United States District Court, E.D. Texas, Sherman Division
E-SYSTEM DESIGN, INC.
MENTOR GRAPHICS CORPORATION
MEMORANDUM OPINION AND ORDER
L. MAZZANT UNITED STATES DISTRICT JUDGE
the Court is Defendant Mentor Graphics Corporation's
(“Mentor”) Motion to Dismiss for Lack of Standing
(Dkt. #9). After reviewing the relevant pleadings and motion,
the Court finds that the motion should be denied.
a suit about a patent licensee suing for patent infringement.
On January 14, 2008, the patent licensor-Georgia Tech
Research Company (“Georgia Tech”)-executed a
licensing agreement (the “Original License
Agreement”) with the patent licensee-Plaintiff E-System
Design (“E-System”) (Dkt. #9 at p. 6). The
Original License Agreement granted “an exclusive
license” to E-System for technology in U.S. Patent
Application No. 11/888, 705 (the “Patent
Application”) that later included United States Patent
No. 8, 352, 232 (the “'232 Patent”) (Dkt. #1
at p. 4; Dkt. #9, Exhibit 1 at pp. 2-3; Dkt. #9, Exhibit 2 at
p. 2; Dkt. #9, Exhibit 6 at p. 2). Thereafter, E-System and
Georgia Tech amended the Original License Agreement five
times (collectively, “the Agreements”). Amendment
No. 5 to the Original License Agreement (“Amendment No.
5”), however, most impacts this Order's analysis.
on March 24, 2015, Amendment No. 5 gave E-System (1) the sole
discretion to grant royalty-free sublicenses of the '232
Patent; (2) obliged E-System to pay Georgia Tech a portion of
any one-time, lump sum received for sublicensing the '232
Patent; (3) relieved E-System from paying royalties for any
“Net Sales” of products alleged to embody the
'232 patent; and (4) gave E-System the sole and exclusive
right to sue Mentor for infringement of the '232 Patent
and all other purported infringers as long as E-System
satisfied certain conditions (Dkt. #9, Exhibit 6). On
September 27, 2017, E-System sued Mentor for patent
infringement, alleging that Mentor had been infringing on the
'232 Patent “since at least 2013.” (Dkt. #1
at p. 8). On December 11, 2017, Mentor filed a Motion to
Dismiss for Lack of Standing (Dkt. #9). On January 8, 2018,
E-System responded (Dkt. #14). On January 23, 2018, Mentor
replied (Dkt. #20). On January 30, 2018, E-System filed its
sur-reply (Dkt. #24).
is a threshold subject matter jurisdictional requirement.
Lujan v. Defenders of Wildlife, 504 U.S.
555, 559-60 (1992). Plaintiff has the burden of demonstrating
standing. Paradise Creations, Inc. v. UV Sales,
Inc., 315 F.3d 1304, 1309 (Fed. Cir. 2003). Standing
must be present when the plaintiff brings suit, and cannot be
cured retroactively. Abraxis Bioscience, Inc. v.
Navinta LLC, 625 F.3d 1359, 1364 (Fed. Cir. 2010). A
plaintiff must be a patentee or a licensee who holds
“all substantial rights in the patent” to have
standing. H.R. Techs., Inc. v. Astechnologies, Inc.,
275 F.3d 1375, 1384 (Fed. Cir. 2002) (quotations omitted). A
court can assess subject matter jurisdiction and the issue of
standing at any time. Fed.R.Civ.P. 12. Each element for
standing “must be supported in the same way as any
other matter on which the plaintiff bears the burden of
proof, i.e., with the manner and degree of evidence
required at the successive stages of the litigation.”
Lujan, 504 U.S. at 561.
If a defendant makes a “factual attack” upon the
court's subject matter jurisdiction over the lawsuit, the
defendant submits affidavits, testimony, or other evidentiary
materials. In the latter case a plaintiff is also required to
submit facts through some evidentiary method and has the
burden of proving by a preponderance of the evidence that the
trial court does have subject matter jurisdiction.
Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir.
1981)). “A motion under 12(b)(1) should be granted only
if it appears certain that the plaintiff cannot prove any set
of facts in support of his claim that would entitle him to
relief.” Home Builders Ass'n of Miss., Inc. v.
City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).
When evaluating patent standing, courts consider a
party's prudential standing and constitutional standing.
Mosaid Techs. Inc. v. Freescale Semiconductor,
Inc., 2012 WL 12903081 at *2 (E.D. Tex. May 14,
E-System Has Prudential Standing
argues that E-System does not have sufficient rights in the
'232 Patent to have prudential standing. E-System
counters that the Agreements grant E-System sufficient rights
to the '232 Patent needed for prudential standing.
patent “is, in effect, a bundle of rights which may be
divided and assigned, or retained in whole or part.”
Alfred E. Mann Found. for Scientific Research v. Cochlear
Corp., 604 F.3d 1354, 1360 (Fed. Cir. 2010) (citation
omitted). “When a sufficiently large portion of this
bundle of rights is held by one individual, we refer to that
individual as the owner of the patent, and that individual
[has prudential standing] to sue for infringement in his own
name.” Id. In turn, “[a] patent owner
may transfer all substantial rights in the
patents-in-suit, in which case the transfer is tantamount to
an assignment of those patents to the exclusive licensee,
conferring standing to sue solely on the licensee.”
Id. at 1358-59 (emphasis added).
assessing whether a party has “all substantial rights
in the patents-in-suit, ” courts often consider several
indicia of ownership (the “Alfred
Factors”). Diamond Coatings Techs., LLC v.
Hyundai Motor Am., 823 F.3d 615, 619 (Fed. Cir. 2016);
Alfred, 604 F.3d at 1360-61. “‘[T]he
nature and scope of the [patentee's] retained right to
sue accused infringers [and license the patent are] the most
important factor[s] in determining whether an [agreement] . .
. transfers sufficient rights to render the [other party] the
owner of the patent.'” Diamond Coatings,
823 F.3d at 619 (quoting Alfred, 604 F.3d at
1360-61). Next, “transfer of the exclusive right to
make, use, and sell products or services under the patent is
vitally important to the assignment.”
Alfred, 604 F.3d at 1360 (emphasis added);
Diamond Coatings, 823 F.3d at 619. Under the
remaining Alfred Factors, courts also consider
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, and the nature of
any limits on the licensee's right to assign its interest
in the patent.
Alfred, 604 F.3d at 1360-61. The Court will address
each of the Alfred Factors in turn.
The Nature and Scope of Georgia Tech's Right to Enforce
and License the '232 Patent Support ...