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Sycamore IP Holdings LLC v. AT&T Corp.

United States District Court, E.D. Texas, Marshall Division

February 16, 2018

AT&T CORP., et al., Defendants.



         Before the Court is Defendant Level 3 Communications, LLC's Motion to Dismiss for Lack of Standing, Dkt. No. 177. The motion is DENIED.

         I. Background

         Level 3 Communications, LLC (“Level 3”), seeks dismissal of the complaint against it on the ground that plaintiff Sycamore IP Holdings LLC (“Sycamore IP”) is merely a co-owner of asserted U.S. Patent No. 6, 952, 405 (“the '405 patent”) and cannot bring this action without joining the other co-owner. According to Level 3, the other co-owner of the '405 patent is the Hong Kong University of Science and Technology (“HKUST” or “the University”). Because HKUST has not joined the action as a co-plaintiff, Level 3 contends that Sycamore IP lacks standing to bring this action on its own and that the action should therefore be dismissed. In the alternative, Level 3 makes the related claim that the action should be dismissed under Rule 19 of the Federal Rules of Civil Procedure because of Sycamore IP's failure to join HKUST as an indispensable party.

         The other defendants in this consolidated action have not joined Level 3's motion. Moreover, HKUST has not taken a position with respect to the issue of patent ownership, and the record does not reflect that HKUST has ever asserted any claim of an ownership interest in the '405 patent.

         II. Discussion

         Section 281 of the Patent Act, 35 U.S.C. § 281, provides that “a patentee shall have remedy by civil action for infringement of his patent.” That provision has been construed to require that any entity with an ownership interest in a patent must be joined in any infringement suit brought by another co-owner. Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1376-77 (Fed. Cir. 2000). The Federal Circuit sometimes refers to that doctrine as the “prudential standing” requirement, see WiAV Solutions LLC v. Motorola, Inc., 631 F.3d 1257, 1265 & n.1 (Fed. Cir. 2010), or as “standing as defined by § 281 of the Patent Act, ” see Alps S., LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 1382 (Fed. Cir. 2015). As applied to a case such as this one, the doctrine of prudential standing is based on the principle that each co-inventor “presumptively owns a pro rata undivided interest in the entire patent.” Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998) (footnote omitted). For that reason, all of the co-owners of a patent must be joined in any action brought for infringement of the patent. Israel Bio-Eng'g Project v. Amgen Inc., 401 F.3d 1299, 1304-05 (Fed. Cir. 2005).

         1. The factual basis for Level 3's theory of lack of prudential standing is as follows: The two named co-inventors of the '405 patent are Dr. Danny Tsang and Dr. Murat Azizoglu. They assigned their interests in the patent to Sycamore Networks. Sycamore Networks then assigned the patent to Dragon Intellectual Property, LLC, through which it was ultimately assigned to the plaintiff, Sycamore IP. There is no dispute that Dr. Azizoglu was a co-owner of the patent and therefore had an interest that could be conveyed to Sycamore Networks and ultimately to Sycamore IP. With respect to Dr. Tsang's interest in the patent, however, the matter is more complicated.

         Level 3 argues that Dr. Tsang, as a faculty member at HKUST, was bound by the University's Patent Policy, Dkt. No. 177-10 (“Patent Policy”), and that the effect of the Patent Policy was to make his interest in the patent the property of HKUST. Sycamore IP responds that Dr. Tsang was on University-approved unpaid sabbatical leave at the time he conceived of the invention and applied for the patent, and that Dr. Tsang's contribution to the invention was the product of his individual efforts during the course of his work for Sycamore Networks. Under HKUST's Patent Policy, according to Sycamore IP, Dr. Tsang's invention was not considered to have been made in the course of his University employment, and as a result, HKUST had no proprietary interest in the resulting patent.

         Although the parties have submitted lengthy briefs on this issue, the Court regards the issue as turning on a straightforward reading of the HKUST's Patent Policy. The relevant portions of the Patent Policy read as follows:

1.4 Policy Applicability to Faculty, Staff and Students For the purpose of application of the Patent Policy of the Hong Kong University of Science and Technology, the term “Members of the University” is defined to include all part-time and full-time members of the faculty and staff and all other agents, employees, students, and fellows of the University. Subject to restrictions imposed by contracts with sponsoring organizations, the University shall have the sole right to determine the disposition of all inventions by the Members resulting from their employment or use of facilities administered by the University. . . .
1.5 Assignment of Rights
All Members of the University as defined above shall, as a condition of employment with the University, assign all rights, title, and interest, to the extent prescribed in this policy, in any invention as defined herein to the University. . . .
The University has vested the sole right to hold and, to transfer, the ownership of all intellectual properties (which term includes inventions and patents) generated by its faculty, students and employees in the Hong Kong University ...

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