Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_02-cv-02060/USCOURTS-casd-3_02-cv-02060-21/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1338 Patent Infringement

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28 02CV2060-B (CAB)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

LUCENT TECHNOLOGIES INC.,

Plaintiff and Counterclaim-defendant,

v.

GATEWAY, INC. and GATEWAY

COUNTRY STORES LLC, GATEWAY

COMPANIES, INC., GATEWAY

MANUFACTURING LLC and

COWABUNGA ENTERPRISES, INC.,

Defendants and Counter-claimants,

and

MICROSOFT CORPORATION,

Intervenor and Counter-claimant,

_____________________________________

MICROSOFT CORPORATION,

Plaintiff and Counterclaim-defendant,

v.

LUCENT TECHNOLOGIES INC.,

Defendant and Counter-claimant

_____________________________________

LUCENT TECHNOLOGIES INC., 

Plaintiff,

v.

DELL, INC.,

Defendant.

_____________________________________

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Civil No: 02CV2060-B(CAB)

consolidated with

Civil No: 03CV0699-B (CAB) and

Civil No: 03CV1108-B (CAB)

ORDER ON THE NON-JURY ISSUE OF

STANDING REGARDING U.S. PATENT

NO. 5,341,457

Case 3:02-cv-02060-B-MDD Document 1722 Filed 04/27/07 Page 1 of 12
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1

 The Defensive Agreement refer to JOINT PATENTS. The ‘457 patent is listed as one of

many patents in this category. (Trial Ex. 1375 § 1.3.) For purposes herein, JOINT PATENTS will

be considered a reference to the ‘457 patent since the other patents in this category are not of

immediate relevance here.

2

I. INTRODUCTION

On January 29, 2007, a jury trial commenced in case no. 02cv2060 on issues

pertaining to U.S. Patent Nos. 5,341,457 and RE 39,080 (“the ‘457 patent” and “the ‘080

patent,” respectively). On February 22, 2007, the jury returned a verdict in favor of Lucent

Technologies, Inc. (“Lucent”) finding the patents valid and infringed by Defendant

Microsoft Corporation (“Microsoft”). In addition to the affirmative defenses put before the

jury, Microsoft raised a number of additional non-jury defenses regarding the patents. 

Several of these were decided as set forth in the Court’s Orders of March 19 and 27, 2007. 

A remaining issue, Lucent’s standing with respect to the ‘457 patent, is addressed herein.

II. BACKGROUND

When the ‘457 patent was issued in 1994, AT&T was the named assignee. In 1996,

AT&T created Lucent as an independent entity. On March 29, 1996, AT&T and the newly

created Lucent entered into a series of agreements that concerned the rights pertaining to

the ‘457 patent. In the first of these agreements, AT&T transferred and assigned the entire

right, title and interest in the ‘457 patent to Lucent. (Trial Ex. 1375.) In the second

agreement, titled “Patent Assignment” (Trial Ex. 6711.) Lucent assigned “an undivided

one-half (1⁄2) ownership interest” in the ‘457 patent back to AT&T subject to a separate

Defensive Protection Agreement between Lucent and AT&T.1

 (Trial Ex. 6724; hereinafter

“Defensive Agreement.”) 

The Defensive Agreement sets forth several provisions on licensing and enforcing

the ‘457 patent with the intention of defining “the scope of their respective rights and

obligations under such jointly owned patents.” (Id. ¶ 6.) The period of the agreement

(“Ownership Period”) is ten years from the execution of the agreement (March 29, 1996 -

March 29, 2006) or for the life of the patent, whichever expires first. (Id. § 1.4.)

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On ownership, the Defense Agreement set forth:

2.1 Ownership Interest in Joint Patents. (a)(l) During the Ownership

Period, the Parties shall each have an equal title interest in each Joint Patent, with

AT&T holding an undivided one half (1/2) interest and LUCENT holding an

undivided one half (1/2) interest.

(a)(2) Notwithstanding AT&T’s ownership interest in Joint Patents under Section

2.1(a)(1), during the Ownership Period AT&T shall not assign its entire interest, or

any portion thereof, in any Joint Patent to any third party without the express written

consent of LUCENT. . . . 

(b) At the expiration of the Ownership Period, AT&T shall, by separate instrument

and without charge to LUCENT, assign to LUCENT all of AT&T’s entire one half

(1/2) ownership interest in Joint Patents. . . .

On the rights of each party, the Defensive Agreement states:

2.2 Rights of each Party under Joint Patents. AT&T and LUCENT shall

each have, under Joint Patents, the rights to make, have made, use, lease, sell and

import any products and services of their respective businesses in which they are

now or hereafter engaged. Such rights shall also extend to AT&T’s and LUCENT’s

Related Companies and Foreign Affiliates.

