued by the United States District Court for the
Southern District of Florida on September 28, 2011, denying a similar motion to stay filed
by plaintiffs in a related case. Dkt. #166.)

OPINION
Standing to sue is a threshold question. A p a rty ’s sta n d in g to s u e fo r p a t e n t
infringement derives from the Patent Act, which provides that “[a] patentee shall have
remedy by civil action for infringement of his patent.” 35 U.S.C. § 281; Enovsys LLC v.
Nextel Communications, Inc., 614 F.3d 1333, 1341 (Fed. Cir. 2010). “Patentee” includes
not only the party to whom the patent was issued, but also the successors in title to that
party, 35 U.S.C. § 100, including those who have received ownership of the patent or

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assignment to an exclusive license to use the patent. Propat International Corp. v. Rpost,
Inc., 473 F.3d 1187, 1193 (Fed. Cir. 2007). Thus, a plaintiff has standing to bring a patent
infringement suit so long as it has an ownership interest or an exclusive license in the patents
at issue. Sicom Systems, Ltd. v. Agilent Technologies, Inc., 427 F.3d 971, 976 (Fed. Cir.
2005).
In this case, there is no question that defendant is the sole owners of the patents it
is asserting in this action and has standing to sue under 35 U.S.C. § 281. Nonetheless,
plaintiffs contend that defendant has lost “prudential standing” because it transferred
substantial rights in its patents to Google through the merger agreement. In particular, the
merger agreement prohibits defendant from taking several actions without Google’s consent
(which cannot be reasonably withheld), including: (1) licensing, assigning or granting a
covenant not to sue on any of its patents, with certain exceptions, § 5.01(j); (2) commencing
any new patent infringement action, § 5.01(j); or (3) settling any pending litigation that
would involve licensing any of its patents, § 5.01(v). Agreement and Plan of Merger, dkt.
#156-3, at 34. Each of these covenants is effective until the merger is consummated. Id.
The merger agreement states that each party will retain the same rights in its intellectual
property “immediately following the Merger” as it had before the merger. Id. at § 3.14(c)
at 24. (While the merger is pending, defendant can continue to provide patent rights to
third parties for the purpose of those parties’ selling, using or manufacturing defendant’s

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products.)
The Court of Appeals for the Federal Circuit has explained that if a patent has more
than one owner, each co-owner must join in the action unless one of the owners holds all
substantial rights in the patent. Israel Bio-Engineering Project v. Amgen, Inc., 475 F.3d
1256, 1264-65 (Fed. Cir. 2007) (“Absent the voluntary joinder of all co-owners of a patent,
a co-owner acting alone will lack standing.”); Ethicon, Inc. v. United States Surgical Corp.,
135 F.3d 1456, 1468 (Fed. Cir. 1998) (recognizing that, as result of this rule, “one co-owner
has the right to impede the other co-owner's ability to sue infringers by refusing to
voluntarily join in such a suit”). Similarly, an exclusive licensee seeking to enforce a patent
must join the owner of the patent as a party unless the owner has transferred “all substantial
rights” in the patent-in-suit to the licensee. Sicom Systems, Ltd. v. Agilent Technologies,
Inc., 427 F.3d 971, 976 (Fed. Cir. 2005).
Plaintiffs rely on these and similar cases to argue that defendant cannot maintain its
infringement claims without joining Google as a party to the lawsuit. At the same time,
plaintiffs contend that Google cannot be joined as a party because it has no ownership
interest in or license to use defendant’s patents, and thus, has no standing under 35 U.S.C.
§ 281. Sicom, 427 F.3d at 976 (only patent owner, assignee or exclusive license holder with
all substantial rights has standing to sue). Thus, plaintiffs contend, there is no party or
combination of parties that may enforce defendant’s patent rights at this time.

