Licensee Cannot Sue for InfringementOctober 26, 2005

When is a right to sue not a right to sue? When it’s a right to sue for commercial patent infringement as part of a patent license agreement. While this seems like a curious result, in Sicom Systems Ltd. v. Agilent Technologies, Inc., the Federal Circuit came to just that conclusion.The patent at issue in the case deals with a type of digital signal transmission monitor. The patent’s owner is the Canadian government. Although the Canadian government retained the right to practice the invention, Sicom was the only licensee. Under an amended license agreement, Sicom was granted the exclusive right to ‘initiate commercial infringement actions’ related to the patent. Sicom sued Agilent Technologies, but the Canadian government was not made a party to the suit.A licensee of a patent has the right to bring actions for infringement when they receive ‘all substantial rights under the patent.’ After analyzing several recent cases dealing with the issue of the rights of licensees to sue for infringement, the court concluded that Sicom did not have ‘all substantial rights,’ and therefore could not sue unless Canada was also joined as a plaintiff. Among the reasons for this conclusion was that Sicom did not have any right to settle litigation, sublicense, or assign its rights without prior approval from Canada. These reservations of rights by the Canadian government were ‘fatal’ to Sicom’s ability to sue for infringement.This case illustrates that patent license agreements must be closely scrutinized, as even when rights appear to be granted as part of the agreement, the state of the law may render such rights invalid. Those entering into license agreements must ensure that if their intent is to grant the exclusive right to sue to a licensee that receives something arguably other than ‘all substantial rights’ of the patent that a provision is inserted requiring the owner of the patent to join the suit, if requested by the licensee.For the complete decision, log on to: http://fedcir.gov/opinions/05-1066.pdf