Patent infringement suit against satellite company revived by Federal Circuit.

Patent infringement suit against satellite company revived by Federal Circuit.

A patent is a set of exclusive rights granted the the inventor of a new invention. To be granted a patent in the United States an inventor must file a patent application with the United State Patent and Trademark Office. The USPTO will assign an examining attorney to review the patent application and confirm that the invention meets the requirements for the patent to be granted.  If the examining attorney determine that the patent application complies with all the statutory requirements of United States Patent Law, the inventor will be granted a patent on the invention claimed in the patent application.

A patent grants its owner the exclusive right to make, use, sell and import an invention in the United States.  If someone other than the patent owner attempts to exercise one of these exclusive rights, without authorization, that can be considered patent infringement.  If a patent owner feels that their patent is being infringed on, the patent owner can file a lawsuit in United States Federal Court.

A patent is a form of intellectual property.  Like other forms of property, a patent can be rented or licensed to other parties with out the patent owner giving up ownership of the patent. But, unlike a plot of land, when someone has a license to a patent it isn’t always obvious when that third party is exploiting that license.  And licensees can license the patent to other individuals, if sub licensing isn’t forbidden by the original license. Sometimes over the course of years a patent owner can believe they have discovered patent infringement, when in fact, the alleged infringer has a legitimate license to the patent.

FRAUNHOFER-GESELLSCHAFT v. SIRIUS XM RADIO INC., 2018-2400 (C.A.F.C. 2019) is a case which illustrates what can happen when a patent license is re-licensed to another party.  The plaintiff in this case developed and patented several inventions related to multicarrier modulation.  Multicarrier modulation is a method for transmitting a main data stream over multiple carrier data streams. The utilization of multiple carrier data streams is useful in satellite-based communication networks, where the signal quality for an individual data stream can vary depending on the line of sight between the satellite and the receiver.

The plaintiff licensed several of its patents to WorldSpace in 1999.  WorldSpace sub licensed the plaintiff’s patents to the defendant.  WorldSpace declared bankruptcy in 2008 which resulted in the liquidation of the company.  At the time of WorldSpace’s bankruptcy the plaintiff did not terminate its license agreement to WorldSpace.  WorldSpace did not terminate the defendant’s sublicence and  the defendant continued to pay WorldSpace.  When the bankruptcy case concluded and WorldSpace ceased to exist the defendant continued to exploit the patents it sublicensed from the defendant.

The plaintiff learned of the defendants activity and filed suit for patent infringement in 2017.  The defendant responded that it was not liable for patent infringement because it had a license.   The district court, applying United States law, dismissed the complaint on the ground that the sublicense was a complete defense to patent infringement and denied the plaintiffs motion to amend the complaint on ground of futility.  The plaintiff appealed this decision to the Court of Appeals for the Federal Circuit.

The Federal Circuit vacated the order dismissing the complaint for failure to state a claim and remanded for further
proceedings. The Federal Circuit held that the District Court erred when it determined that the sub license was a complete defense to patent infringement and that the plaintiff should have given the plaintiff an opportunity to amend the complaint.  The Federal Circuit noted that the sublicense agreement must be reviewed to see if the plaintiff properly terminated during the WorldSpace bankruptcy.  The  Federal Circuit also noted that the district court may still deem the sublicense agreement as a defense and enter summary judgement for the defendant.

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