Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 1 of 11 PageID #: 4098
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`· JNTHE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`ACCELERATION BAY LLC,
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`. Plaintiff,
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`v.
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`ACTIVISION .BLIZZARD, INC.,
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`Defendant.
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`ACCELERATION BAY LLC,
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`Plaintiff,
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`v.
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`ELECTRONIC ARTS INC.,
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`Defendant.
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`ACCELERATION BAY LLC,
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`Plaintiff,
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`v.
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`Civil Action No. 15-228-RGA
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`Civil Action No.15-282-RGA
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`TAKE-TWO. INTERACTIVE SOFTWARE,
`INC., ROCKSTAR GAMES, INC., and 2K
`SPORTS, INC.,
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`Defendants.
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`Civil Action No. 15-311-RGA
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`MEMORANDUM
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`Presently before the Court is Defendants' motion to dismiss for lack of standing. (D .I.
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`100). 1 The issues have been fully briefed. (D.I. 101, 109, 119). The Court heard oral argument
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`on May 2, 2016. (D.I. 133). For the reasons set forth herein, unless Boeing joins this action
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`within 14 days, Defendants' motion to dismiss will be GRANTED. ·
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`1 All citations are to Civil Action No. 15-228, unless otherwise indicated.
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`1
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 2 of 11 PageID #: 4099
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`Acceleration Bay LLC ("AB") filed three separate patent infringement lawsuits against
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`Defendants. (D.I. 1). AB alleges that Defendants infringe U.S. Patent Nos. 6,701,344;
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`6,714,966; 6,732,147; 6,829,634; 6,910,069; and 6,920,497 (collectively "the patents-in-suit").
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`(D .I. 7). AB claims to own these patents by way of a purchase agreement with the Boeing
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`Intellectual Property Licensing Company. (D.I. 109 at 7). During discovery, Defendants
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`acquired this agreement from Boeing. (D.I. 133 at 67). Shortly thereafter, on March 1, 2016,
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`Defendants filed this motion. (Id. at 67, 69-70; D.I. 100).
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`Standing to sue is a threshold requirement in every federal case. Warth v. Seldin, 422
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`U.S. 490, 498 (1975). Standing is "comprised of both constitutional and prudential
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`components." OxfordAssocs. v. Waste Sys. Auth. ofE. Montgomery Cty., 271F.3d140, 145 (3d
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`Cir. 2001). Whether a plaintiff has standing to sue is a matter oflaw to be determined by the
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`court. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1551 (Fed. Cir. 1995) (en bane). "The
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`party bringing the action bears the burden of establishing that it has standing." Sicom Sys., Ltd.
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`v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005). "Standing must be present at the time
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`the suit is brought." Id. at 975-76.
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`Generally, to satisfy prudential standing, a patent infringement plaintiff "must have held
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`legal title to the patent at the time of the infringement." Rite-Hite, 56 F.3d at 1551; see also 35
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`U.S.C. §§ lOO(d), 281. "A conveyance oflegal title by the patentee can be made only of the
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`entire patent, an undivided part or share of the entire patent, or all rights under the patent in a
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`specified geographicalregion of the United States." Id. (citing Waterman v. Mackenzie, 138
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`U.S. 252, 255 (1891)). "A transfer ofless than one of these three interests is a license, not an
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`assignment of legal title." Id. at 1551-52. In circumstances where a patent owner transfers "all
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`substantial rights" to the patents-in-suit, however, "the transfer is tantamount to an assignment of
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`2
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 3 of 11 PageID #: 4100
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`those patents to the exclusive licensee, conferring standing to sue solely on the licensee." Alfred
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`E. Mann Found. for Sci. Research v. Cochlear Corp., 604 F.3d 1354, -1358-59 (Fed. Cir. 2010).