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All of the cases cited by plaintiffs are distinguishable from the present case. In most
of the cases cited by plaintiffs, the issue was whether a license agreement had conveyed “all
substantial rights” in a patent to an exclusive licensee, so that the exclusive licensee could sue
for patent infringement without joining the patent owner. In those cases in which the
exclusive licensee had not received all substantial rights, the court concluded that the patent
owner had to be joined as a party, either voluntarily or involuntarily. E.g., Sicom, 427 F.3d
at 980 (licensee lacked sufficient ownership rights to confer standing to sue for infringement
in its own name without joining patent owner); Intellectual Property Development, Inc. v.
TCI Cablevision of California, Inc., 248 F.3d 1333, 1345-48 (Fed. Cir. 2001) (same); Prima
Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1382 (Fed. Cir. 2000) (same); Speedplay, Inc.
v. Bebop, Inc., 211 F.3d 1245, 1250-52 (Fed. Cir. 2000) (agreement transferring certain
patent rights constituted assignment of all substantial rights in patents at issue, even though
assignor retained right to bring infringement suit if assignee chose not to and assignee was
required to ask for consent for further assignments); Vaupel Textilmaschinen KG v.
Meccanica Euro Italia SPA, 944 F.2d 870, 875 (Fed. Cir. 1991) (agreement transferring
patent rights constituted assignment of all substantial rights in patent where assignor
retained only (1) veto right on sublicensing; (2) right to obtain patents on invention in other
countries; (3) reversionary right to patent in event of bankruptcy; and (4) right to receive
infringement damages).

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The issue in this case is not whether the owner of the patent must be joined as a
party. Defendant is the owner and it is seeking to enforce its own patents through its
counterclaims. The cases cited by plaintiffs might be useful if the issue were whether one of
defendant’s licensees could bring a patent infringement suit without joining defendant as a
party, but that is not the issue in this case. This case does not involve the sharing of rights
between an owner and a licensee, as Google is neither an owner nor a licensee. Google has
no right to make, use, sell or license the patented products and has no right to enforce the
patents. It has not even attempted to enforce the patents.
The issue in this case is more similar to that in Alfred E. Mann Foundation for
Scientific Research v. Cochlear Corp., 604 F.3d 1354, 1359-60 (Fed. Cir. 2010), in which
a patent owner sought to bring an infringement suit. The issue before the court was whether
the owner had divested itself of any right to sue by transferring substantial rights to an
exclusive licensee. Id. The court concluded that the patent owner had retained sufficient
rights in the patents to give it standing to enforce them in an infringement suit. Id. at 136263. However, the court remanded the case so that the district court could determine
whether the patent owner was required to join the exclusive licensee as a party, noting that
generally, both the owner and exclusive licensee are necessary parties in a patent
infringement action. Id. at 1363. See also Independent Wireless Telegraph Co. v. Radio
Corp. of America, 269 U.S. 459, 466 (1926) (“Indeed both the owner and the exclusive

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licensee are generally necessary parties in the action in equity.”); Aspex Eyewear, Inc. v.
Miracle Optics, Inc., 434 F.3d 1336, 1344 (Fed. Cir. 2006) (exclusive licensee must generally
be joined as party in patent infringement suit).
However, neither Mann, Aspex, Independent Wireless nor any other case cited by
plaintiffs suggests that a non-exclusive licensee or a non-licensed party would be a necessary
party in an infringement action. Because such parties lack constitutional standing and
cannot be joined as plaintiffs, such a rule would undermine 35 U.S.C. § 281, which states
that a patentee “shall have remedy by civil action for infringement of his patent.”
In sum, I conclude that Google is not a necessary party to defendant’s patent
infringement suit. At this point, it is merely an entity that obtained temporary rights in a
merger agreement but has no constitutional standing to bring an infringement suit to enforce
defendant’s patents,. There is no evidence that defendant’s exclusionary rights in its patents
are materially diminished by the temporary agreement or that the agreement affects
defendant’s standing in this action. The agreement merely requires defendant temporarily
to obtain Google’s consent, which may not be unreasonably withheld, before initiating new
lawsuits, amending or settling claims in existing suits through licensing and granting certain
assignments and licenses.

The merger agreement does not give Google any right to

undertake these activities on its own, to be involved in or control these activities after it gives
its consent or even to share in the proceeds from these activities. Defendant retains its

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position as an owner with standing to enforce its patent rights. Accordingly, I will deny
plaintiffs’ motion to stay the case under Rule 19.

ORDER
IT IS ORDERED that
1. The motion for leave to file supplemental authority, dkt. #166, filed by defendants
Motorola Mobility, Inc. and Motorola, Inc. is GRANTED.
2. The motion to stay filed by plaintiffs Apple, Inc. and NeXT Software, Inc., dkt.
#154, is DENIED.
Entered this 3d day of October, 2011.
BY THE COURT:
/s/
BARBARA B. CRABB
District Judge

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