The Defensive Agreement addresses licensing by each party:

2.4 Licensing of Joint Patents for fields other than Telecommunications

Services. LUCENT shall have all rights to grant nonexclusive licenses under Joint

Patents to any Person for any grant area other than telecommunications services.

AT&T hereby consents to the grant of such licenses by LUCENT and to LUCENT

retaining all royalties that it receives for such licenses without accounting therefor to

AT&T.

For licensing within the telecommunications services field, the Agreement set forth other

provisions:

2.6 Licensing of Joint Patents for the field of Telecommunications Services. Services. LUCENT shall have the exclusive right to grant to any Person

nonexclusive licenses under any Joint Parent for the field of Telecommunications

Services . . . .

This provision was subject to the caveats listed below section 2.6, which include the

requirement for Lucent to obtain AT&T’s concurrence or to obtain a covenant from the

licensee that it would not sue AT&T or its subsidiaries for patent infringement during the

term of the license.

The Defensive Agreement further provided clarification on the rights of each party

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to enforce the ‘457 patent.

2.5 Enforcement of Joint Patents for fields other than telecommunications

services. LUCENT shall have all rights to enforce patent infringement claims under

any Joint Patent against any Person for any field other than telecommunications

services. AT&T hereby consents to such rights to enforce by LUCENT and to

LUCENT retaining any and all amounts recovered as the result of such enforcement

without accountings therefor to AT&T. Lucent shall give notice to AT&T if any

third party asserts by lawsuit, license discussions or otherwise any invalidity claims

as to any Joint Patent.

In the field of telecommunications, the enforcement rights were defined as follows:

2.7 Enforcement of Joint Patents for the field of Telecommunications Services.

The Parties agree that LUCENT shall have the exclusive right to enforce patent

infringement claims under any Joint Parent against any Person subject to the

following provisions.

The Defensive Agreement then lists several provisions including that any settlements or

resolution be consistent with AT&T’s rights set out in sections 2.6 and 2.7, and a provision

providing for AT&T to invoke the joint patents for defensive purposes if it is sued by

another party for patent infringement.

As noted above, the Defensive Agreement placed a “one half (1/2) ownership

interest” of the ‘457 patent with AT&T for a ten-year period. At the expiration of this

period, AT&T was to assign all of its interest in the ‘457 patent back to Lucent. (Id. §

2.1(b).) On February 23, 2007, AT&T executed a document titled “Patent Assignment”

assigning all of its interest in the ‘457 patent back to Lucent. (Dec. Godziela Supp.

Lucent’s Rep. Br. Ex. A.)

III. APPLICABLE LAW

Standing is a jurisdictional issue and thus may be raised at any time during the

pendency of the litigation. Pandrol USA, LP v. Airboss Ry. Products, Inc., 320 F.3d 1354,

1367 (Fed. Cir. 2003). A consideration of a party’s standing in a patent suit is comprised of

Article III standing and prudential standing. Propat Intern. Corp. v. Rpost, Inc., 473 F.3d

1187, 1193 (Fed. Cir. 2007). A party meets the requirements for Article III standing under

Lujan v. Defenders of Wildlife, 504 U.S. 555, (1992) if it can show an injury in fact

(concrete and particularized, that is actual or imminent) which is fairly traceable to the

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defendant and redressable by a favorable decision. 

Even where a party can demonstrate Article III standing, issues with regard to the

ownership of rights in the patent raise prudential standing concerns. Independent Wireless

Telegraph Co. v. Radio Corporation of America, 269 U.S. 459, 468 (1926); see also Prima

Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000) (recognizing that the

joinder of a patent owner is a prudential concern). Generally, “[a]n action for infringement

must join as plaintiffs all co-owners.” Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456,

1467 (Fed. Cir. 1998) (citation omitted).

The presence of the owner of the patent as a party is indispensable, not only to give

jurisdiction under the patent laws, but also in most cases to enable the alleged

infringer to respond in one action to all claims of infringement for his act, and thus

either to defeat all claims in the one action, or by satisfying one adverse decree to

bar all subsequent actions. 