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`Thus, to sue for infringement in its own name, a plaintiff must either hold {1) "all patent rights(cid:173)
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`the entire bundle of sticks," or (2) "all substantial rights." Morrow v. Microsoft Corp., 499 F.3d
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`1332, 1339-40 (Fed. Cir. 2007).
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`"[U]nlike an assignee that may sue in its own name, an exclusive licensee having fewer
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`than all substantial patent rights (that is not subject to an exception) that seeks to enforce its
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`rights in a patent generally must sue jointly with the patent owner." Intellectual Prop. Dev., Inc.
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`v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1347-48 (Fed. Cir. 2001); see also Aspex
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`Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1344 (Fed. Cir. 2006) (Just as "a patentee
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`must be joined in any lawsuit involving his or her patent, there must be joinder of any exclusive
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`licensee:" (citing Indep. Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459,466 (1926))). In
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`other words, "[ w ]hen there is an exclusive license agreement, ... but the exclusive license does
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`not transfer enough rights to make the licensee the patent owner, either the licensee or the
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`licensor may sue, but both of them generally must be joined as parties to the litigation." Alfred
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`E. Mann, 604 F.3d at 1360.
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`"[W]hether a transfer of a particular right or interest under a patent is an assignment or a
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`license does not depend upon the name by which it calls itself, but upon the legal effect of its
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`provisions:" Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 873
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`(Fed. Cir. 1991). To detemiine "whether a provision in an agreement constitutes an assignment
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`or a license, one must ascertain the intention of the parties and examine the substance of what
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`was granted:" Id. at 874. Here, the license agreement is to be interpreted under Washington
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`3
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 4 of 11 PageID #: 4101
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`law,2 which provides that the interpretation of a contract presents a question oflaw, so long as
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`"the interpretation does not depend on the use of extrinsic evidence, or ... only one reasonable
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`inference can be drawn from the extrinsic evidence." Tanner Elec. Coop. v. Puget Sound Power
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`& Light Co., 911P.2d1301, 1310 (Wash. 1996). Under Washington law, "the touchstone of the
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`interpretation of contracts is the intent of the parties." Scott Galvanizing, Inc. v. Nw.
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`EnviroServices, Inc., 844 P.2d 428, 432 (Wash. 1993).
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`In "ascertain[ing] the intention of the parties and examin[ing] the substance of what was
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`granted ... , it is helpful to look at wh[ich] rights were retained by the grantor." Prima Tek IL
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`L.L.C. v. A-Roa Co., 222 F.3d 1372, 1378 (Fed. Cir. 2000). Here, Boeing nominally assigned "all
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`right, title and interest in and to the [patents-in-suit]" to AB, but that transfer was made "subject
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`to" certain pre-existing licenses, '.'and the license set forth in paragraph 4.3.~' (D.I. 102, Ex. Aif
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`4.1 ). The license in if 4.3 has two components: (1) a non-exclusive, non-transferable right to
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`practice the patents in any field of use; and (2) the exclusive, transferable right to practice the
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`patents in the "Boeing Field ofUse,"3 including the sole right to sublicense and enforce the
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`patents in the Boeing Field of Use. (D.I. 102, Ex. A if 4.3). While Boeing intended to assign all
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`"right, title and interest" in the patents, it clearly intended to "condition[] [that assignment] on
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`theterms of the license [Boeing] retained." Clouding IP, LLC v. Google Inc., 61 F. Supp. 3d 421,
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`2 State contract law determines "the proper construction of [patent] assignment agreements." Minco, Inc.
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`v. CombustionBng'g, Inc., 95 F.3d 1109, 1117 (Fed. Cir. 1996).
`3 The Boeing Field of Use "includes [the] use of a product, process or service for or in conjunction with"
`any of the following, or a "simulation" thereof: "aircraft, airplane, missiles, spacecraft, satellite, space
`station, vehicle, platform or any combination or sub-combination thereof intended for use in the
`atmosphere ... or in space, alone or in combination with assets or services located on, above or under the
`earth's surface." (D.I. 102, Ex. A if 2.5). The Boeing Field of Use also includes: military or national
`security uses (or a simulation under the auspices ofa government); "marine, rail, and multi-modal
`transportation;" "solar energy technology;" and "information surveillance and reconnaissance." (Id.).
