sub-header

Rule 19 Joinder Provisions Are Not Optional

| Mark E. DavisAndrea Cheek

LONE STAR SILICON INNOVATIONS v. NANYA TECHNOLOGY CORPORATION

Before O’Malley, Reyna, Chen.  Appeal from the Northern District of California.

Summary: When a patent assignee does not acquire all substantial rights in a patent, Rule 19 compels courts to join a patentee as a necessary party, when feasible.  Additionally, whether a party possesses all substantial rights in a patent does not implicate standing or subject matter jurisdiction.

Lone Star sued Appellees for infringement of several patents.  A transfer agreement between Lone Star and AMD purported to transfer “all right, title, and interest” in the asserted patents to Lone Star.  However, the transfer agreement permitted Lone Star to assert the patents against only unlicensed third parties specifically listed in the agreement. The transfer agreement also limited Lone Star’s right to abandon and transfer the patents. In view of these limitations, the district court found that Lone Star lacked all substantial rights in the patents and concluded that Lone Star could not sue in its own name.  The district court refused to allow Lone Star to join AMD as a plaintiff and dismissed the suit against Appellees.

On appeal to the Federal Circuit, Lone Star argued that it possessed all substantial rights in the asserted patents because the transfer agreement purported to transfer “all right, title, and interest,” and in the alternative that it should have been permitted to join AMD as a necessary party.  The Federal Circuit agreed with the district court that Lone Star did not possess all substantial rights in the asserted patents, rendering AMD a necessary party to the infringement lawsuit.  The Federal Circuit then considered Lone Star’s argument that it should have been given an opportunity to join AMD as a necessary party before the case was dismissed.  The Federal Circuit explained that under Fed. R. Civ. P. 19, courts must join a patentee, if feasible, when it is a necessary party.  The Federal Circuit further explained that if it is not feasible to join a necessary party, the court must consider whether the case should proceed anyway or be dismissed because the party is indispensable.  Because the district court failed to engage in this necessary analysis, the Federal Circuit remanded the case to the district court to consider the mandatory joinder provisions of Rule 19. 

The Federal Circuit also considered Appellees’ argument that Lone Star lacked standing to bring suit because it failed to allege that it was an exclusive licensee.  The Federal Circuit rejected Appellees’ argument in view of Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), explaining that whether a party possesses all substantial rights in a patent does not implicate standing or subject matter jurisdiction. 

Editor: Paul Stewart