Transfer of Expired Patents Gets Same Test

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By Anandashankar Mazumdar

Aug. 17 — A patent holder will get another chance to argue that it should be allowed to amend an infringement complaint against 49 parties regarding expired patents, the U.S. Court of Appeals for the Federal Circuit ruled Aug. 13.

The appeals court said that Keranos LLC did have standing to sue over its expired patents, but the court did not have enough information in the record to determine whether a federal district court had properly barred the patent holder from amending its complaint.

Assignee Gets Rights But Not Title

Keranos LLC of Longview, Texas, was founded in February 2010 and immediately assigned rights in three patents by United Module Inc. which, according to the appeals court, “generally relate to split-gate flash memory” (U.S. Patent Nos. 4,795,719, 4,868,629, and 5,042,009).

However, United Module retained legal title to the patents—which had expired in 2006 and 2008. A series of legal actions followed, including lawsuits by Keranos and declaratory judgment actions by potential infringement defendants.

Following some discovery in the instant proceeding, Keranos sought to expand its infringement allegations against many of the defendants. However, Judge Michael H. Schneider of the U.S. District Court for the Eastern District of Texas denied Keranos's motions for leave to amend its complaints.

Keranos appealed, and several of the defendants—including Samsung Semiconductor Inc., International Business Machines Corp., Intel Corp. and Texas Instruments Inc.—further argued on appeal that Keranos did not have standing to bring infringement claims because it had not acquired any rights in them until after they had expired.

Same Test for Expired Patents

The appeals court concluded that Keranos—as an exclusive licensee of United Module—had indeed been granted “all substantial rights” in the patents.

Looking at the evidence in the record, the court found that Keranos had acquired a proprietary interest in the patents, that “the agreement as a whole indicates” an intent to transfer all substantial rights, and, most importantly, that only Keranos—not United Module—held the right to sue for infringement.

“Importantly, UMC did not retain the right to sue accused infringers, which ‘is the most important factor in determining whether an exclusive license transfers sufficient rights to render the licensee the owner of the patent,' ” the court said, quoting from Alfred E. Mann Found. for Scientific Research v. Cochlear Corp., 640 F.3d 1354, 95 U.S.P.Q.2d 1321 (Fed. Cir. 2010).

The fact that the patents had already expired when the agreement was made did not change the analysis, the court said.

It was true that Keranos could not sue for unauthorized practicing of the patents that occurred after expiration, but this did not mean that Keranos held less than “all substantial rights” in the patents.

The rights in expired patents are fewer than rights in non-expired patents, the court said, but Keranos held all the significant rights that still existed.

The court thus found that Keranos had standing and said it would “decline to create one test for establishing standing when an unexpired patent has been transferred and a second test for establishing when an expired patent has been transferred.”

Amendment to Be Judged Separately for Each Defendant

Having found standing, the court said that it could not determine from the record whether under the local rules the district court had properly denied Keranos's motion for leave to amend.

The court thus vacated the lower court's decision and remanded the matter for determination on a defendant-by-defendant basis whether Keranos should be granted leave to amend.

Keranos was represented by Agility IP Law LLP, Menlo Park, Calif. The defendants were represented by King & Spalding LLP, Washington.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at

To contact the editor responsible for this story: Tony Dutra in Washington at

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