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`4
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 5 of 11 PageID #: 4102
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`434 (D. Del. 2014). Since Boeing retained these rights, it did not convey "entire patent[s], an
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`undivided part or share of [any] patent, or all rights under the patent[ s] in a specified
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`geographical region of the United States." Rite-Hite, 56 F.3d at 1551. AB is therefore an
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`exclusive licensee. Id. at 1551-52.
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`At oral argument, AB argued that it had "been granted all rights," and then "granted a
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`very small package of rights back to Boeing." (D.I. 133 at 39). The agreement provides that the
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`license in if 4.3-which the assignment in if 4.1 was made "subject to"-was a "[l]icense [b Jack
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`to [Boeing]." (D.I. 102, Ex. A irir 4.1, 4.3). Specifically, the agreement states that "[u]pon the
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`Closing, [AB] hereby grants [the license] to [Boeing] and any Affiliate." (Id. if 4.3). In
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`examining a contract with similar language, a district court reached the conclusion advocated by
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`AB. See Princeton Dig. Image Corp. v. Hewlett-Packard, 2013 WL 1454945, at *4 (S.D.N.Y.
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`Mar. 21, 2013). In this context, I do not think there is a material distinction between a right
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`retained and a right granted back.4 Courts "determine the parties' intent by focusing on the
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`objective manifestations of the agreement." Hearst Commc 'ns, Inc. v. Seattle Times Co., 115
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`P.3d 262, 267 (Wash. 2005). Here, the agreement evinces the parties' intent to effectuate a
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`particular allocation of rights. Boeing's grant was explicitly limited by the agreement's "subject
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`to" language, which reserved for Boeing certain rights. The labels ascribed to those retained
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`rights have no bearing on the "analy[ sis] [of] the respective rights allocated to each party under
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`[an] agreement." Propat Int'! Corp. v. RPost, Inc., 473 F.3d 1187, 1189 (Fed. Cir. 2007); see
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`also Diamond Coating Techs., LLC v. Hyundai Motor Am., 2016 WL2865704, at *2 (Fed. Cir.
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`May 17, 2016) ("We have not allowed labels to control by treating bare formalities of 'title'
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`4 Generally, "[a] grant-back clause in a patent license requires the licensee to grant back to the licensor
`patent rights which the licensee may develop or acquire," rather than rights that already exist. 6A Donald
`S. Chisum, Chisum on Patents§ 19.04[3][j] (2016).
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`5
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 6 of 11 PageID #: 4103
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`transfer as sufficient to determine that an 'assignment' of the entire exclusive right has
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`occurred."); Intellectual Prop. Dev., 248 F.3d at 1344 ("actual consideration of the rights
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`transferred is the linchpin of ... a[n] [assignment] determination"). Put another way, because
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`Boeing retained certain rights, AB never held "all patent rights." Morrow, 499 F.3d at 1339.
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`"Even ifthe patentee does not transfer formal legal title, the patentee may effect a
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`transfer of ownership for standing purposes if it conveys aU substantial rights in the patent to the
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`transferee." Propat, 473 F.3d at 1189. While the Federal Circuit has not "establish[ ed] a
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`complete list of the rights" to be examined, it has "listed at least some." Alfred E. Mann, 604
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`F.3d at 1360. 5 "[T]he nature and scope of the licensor's retained right to sue accused infringers
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`is the most important factor in determining whether an exclusive license transfers sufficient
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`rights to render the licensee the owner of the patent." Id. at 13 61; see also Prima Tek, 222 F.3 d
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`at 1379 ("we pay particular attention to whether the agreement conveys in full the right to
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`exclude others from making, using and selling the patented invention" (emphasis in original)).