Independent Wireless Telegraph Co. v. Radio Corporation of America, 269 U.S. 459, 468

(1926). Where there is “an assignment of all significant rights under the patent,” the

assignee then has standing to sue on its own. Ortho Pharmaceutical Corp. v. Genetics

Institute, Inc., 52 F.3d 1026, 1030 (Fed. Cir.1995). However, “[i]f the patent owner grants

only a license [rather than an assignment], the title remains in the owner of the patent; and

suit must be brought in his name . . . . Any rights of the licensee must be enforced through

or in the name of the owner of the patent, and perhaps, if necessary to protect the rights of

all parties, joining the licensee with him as a plaintiff.” Abbott Laboratories v. Diamedix

Corp., 47 F.3d 1128, 1131 (Fed. Cir.1995). 

IV. ANALYSIS

Lucent argues that it had Article III standing from the outset of this case and

Microsoft does not appear to dispute this contention. Rather, the parties focus their dispute

on prudential standing, namely whether all the owners of the ‘457 patent were properly

joined in this case. Microsoft contends that AT&T is a co-owner of the ‘457 patent and

thus must be joined for Lucent to have standing. Lucent maintains that AT&T is not a

necessary party to the instant litigation. Having reviewed the parties’ briefs and the

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applicable case law, the Court finds that Lucent has standing to maintain the action on the

‘457 patent for at least three reasons.

A. Lucent has prudential standing prior to entry of judgment

In a patent litigation, where a party has constitutional standing but lacks prudential

standing, the party may cure these circumstances in one of two manners. The party may

join the missing owner. Mentor H/S, Inc. v. Medical Device Alliance, Inc., 240 F.3d 1016,

1019 (Fed. Cir. 2001). In the alternative, the party may acquire the missing ownership

rights. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198, 1204 (Fed. Cir.

2005). If the party cures its standing defect before entry of judgment, there is no

jurisdictional defect and judgment entered thereon will be valid. Id.

In the instant case, Microsoft asserts that Lucent and AT&T are co-owners of the

‘457 patent. Thus, as an owner, at the outset of the ligation, Lucent had constitutional

standing. If it lacked prudential standing, Lucent could thus cure this failure before

judgment. See id. at 1203-04. On February 23, 2007, AT&T reassigned any rights it held

in the ‘457 patent to Lucent. (Dec. Godziela Supp. Lucent’s Rep. Br. Ex. A.) Since

judgment has not yet been entered in the instant case, if any standing defect did exist, it has

been cured prior to judgment; Lucent now owns the undivided entire interest in the ‘457

patent. Therefore, presently there is no jurisdictional defect and judgment may be validly

entered.

B. Lucent is the only owner with “all substantial rights” to the ‘457 patent

The labeling of a party as an owner, assignee or a licensee of the patent is not

determinative in the assessment of the party’s rights and in the determination of a party’s

standing. Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F.2d 870, 875

(Fed. Cir. 1991) (quoting in part Waterman v. Mackenzie, 138 U.S. 252, 256 (1891): “It is

well settled that whether a transfer of a particular right or interest under a patent is an

assignment or a license does not depend upon the name by which it calls itself, but upon the

legal effect of its provisions.”). “To determine whether a provision in an agreement

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28 7

constitutes an assignment or a license, one must ascertain the intention of the parties and

examine the substance of what was granted.” Id. at 874.

“Even if the patentee does not transfer formal legal title, the patentee may effect a

transfer of ownership for standing purposes if it conveys all substantial rights in the patent

to the transferee. In that event, the transferee is treated as the patentee and has standing to

sue in its own name.” Propat Intern. Corp. v. Rpost, Inc., 473 F.3d 1187, 1189 (Fed. Cir.

2007). Factors considered in a determination of whether a party holds all substantial rights

include: (1) whether the party can bring suit independently and/or whether another party

has retained rights to initiate or participate in infringement suits; (2) the right of the party to

exclude others from making, using and selling the patented invention; (3) the party’s right

to sub-license and/or whether another party has retained the right to grant licenses to the

patent.. Agilent Technologies, Inc., 427 F.3d 971, 977-78 (Fed. Cir. 2005); Prima Tek II,

L.L.C. v. A-Roo Co., 222 F.3d 1372, 1380 (Fed. Cir. 2000). 

In the instant case, although the series of three agreements executed by Lucent and

AT&T label AT&T as a “co-owner,” it is the intent of the parties to these agreements and

the substance therein that governs what rights are held by each party. See Vaupel, 944 F.2d

at 875. Applying the relevant factors to the examination of these agreements, the Court

finds that AT&T, regardless of the labels in the agreements was a licensee and that it is

Lucent alone which holds all substantial rights to the ‘457 patent. 

