Background
A.L.M. Holding Company and Ergon Asphalt & Emulsions, Inc. jointly owned six patents related to warm-mix asphalt paving. They entered into an agreement licensing exclusive rights to manufacture and sell products to Ingevity Corporation, while retaining the right to sue third parties for infringement, the right to veto sublicenses, and the right to collect royalties. When A.L.M. sued Zydex Industries for patent infringement, the District Court for the District of Delaware dismissed the case, ruling that the retained right to sue was not an exclusionary right sufficient for constitutional standing. The district court relied on Morrow v. Microsoft Corp. to conclude that a contractual right to sue separated from other patent rights does not confer standing.
The court’s reasoning
The Federal Circuit reviewed the standing determination de novo, clarifying that Article III standing requires an injury in fact, which for patent infringement involves an exclusionary right. The court explained that while statutory standing under Section two thousand eight hundred and one of Title thirty-five requires all substantial rights, constitutional standing only requires a concrete, non-illusory exclusionary interest. The court found that A.L.M. retained a right to sue, royalty interests, and the ability to veto sublicenses. These rights collectively ensured that the licensee could not unilaterally authorize an infringer to practice the patents without the owner’s consent or payment. The court distinguished Morrow, where the plaintiff held only a bare right to sue without ownership or other rights, and noted that the right to sue in this case was not illusory because the licensee could not grant royalty-free sublicenses to extinguish the owner’s interest. The court concluded that the retained rights satisfied the irreducible constitutional minimum of standing.
What it means going forward
The decision clarifies that patent owners who retain a right to sue, royalty interests, and sublicensing control maintain constitutional standing even when granting exclusive licenses. It signals that district courts must look beyond the mere existence of a right to sue and examine whether that right is illusory given the broader licensing context.
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