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`"Where the licensor retains a right to sue accused infringers, that right often precludes a finding
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`that all substantial rights were transferred to the licensee." Alfred E. Mann, 604 F.3d at 1361.
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`Here, Boeing retained the right to sue within its field of use. (D.I. 102, Ex. Aif 4.3). This
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`right is not limited or conditioned in any way. The Federal Circuit has concluded that an
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`exclusive field of use licensee does "not hold all substantial rights in the full scope of the ...
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`patent," and therefore lacks standing. Int'l Gamco, Inc. v. Multimedia Games, Inc., 504 F.3d
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`5 Those rights include: (1) the "transfer of the exclusive right to make, use, and sell products or services
`under the patent;" (2) "the scope of the licensee's right to sublicense;" (3) ''the nature oflicense
`provisions regarding the reversion ofrights to the licensor following breaches of the license agreement;"
`(4) ''the right of the licensor to receive a portion of the recovery in infringement suits brought by the
`licensee;" (5) "the duration of the license rights granted to the licensee;" (6) ''the ability of the licensor to
`supervise and control the licensee's activities;" (7) ''the obligation of the licensor to continue paying
`patent maintenance fees;" and (8) "the nature of any limits on the licensee's right to assign its interests in
`the patent." Id. at 1360-61.
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`6
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 7 of 11 PageID #: 4104
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`1273, 1280 (Fed. ·Cir. 2007). While Boeing conferred upon AB a right to sue within a large field
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`of use-to wit, everything outside the Boeing Field of Use-this conveyance still poses the same
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`"threat of multiple suits based on the same allegations of infringement" that arises whenever a
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`"license ... split[s] the patented subject matter amongst various parties." Id. at 1279-80; see
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`also Alfred E. Mann, 604 F.3d at 1360 ("When ... an exclusive license agreement ... does not
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`transfer enough rights to make the licensee the patent owner, either the licensee or the licensor
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`may sue, but both of them generally must be joined as parties to the litigation."). Additionally,
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`Boeing retained the right to assert the patents-in-suit as a counterclaim in any action in which
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`Boeing has been accused of patent infringement. (D.I. 102, Ex. A·if 4.4).6 This limitsAB's right
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`to indulge infringements, as Boeing could effectively direct AB to bring suit as a counter-
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`plaintiff. See Clouding JP, 61 F. Supp. 3d at 434 ("Symantec can instruct Clouding to sue certain
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`third parties identified by Symantec-namely, third parties that have asserted claims against
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`Symantec .... [ J]ust as the licensor in Abbott could override the licensee's desire to indulge
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`infringement, so, too, can Symantec circumvent Clouding' s decision to allow infringement."
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`(citing Abbott Labs. v. Diamedix Corp.,4TF.3d 1128, 1132 (Fed. Cir. 1995))). Since Boeing has
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`retained considerable rights to sue, "the most important factor" in this inquiry tips heavily in
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`favor of a finding that Boeing did not transfer to AB all substantial rights. Alfred E. Mann, 604
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`F.3d at 1361.
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`Boeing also retained the right to "practice the methods described in the [patents-in-suit]
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`and to make, have made, use, sell, offer to sell, import and export any product or service utilizing
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`the [patents-in-suit] for any ... purpose in any field of use." (D.L 102, Ex. Aif 4.3(a)). Boeing's
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`grant was also made subject to prior licenses. (Id. if 4.1, id. at 19). Boeing's retention of these
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`6 The purchase agreement provides that, in these circumstances, AB will ''join" Boeing in the action and
`will bear all legal costs associated with joining. (Id.).