Under the agreements, it is Lucent and not AT&T that holds the rights to enforce the

‘457 patent. Under the Defensive Agreement, Lucent was granted “all rights to enforce

patent infringement claims” in non-telecommunications fields and “the exclusive right”

subject to several provisions in the telecommunications services field. (Trial Ex. 6724 §§

2.5, 2.7.) Lucent could institute infringement suits independent of AT&T; AT&T had no

veto power as to this right, nor any right to control the litigation. Furthermore, the

Defensive Agreement provides that all royalties from such litigations would flow only to

Lucent. (Id. § 2.5.) AT&T held no rights itself to sue other parties for infringement of the

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‘457 patent. AT&T only held the right to use the ‘457 patent in a defensive action against

parties that sued AT&T. (Id. § 2.7.) 

Similar to the distribution of the enforcement right, it is Lucent and not AT&T that

held the only rights to grant licenses to the ‘457 patent to other parties. In fields other than

telecommunications services, the Defensive Agreement granted Lucent “all rights to grant

nonexclusive licenses” and to collect all royalties (id. § 2.4.) In such fields, AT&T held no

rights to grant licenses. In the telecommunications services field, Lucent also had the

exclusive right to grant nonexclusive licenses. (Id. § 2.6.) In contrast, AT&T held no rights

to license the ‘457 patent in this field. 

Although Microsoft argues that with respect to the sections on enforcement and

licensing that the phrase “LUCENT shall have all rights” should be construed to mean that

both AT&T and Lucent were granted such rights, this interpretation is unsupported by the

context or the intent of the document. The parties set forth the Defensive Agreement with

the intention “to define the scope of their respective rights and obligations under such

jointly-owned patents.” (Id. ¶ 6.) Where the agreement refers to rights that both parties

held, it specifically states “AT&T and LUCENT” (see e.g., id. §2.2) or refers to “the

parties” (see e.g., id. §§ 2.1, 3.2). In contrast, in sections that pertain to the grant of a right

to a single party, only one party is named (see e.g., id. §§ 2.1(a)(2), 2.3, 2.4-2.7.) 

Furthermore, although the word “exclusive” is used with reference to licensing in the

telecommunications field rather than the word “all” used in the section addressing the

non-telecommunications fields, the context of these terms does not indicate, as Microsoft

argues, that “all” rights to Lucent should be construed to mean that AT&T also held

equivalent rights. If there is any difference in the meaning of these words, the context

indicates that “exclusive” is the narrower term. “All” is used with no caveats attached;

where Lucent is given “all rights to grant non-exclusive licenses,” and “all rights to enforce

patent infringement claims” there are no reservation of rights to AT&T. In comparison

where Lucent is given the “exclusive right” to grant nonexclusive licenses or to enforce the

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patent in the telecommunications field, it comes subject to limitations (such as the consent

by AT&T, the ability to obtain the licensee's waiver, and the ability for AT&T to invoke

the patent defensively). In sum, regardless of the use of “all” and “exclusive,” in the areas

of licensing and enforcement, the Defensive Agreement provided these rights to Lucent,

not to AT&T.

Additionally, the Defensive Agreement provided Lucent (and not AT&T) with the

right to exclude others from using the ‘457 patent. Although AT&T had rights “to make,

have made, use, lease, sell and import” with respect to the ‘457 patent (id. § 2.2), it could

not prevent others from doing the same. First, Lucent held the rights to make, have made,

use, lease, sell and import in all fields. (Id.) Second, in non-telecommunications fields,

Lucent could license the ‘457 patent to other parties independently of AT&T; AT&T could

not veto such licenses, nor was its consent required. (Id. § 2.4.) In the telecommunications

field, Lucent also had rights to license the ‘457 patent. Although such rights could be

subject to a concurrence by AT&T, it was not absolutely required. (Id. § 2.6(a).) In the

alternative, Lucent could obtain a waiver from the prospective licensee that it would not

bring suit for patent infringement against AT&T during the term of the license. (Id.). 

Additional factors also indicate all substantial rights rest with Lucent and not

AT&T. Under the Defensive Agreement, Lucent held the sole right to prosecute and

maintain the patent. (Id. §2.3.) AT&T was constrained in its ability to assign any part of its

interest subject to the express written consent of Lucent. (Id. §2.1 (a)(2).) In contrast, no

such reciprocal constraints were placed on assignment of Lucent’s interest. 

