constitutional standing Archives

Fifth Circuit Takes U-Turn, But Still Concludes Automotive Supplier Can’t Force SEP Holder to Issue License

In response to a petition for panel rehearing, the US Court of Appeals for the Fifth Circuit withdrew its prior decision finding that an automotive parts supplier did not have constitutional standing to pursue an antitrust lawsuit against owners of standard essential patents (SEPs). The Court issued a new opinion summarily affirming the district court’s original decision finding constitutional standing but dismissed the case based on lack of antitrust standing. Continental Automotive Systems, Inc. v. Avanci, LLC et al., Case No. 20-11032 (5th Cir. June 21, 2022) (Stewart, Ho, Engelhardt, JJ.) (per curiam).

Continental sued several SEP holders and their licensing agent, Avanci, for violation of Sections 1 and 2 of the Sherman Antitrust Act based on Avanci’s refusal to license the SEPs on fair, reasonable and nondiscriminatory (FRAND) terms. Avanci moved to dismiss, arguing that Continental lacked both constitutional standing and antitrust standing. The district court found that Continental had constitutional standing because its lack of success obtaining licenses on FRAND terms was an injury. However, the district court found that Continental lacked antitrust standing and therefore dismissed the lawsuit. Continental appealed.

The Fifth Circuit issued its original opinion in March 2022, finding that Continental’s theory of injury was insufficient to confer constitutional standing. The Court explained that Avanci’s refusal to sell licenses did not result in a cognizable injury to Continental, and that Continental had no rights to enforce FRAND contracts between the individual patent holders and the standard setting organization (SSO) since Continental was not part of the SSO to which the SEP holders belonged. The Court also found that even if Continental was contractually entitled to a license on FRAND terms, the SSO contract had not been breached because the individual patent holders fulfilled their obligations to the SSO by actively licensing Continental’s customer, which meant that the SEP licenses were (derivatively) available to Continental on FRAND terms. Finding that Continental lacked constitutional standing, the Court did not reach the issue of whether Continental lacked antitrust standing.

Continental filed a petition for panel rehearing and rehearing en banc. Numerous third parties, including legal and economic scholars, industry associations and tech companies, also filed amici briefs supporting Continental, arguing that the Fifth Circuit wrongly found that Continental was not an intended beneficiary of the FRAND obligations that the SEP owners made to the relevant SSO.

On June 14, 2022, the Fifth Circuit issued an order withdrawing its March 2022 opinion. A week later, the Court issued a new opinion summarily stating that “[h]aving reviewed the district court’s detailed order, and considered the oral arguments and briefs filed by the parties and amicus curiae, we AFFIRM the judgment of the district court that Continental failed to state claims under Sections 1 and 2 of the Sherman Act.”

Practice Note: Although the ultimate outcome did not change, the Fifth Circuit withdrew its previous finding that third-party beneficiaries to SSOs did not have constitutional standing to file a lawsuit.

Exclusive Licensee Has Constitutional but Not Statutory Standing

The US Court of Appeals for the Federal Circuit vacated the dismissal of an exclusive licensee’s complaint for lack of statutory and constitutional standing, despite affirming that the licensee had no statutory standing where the district court erroneously found no constitutional standing. Univ. of So. Florida Res. Found., Inc. v. Fujifilm Med. Sys. U.S.A., Inc., Case No. 20-1872 (Fed. Cir. Nov. 23, 2021) (sealed opinion issued Oct. 22, 2021) (Stoll, J.)

In April 1997, the University of South Florida (USF) received an invention disclosure related to a workstation-user interface for digital mammography. In September 1997, the inventors, USF and the USF Research Foundation (USFRF) entered into a revenue allocation agreement assigning all rights in the invention to USF. The inventors also entered into a separate assignment agreement in 2002. The patent issued in 2003. The revenue allocation agreement was later followed by a nunc pro tunc license agreement, which recited an effective date of July 1997.

In May 2016, USFRF sued Fujifilm Medical Systems for infringement of the issued patent. USFRF pled that USF assigned its rights in the issued patent to USFRF such that USFRF was “currently the owner” of the patent. In June 2019, Fujifilm moved for summary judgment, arguing that USFRF lacked statutory standing because USF had not fully assigned the patent to USFRF. Five days later, USFRF amended its complaint to state that it was an exclusive licensee (i.e., it was not the assignee).

In May 2020, the district court dismissed the case, finding that USFRF lacked both statutory and constitutional standing. Analyzing the nunc pro tunc license agreement, the district court found a lack of statutory standing because the agreement was silent on (and thus did not transfer to USFRF) the right to sue to enforce the patent. The district court also found that USFRF lacked constitutional standing because USFRF had not established that the invention disclosure number in the license agreement corresponded to the issued patent and had not shown that the nunc pro tunc agreement was signed before the complaint was filed. USFRF appealed.

The Federal Circuit analyzed both statutory and constitutional standing and affirmed the district court’s finding with respect to statutory standing, reasoning that this case was analogous to others in which an exclusive licensee lacked statutory standing because the right to sue was either not transferred or only partially transferred. The Federal Circuit found that the district court had clearly erred with respect to constitutional standing, however. First, the Court held that there had been sufficient evidence tying the invention disclosure identified in the assignment agreement to the issued patent. Second, the Court found that it did not matter when the nunc pro tunc agreement was signed because the original revenue allocation agreement was signed before the complaint was filed and conveyed at least one exclusionary right to USFRF—enough for USFRF to have constitutional standing.

Because “the district court’s dismissal was predicated on constitutional standing,” the Federal Circuit remanded for further proceedings, including determination of whether USFRF may join USF.

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