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`7
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 8 of 11 PageID #: 4105
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`rights weighs against a finding that Boeing transferred all substantial rights. Abbott Labs., 47
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`F.3d at 1132-33 (Licensor's retention of a "limited right to make, use, and sell products
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`embodying the patented inventions" was among the rights "that are commonly held sufficient to
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`make a patent owner ... a necessary party." Additionally, the court considered the fact that
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`"[Licensee's] exclusive license was ... made subject to prior licenses granted by [Licensor].");
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`see also Diamond Coating Techs., 2016 WL 2865704, at *3 ("We have held that a 'licensor's
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`retention of a limited right to develop and market the patented invention indicates that the
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`licensee failed to acquire all substantial rights."' (quoting Fieldturf Inc. v. Sw. Recreational
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`Indus., 357 F.3d 1266, 1269 (Fed. Cir. 2004))). Boeing may also require AB "to grant licenses to
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`the [patents-in-suit] ... as is necessary to comply with [a certain] European Community
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`Commission Decision," and "to comply with the provisions" in an earlier Airbus agreement.
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`(D.I. 102, Ex. Aif 4.3). This too suggests that Boeing did not transfer all substantial rights. See,
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`e.g., Prima Tek, 222 F.3d at 1380 ("Unlike the agreement in Vaupel, [this] agreement ... goes far
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`beyond a mere 'sub-licensing veto,' .... [and] requires that Prima Tek I execute a sub-license to
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`Prima Tek II and to no one else."); see also Alfred E. Mann, 604 F.3d at 1360 (listing "the scope
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`of the licensee's right to sublicense" as a right to be examined). The agreement also provides
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`that "[i]f [AB] has not actively pursued monetization of the [patents-in-suit] ... within six (6)
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`months from the Effective Date of this Agreement, [Boeing] at its option shall have the right to
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`have the [patents-in-suit] re-assigned back to [Boeing]." (D.I. 102, Ex. Aif 4.5). This too
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`supports a finding that Boeing did not transfer all substantial rights. Alfred E. Mann, 604 F.3d at
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`1360-61 (listing "the nature oflicense provision~ regarding the reversion of rights to the licensor
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`following breaches of the license agreement" as a right to be examined). While some of the
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`"termination provisions" in the agreement, along with the "right to receive infringement damages
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`8
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 9 of 11 PageID #: 4106
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`... [as] compensation," are consistent with an "assignment ... 'by way of mortgage,"' this
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`provision is different. Vaupel, 944 F.2d at 875 (quoting Waterman, 138 U.S. at 256). It goes
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`beyond payment obligations and subjects AB's licensing efforts to the demands of Boeing. If
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`AB does not comply, Boeing may retake possession of the patents.
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`AB repeatedly emphasizes its obligation to pay maintenance fees. This is indeed a
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`relevant consideration. Alfred E. Mann, 604 F.3d at 1361 (listing "the obligation of the licensor
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`to continue paying patent maintenance fees" as a rightto be examined); Mentor HIS, Inc. v. Med.
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`Device Alliance, Inc., 240 F.3d 1016, 1018 (Fed. Cir. 2001) ("[Licensor] also is obliged to pay
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`the maintenance fees for the patent."). The transfer of a particular substantial right does not,
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`however, preclude a finding that Boeing did not transfer all substantial rights.
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`Upon consideration of the provisions of the purchase agreement, I conclude that Boeing
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`did not-transfer all substantial rights to AB. When a "licensor d[oes] not transfer 'all substantial
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`rights' to the exclusive licensee, ... the licensor remains the owner of the patent and retains the
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`right to sue for infringement." Alfred E. Mann, 604 F.3d at 1359. The Federal Circuit "adheres
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`to the principle that a patent owner should be joined, either voluntarily or involuntarily, in any
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`patent infringement suit brought by an exclusive licensee having fewer than all substantial
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`rights." Intellectual Prop. Dev., 248 F.3d at 134 7.
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`Even if I were to conclude, as AB urges, that Boeing transferred all substantial rights to
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`AB, Boeing-as an exclusive licensee-would still need to be joined in this action. See Alfred
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`E. Mann, 604 F.3d at 1360 (citingAspex Eyewear, 434 F.3d at 1344); Clouding JP, 61 F. Supp.
