Thursday, August 13, 2015

CAFC addresses standing, local rules in KERANOS, LLC v. SILICON STORAGE TECHNOLOGY, INC

The issue:

This appeal involves whether appellant [Keranos], an exclusive
licensee, has standing to sue for patent infringement and
whether the district court properly applied the local
patent rules to deny appellant’s motions to amend its
infringement contentions. Appellant Keranos, LLC
appeals from the final judgments of the United States
District Court for the Eastern District of Texas entered
after the district court denied Keranos’s motions for leave
to amend infringement contentions.


Appellees contend that Keranos lacks standing to sue
for past infringement of the asserted patents, which
expired before Keranos acquired rights in the patents and
before Keranos filed its complaint for patent infringement.

The outcome:

We agree with the district court that Keranos has
standing to sue for infringement of the asserted patents.
We cannot determine based on the record, however,
whether the district court abused its discretion in denying
Keranos’s motions for leave to amend infringement contentions
based on the local patent rules. The court therefore
vacates and remands for further consideration by the
district court regarding Keranos’s motions for leave to

The analysis:

We look to the provisions of the
exclusive license to determine if all substantial rights
under the patent were assigned such that Keranos has
standing to sue in its own name, or if UMC retained
certain substantial rights such that Keranos should have
joined UMC as a co-plaintiff below. See Prima Tek II, 222
F.3d at 1377–78.


Importantly, UMC did not retain the right to sue accused
infringers, which “is the most important factor in
determining whether an exclusive license transfers sufficient
rights to render the licensee the owner of the patent.”
Mann, 640 F.3d at 1361. Instead, the agreement
expressly prohibits UMC from instituting or participating
in any law suit related to the patent, or from negotiating
or granting further licenses to the patents, absent written
authorization from Keranos.

Second, in a confidential provision, UMC transferred
to Keranos an exclusive right that gave Keranos a proprietary
interest in the patents. Cf. Ortho Pharm. Corp. v.
Genetics Inst., Inc., 52 F.3d 1026, 1034 (Fed. Cir. 1995)
(“A patentee may not give a right to sue to a party who
has no proprietary interest in the patent.” (citations
omitted)); Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187,
1191 (Fed. Cir. 2007) (“The responsibility to maintain a
patent is one of the obligations that has been recognized
by this court as an indication that the party with that
obligation has retained an ownership interest in the
patent.”) (citation omitted).

Finally, the agreement as a whole indicates that UMC
intended to transfer all substantial rights to Keranos. See
Vaupel, 944 F.2d at 874.

As to the appellee's argument:

On appeal, appellees rely on our decision in Mars, Inc.
v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008), to
contend that, because UMC did not transfer to Keranos
legal title to the expired patents, Keranos does not have
standing to sue in its own name. Appellees argue that
standing for expired and unexpired patents should be
analyzed differently, because substantial rights no longer
exist once a patent expires. Mars, however, suggests the
opposite conclusion—that the same legal analysis applies
to both expired and unexpired patents to determine
whether an entity has standing to sue for patent infringement.
As discussed below, this analysis does not
require the holder of all substantial rights in the patent to
also hold legal title in the patent to have standing when
asserting either expired or unexpired patents.

As to local patent rules:

Having determined that Keranos has standing, we
turn to the merits of its appeal: the district court’s denial
of Keranos’s motions for leave to amend infringement
contentions. The district court held that Keranos’s
amended infringement contentions, which “would add
thousands of additional products not specifically disclosed
in [Keranos’s] original infringement contentions,” did not
meet the requirements of the local patent rules. J.A. 6–8.
To justify its identification of new products in its amended
infringement contentions, Keranos argued that it needed
discovery to obtain the information required about those
products, because publicly available information was
insufficient for it to identify products that contained the
allegedly infringing technology. Keranos also argued that
the amended infringement contentions did not add any
new patent claims or infringement theories because each
of the new products fell within the scope of the original
infringement contentions, which generally identified
products that “incorporated the SuperFlash technology.”
J.A. at 6.

The district court disagreed with Keranos that the
type of information in public documents was insufficient
to identify whether the product potentially infringed,
noting that Keranos’s original infringement contentions
used public documents containing that same type of
information to identify the accused products. The district
court also found that, under the local rules, Keranos had
to identify the accused products by specific product name
or number, if known, rejecting Keranos’s contention that
it complied with the local rules by identifying product
families or describing allegedly infringing technology
incorporated in various, unidentified products. The
district court concluded that Keranos “failed to demonstrate
that it acted diligently in searching for and naming
the additional products that incorporate the accused
technology” when it drafted its original infringement
contentions, given that Keranos had the burden “to search
for and identify infringing products to the extent possible
based on publicly available information.” J.A. 7–8 (citing
Am. Video Graphics, L.P. v. Elec. Arts, Inc., 359 F. Supp.
2d 558, 560 (E.D. Tex. 2005) (“The Patent Rules demonstrate
high expectations as to plaintiffs’ preparedness
before bringing suit, requiring plaintiffs to disclose their
preliminary infringement contentions before discovery
has even begun.”)).
In the Eastern District of Texas, Patent Rule 3-1 requires
the patent owner to serve infringement contentions
that, among other things, identify “as specific[ally] as
possible” each accused product.

Of publicly available information:

Keranos further asserts that publicly available information
did not exist for some of appellees’ products. For
example, the parties agree that TSMC’s product numbers
cannot be identified by public sources. S


Keranos has standing to sue for infringement of the
asserted patents because it owns all substantial rights in
those patents. Regarding the district court’s order denying
Keranos’s motions for leave to amend infringement
contentions, we cannot determine from the order whether
the district court exceeded its discretion by denying
Keranos’s motions with respect to all of the differently
situated appellees. We therefore vacate the judgment
below and remand with instructions to determine, on a
party-by-party basis, whether Keranos violated the local
patent rules.



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