Partial Patent License Means No Standing to Sue ASUS, Dell

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By Peter Leung

March 18 — ASUS Computer International and Dell Inc. can't be sued by a patent licensee for alleged infringement because the licensor retained too many rights, the U.S. District Court for the District of Colorado ruled March 15.

The court said that, though the licensing agreement between patent holder Ryujin Patent & Licensing Ltd. and licensee KW-2 LLC was entitled “Exclusive Patent License Agreement,” the contract actually reserved substantial rights for Ryujin. That means KW-2 was not an exclusive licensee with a true ownership interest and does not have standing to sue.

The patent involved is U.S. Patent No. 6,027,835 covering electrode sheet technology.

In granting ASUS and Dell's motion to dismiss, the court pointed to several provisions in the licensing agreement. It noted that Ryujin retained a 94-percent interest in any amount recovered in litigation. While retaining this type of interest does not automatically mean that the licensee is not exclusive, the fact that Ryujin has such a large share suggests that KW-2 lacked “important indicia of a true ownership interest in the patent.”

Another issue was the fact that Ryujin could block any assignment of patent rights to a third party. The court explained that the right to dispose of an asset is an important indication of an ownership interest, and restrictions to this right are often “fatal” to a claim that a licensee is exclusive.

Furthermore, KW-2 did not have an unfettered right to enforce the licensed patent, because the agreement listed specific entities that it couldn't sue. This was another indication that it was not an exclusive licensee, the court said. The argument that those entities were previous owners who wished to continue practicing the patent did not help KW-2.

The last factor weighing against KW-2 was the fact that it was obligated to pay the patent's maintenance fees but could not abandon the patent without Ryujin's consent.

Ridley McGreevy & Winocur PC and Prebeg Faucett & Abbott PLLC represented KW-2. Lewis Roca Rothgerber Christie LLP, McKenna Long & Aldridge LLP and Dentons US LLP represented ASUS and Dell. Dell also retained Farella Braun & Martel LLP and Wheeler Trigg O'Donnell LLP.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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