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`3d at 430 n.8 ("[W]here the plaintiff is a patentee who has given away some but not all
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`substantial rights, it must join its exclusive licensee."); Personalized Media Commc 'ns, L.L. C. v.
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`Echostar Corp., 2012 WL 8251414, at *3 (E.D. Tex. July 10, 2012) (requiringjoinder of field of
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`9
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 10 of 11 PageID #: 4107
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`use licensee). "Because one purpose of the joinder requirement is to protect the alleged infringer
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`from multiple lawsuits, the transfer of the right to sue for infringement is critical." Luminara
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`Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1350 (Fed. Cir. 2016). Here, since Boeing
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`maintains a right to sue under any reading of the agreement, there exists "a substantial risk of
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`multiple suits and multiple liabilities against an alleged infringer for a single act of
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`infringement." Int'! Gamco, 504 F.3d at 1278.7 Therefore, since Boeing's absence would place
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`on Defendants a "substantial risk of incurring double, multiple, or otherwise inconsistent
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`obligations," it would be a required party to this action. Fed. R. Civ. P. 19(a)(l).8
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`Boeing must be a plaintiff for these lawsuits to continue. It is not. Therefore, AB lacks
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`prudential standing and this action must be dismissed pursuant to Fed. R. Civ. P. 12(b)(l).
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`Ballentine v. United States, 486 F.3d 806, 810 (3d Cir. 2007). Defendants concede, however, that
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`any prudential standing deficiencies would be cured by Boeing's joinder. (D.I. 133 at 5). AB
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`represented at oral argument that Boeing would likely not join in these lawsuits. (Id. at 34).
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`AB's briefing makes no suggestion to the contrary. Nonetheless, AB states in its letterto the
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`Court that it "may cure any defect in prudential standing." (D.I. 132 at p. 1). Accordingly, I am
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`inclined to afford AB an opportunity to correct this deficiency.
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`7 AB insists that since AB '"will be a party to any suit that [Boeing] initiates, it will be collaterally
`estopped from re-litigating an issue that received a final judgment on the merits,' removing any risk of
`inconsistent litigation." (D.I 133 at 3 (alteration in original) (citing Bluestone Innovations LLC v. Nichia
`Corp., 2013 WL 1729814, at *5 (N.D. Cal. Apr. 22, 2013))). The joinder of AB in any action initiated by
`Boeing does not remove the risk of duplicative litigation. For instance, if Boeing is not joined in this
`action, neither res judicata nor collateral estoppel would bar future claims asserted by Boeing (or a
`transferee) that could not have been-raised by AB in this case---i.e., claims within the Boeing Field of
`Use. Gamco describes this very concern. Int'! Gamco, 504 F.3d at 1279 ("the single infringing act of
`· offering NYSL games might subject the infringer to suit by Gamco for the lottery games, and separately
`by IGT or some other game-specific licensee for the other games").
`8 I recognize that this conclusion may conflict with that reached in Bluestone Innovations, 2013 WL
`1729814, at *5. Rule 19 is not subject to per se rules, however. See Univ. of Utah v. Max-Planck(cid:173)
`Gesellschaft zur Forderung der Wissenschaften e. V., 734 F.3d 1315, 1326 (Fed. Cir. 2013). While the
`court in Bluestone concluded, based on the facts of that case, that an exclusive licensee was not a
`necessary party, I conclude differently with respect to Boeing.
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`10
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`Case 1:15-cv-00311-RGA Document 144 Filed 06/03/16 Page 11 of 11 PageID #: 4108
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`If Boeing fails to join this action within 14 days, Defendants' motion will be
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`GRANTED. I need not reach the other arguments raised by Defendants unless Boeing joins this
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`action. A separate order will be entered.
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`June.5, 2016
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`11
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