Troutman Sanders LLP: Standing Granted in Trustee-Beneficiary Relationship, Says Judge Smith

Troutman Sanders LLP: Standing Granted in Trustee-Beneficiary Relationship, Says Judge Smith

By Matthew Osborne

Standing can be a tricky issue in situations where affiliated corporate entities assign and cross-license patents amongst themselves. In Pfizer, Inc., v. Teva Pharmaceuticals USA, Inc., Case No. 2:10cv128, 2011 U.S. Dist. LEXIS 90021 (E.D.Va. Aug. 12, 2011) [enhanced version available to subscribers], Judge Smith weighed-in on two interesting scenarios: trustee-beneficiary patent ownership and exclusive licenses with owner-retained rights.

Standing, Generally

Before delving into the facts of Pfizer's multiplicity of corporate entities and transfers of patent rights therebetween, Judge Smith broadly covered the categories of plaintiffs that have standing in suits of patent infringement, along with their respective remedies, as set out by the CAFC:

  • Plaintiffs which can sue in their name alone, including patent owners, assignees, and exclusive licensees with "all substantial rights in the patent;"
  • Plaintiffs which can sue in tandem with the patent owner, including exclusive licensees not holding "all substantial rights;" and
  • Plaintiffs which can sue in equity, including parties with equitable ownership of a patent

Trustee-Beneficiary Relationship

In a rather interesting contractual maneuver, dubbed the "Patent Filing Agreement," Pfizer, Ltd. developed technology to be pursued before the USPTO under the control of affiliate Pfizer, Inc. The arrangement assigned all Pfizer, Ltd. invention rights to Pfizer, Inc., to be held "in trust" for beneficiary, Pfizer, Ltd.  The ability to grant licenses in issued patents was retained by Pfizer, Ltd.

Judge Smith held both Pfizer, Ltd. and Pfizer, Inc. to have standing as plaintiffs in the suit. Regarding Pfizer, Inc., the Court found the Patent Filing Agreement to clearly rest ownership of US patents in the hands of Pfizer, Inc. and, accordingly, the ability to stand as sole plaintiff in litigation. Regarding Pfizer, Ltd., the Court found the beneficiary relationship to the patent-in-suit, coupled with the right to grant licenses and enforce the patent, to independently give the beneficiary the ability of sole plaintiff standing in litigation. Judge Smith further noted that a beneficiary would, at the very least, be able to hold standing in tandem with the patent owner or in equity.

Exclusive Licensee (with Retained Rights)

The Court then turned to the complicated case of subsidiary Pfizer Ireland Pharmaceuticals Unlimited Liability Co. ("Pfizer Ireland"), also a party to the litigation. Pfizer Ireland had received an exclusive license to the patent-in-suit though a series of conveyances too complex to list here. With the chain of custody blessed by the Court, Judge Smith turned to the terms of the exclusive license, to determine whether it met the burden required for co-plaintiff standing. In its examination of the license, the Court considered:

  • Whether the licensee has exclusive rights in a territory,
  • Whether the licensor has retained the right to grant further licenses,
  • Whether the licensee has the right to sue for infringement, and
  • Whether the licensor retains rights to develop and market the invention.

After analysis, Pfizer Ireland was deemed a bare licensee for the purposes of standing. The Court pointed to Pfizer, Ltd.'s retained "Right of Conversion," which allowed Pfizer, Ltd. to revoke exclusivity at a later date, and Pfizer Ireland's lack of a primary right of enforcement in cutting against a truly exclusive license.

Based on this analysis, Judge Smith removed Pfizer Ireland from the suit, while keeping both Pfizer, Inc. and Pfizer, Ltd. as co-plaintiffs.

Copyright © 2011, Troutman Sanders LLP

Virginia IP Law

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Virginia intellectual property lawyers & attorneys of Troutman Sanders Law Firm, offering services related to patent litigation, trademarks, copyrights, trade secrets, service marks and unfair competition, serving Virginia, Maryland, Washington D.C. and the Eastern United States.


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