Finally, the Ownership Period limitation comes to bear on the determination. The

Defensive Agreement had an Ownership Period that commenced at the execution of the

agreement, March 29, 2006, and ran for ten years or for the life of the patent, whichever

ended earliest. (Id. § 1.4.) At the end of the period, AT&T was to assign its rights back to

Lucent “by separate instrument.” (Id. § 2.1(b).) These clauses evidence the parties’

intention for the rights granted to AT&T to be of limited duration. This factor also strongly

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indicates that AT&T’s interest was not an “ownership” interest even if it was identified as

such in the agreements. See Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336,

1342 (Fed. Cir. 2006) (noting that the limited defined term of the rights was the “dominant

factor” in finding that the party was a licensee and not an owner even where the licensee

had the rights to make, use, sell, enforce and sublicense during its term).

In light of all of these factors, the Court finds that Lucent held all substantial rights

in the ‘457 patent. AT&T, although referred to as “owner” had transferred the bulk of its

rights to Lucent under the Defensive Agreement and thus was essentially a licensee. 

Therefore, in the instant action Lucent has standing to sue in its own name without joining

AT&T.

C. AT&T is not a necessary party

In addition to the two reasons already discussed, the Court finds that, even if AT&T

held some rights to the ‘457 patent, AT&T was never a necessary party to the instant

litigation. Therefore, the lack of joinder of AT&T to the litigation did not create a

jurisdictional defect.

Rule 19 of the Federal Rules of Civil Procedure governs the determination of

necessary parties. This rule considers if complete relief be granted with the parties in suit

and whether the failure to join another party imposes “a substantial risk of incurring

double, multiple or otherwise inconsistent obligations” on the parties presently joined. 

Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F.2d 870, 876 (Fed. Cir.

1991). In the context of this rule, standing to sue for infringement cannot be contractually

created by granting such right to a party with no proprietary interest in the patent. Prima

Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1381 (Fed. Cir. 2000). In such situation, the

contractual transfer of the right to sue does not relieve the requirement for the patent owner

to be joined. Id. However, a right to sue coupled with a transfer of “all substantial rights”

in the patent can confer standing to a licensee absent joinder of the patent owner. Vaupel

Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F.2d 870, 875 (Fed. Cir. 1991)

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(owner was not a necessary party to suit by exclusive licensee who held the right to sue). 

Thus, every patent owner is not a necessary party under Rule 19. 

Here, under the agreements with AT&T, Lucent owns proprietary rights in the ‘457

patent. Additionally, under the Defensive Agreement, Lucent holds the sole rights to sue

for infringement. It holds all rights to enforce the patent in non-telecommunications fields. 

(Trial Ex. 6724 § 2.5.) Even in the telecommunications field, only Lucent holds the rights

to initiate a suit for infringement of the ‘457 patent. (Id. § 2.7). The only right held by

AT&T with respect to enforcement was the right of AT&T in the telecommunications field

to invoke the ‘457 patent for defensive purposes. (Id. § 2.7(b).) Thus, under the

considerations of Rule 19, Microsoft, does not face any possibility of a second

infringement suit on the ‘457 patent by AT&T since AT&T holds no rights to initiate a

litigation on the ‘457 patent.. Furthermore, complete relief can be granted in this litigation. 

The patent has been found valid and infringed. Under the Defensive Agreement, Lucent

holds all rights to collect damages from infringement suits (id. § 2.5) and thus, judgment

can be executed. 

The only remaining concern set forth in Rule 19 is whether AT&T claims an interest

in the action and its absence “may . . . as a practical matter impair or impede the person's

ability to protect that interest.” Here, AT&T’s position is no different than any other nonexclusive licensee. While AT&T can practice the invention of the ‘457 patent, it cannot

exclude others from doing the same. As explained herein, Lucent could grant nonexclusive licenses in all fields. Even in the telecommunications fields where AT&T could

exert some control, the Defensive Agreement allowed Lucent to grant such licenses without

consent of AT&T and instead obtain a waiver from the prospective licensee. Thus, given

AT&T’s lack of ability to exclude others, AT&T is for all practical purposes equivalent to a

non-exclusive licensee; it would not even have standing to join the suit. See Ortho

Pharmaceutical Corp. v. Genetics Institute, Inc., 52 F.3d 1026, 1031 (Fed. Cir. 1995) (“A

holder of such a nonexclusive license suffers no legal injury from infringement and, thus,

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has no standing to bring suit or even join in a suit with the patentee.”). Therefore, in light

of all of these considerations, AT&T is not a necessary party to the instant suit.

V. CONCLUSION

For each of the three reasons discussed herein, the Court finds that LUCENT HAS

STANDING to maintain the instant action.

IT IS SO ORDERED

DATED: April 27, 2007

Hon. Rudi M. Brewster

United States Senior District Court Judge

cc: Hon. Cathy Ann Bencivengo

 United States Magistrate Judge

 All Counsel of Record

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