Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02323/USCOURTS-casd-3_13-cv-02323-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:0271 Patent Infringement

---

1

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SPH AMERICA, LLC,

Plaintiff, 

v.

HUAWEI TECHNOLOGIES, CO., LTD., 

FUTUREWEI TECHNOLOGIES, INC., 

HUAWEI DEVICE USA, INC.

Defendants.

Case No.: 13-CV-2323-CAB-KSC

ORDER DISMISSING CASE FOR 

LACK OF STANDING

On December 2, 2016, the Court entered an order requiring Plaintiff SPH America, 

LLC (“SPH America”) to show cause as to why it has standing to bring this lawsuit. Both 

sides filed written responses to the order, and the Court held a hearing on January 17, 2017. 

For the reasons set forth below, the Court finds that SPH America does not have standing.

I. Background

This is a patent infringement lawsuit in which SPH America alleges that Defendants 

Huawei Technologies, Co., Ltd., Futurewei Technologies, Inc., and Huawei Device USA, 

Inc., (collectively Defendants or “Huawei”) infringe nine United States Patents, Nos.: RE 

40,385; RE 40,253; 5,960,029; 8,121,173; RE 44,507; RE 44,530; 8,565,346; 8,532,231; 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 1 of

 10
2

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

and 7,443,906.

1

 These patents are all owned by the Electronics and Telecommunications 

Research Institute (“ETRI”), a South Korean research organization. In 2006, ETRI entered 

into an agreement to license certain patents and their family members to SPH, a Koreanbased entity. [Doc. No. 266-2.] On or about February 27, 2007, the license rights were 

transferred from the Korean-based SPH to plaintiff SPH America. [Doc. No. 266-6 at 3.

2

]

The patents at issue in this litigation are subject to the terms of that agreement and its 

amendments. [Doc. Nos. 266-2; 266-4; 266-6; and 266-8.]

The question of subject matter jurisdiction came to the attention of the Court as a 

result of a discovery dispute between the parties. The patents at issue were also asserted

by SPH America in a related lawsuit against Samsung, Case No. 14-CV-1474-CAB-KSC. 

Huawei requested documentation between SPH America and Samsung regarding the terms 

of a license agreement (the “Samsung License”) reached in settlement of that litigation.

[Doc. No. 244-3.] SPH America responded that ETRI, the owner of the patents, conducted 

the licensing discussions and that SPH America had no direct email communications with 

Samsung prior to signing Samsung License. [Id.] SPH America did not provide any

documents evidencing that it directed ETRI’s negotiations, and the documents provided 

indicated that ETRI simply sent the final agreement to SPH America for signature when 

the deal was completed. These circumstances raised concerns about SPH America’s true 

role as a licensee and the intentions of ETRI and SPH America regarding their contractual

arrangement.

These concerns were further heightened by a public statement prepared by ETRI’s 

legal department [see Doc. No. 276-3, at 3-4], and issued in 2010 [Doc. No. 262-11],

explaining the relationship between ETRI and SPH America. ETRI described SPH 

America as its litigation agent, acting on ETRI’s behalf according to ETRI’s will, to 

 

1 On May 13, 2015, the Court entered an order invalidating the ‘906 patent as indefinite. [Doc. No. 93]. 

That order is nullified by this subsequent determination that SPH America did not have standing to bring 

an infringement lawsuit on the patents at issue, including the ‘906 patent.

2 Page references of docket entries are to the page numbers assigned by CM/ECF.

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 2 of

 10
3

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

enforce ETRI’s patents in the United States for a portion of any recovery. In other words, 

ETRI admitted the arrangement is “effectively [the] grant [of] a ‘hunting license,’ solely 

for the purpose of litigation, in the form of a pro forma exclusive license.” Prima Tek II, 

LLC v. A-Roo Co., 222 F.3d 1372, 1381 (Fed. Cir. 2000). Such an arrangement would not 

provide SPH America with standing to sue. Consequently the Court issued an order to 

show cause (“OSC”) to SPH America to demonstrate it has standing.

II. The Terms of the License Arrangement

In summary, the ETRI-SPH America agreement and its amendments purport to grant 

an exclusive license to SPH America to use the licensed patents, including to sublicense 

them to third parties and bring infringement actions. SPH America, however, is obligated 

use its best efforts to make licensing and litigation decisions that protect the interests of 

ETRI. SPH bears all the expense of any litigation and is required to pay ETRI between

50% to 70% of any third-party royalties and any litigation proceeds SPH America collects. 

SPH America has guaranteed minimum payments to ETRI that increase from

approximately $268 million per year in 2007, to $896 million per year from 2016 and 

thereafter. 

ETRI retains title to the patents. SPH America cannot transfer any of its rights or 

obligations under the agreement to a third party without consent of ETRI, and SPH 

America remains liable to ETRI for the activities of a third party transferee unless those 

activities are approved by ETRI, but such consent and approval cannot be unreasonably 

withheld by ETRI. All the license rights revert to ETRI if SPH America breaches the 

agreement or becomes unable to perform due to bankruptcy, insolvency or any other 

similar event. Certain of the licensed patents (the WiFi patents) are deemed to be returned 

to ETRI if SPH America fails to make guaranteed royalty payments. 

In light of the rights conveyed to SPH America, the rights retained by ETRI under 

the agreements, and the conduct of the parties evidencing their intentions surrounding the 

conveyance, the Court must determine whether SPH America had substantial rights to each 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 3 of

 10
4

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

of the patents at issue at the time the complaint was filed to have standing to sue in its own 

name.

III. Legal Standards

“Before a court may exercise jurisdiction over a patent infringement action, it must 

be satisfied that, ‘in addition to Article III standing, the plaintiff also possesse[s] standing 

as defined by § 281 of the Patent Act.’” Drone Techs., Inc. v. Parrot S.A., 838 F.3d 1283, 

1292 (Fed. Cir. 2016) (quoting Alps S., LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 

1382 (Fed. Cir. 2015)).

Article III standing must be present at the time the suit is brought. Sicom Sys., Ltd. 

v. Agilent Techs., Inc., 427 F.3d 971 975-76 (Fed. Cir. 2005). If a plaintiff lacks standing 

at that time, the Court lacks subject matter jurisdiction and the case must be dismissed 

pursuant to Rule 12(b)(1). The party “bringing the action bears the burden of establishing 

that it has standing.” Id. at 976.

The party bringing suit has to have a legally protected interest in the patent created 

by the Patent Act, so that it would suffer legal injury from an act of infringement, to satisfy 

Article III standing. Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1193 (Fed. Cir. 

2007). “A party ... that has the right to exclude others from making, using, and selling an 

inventions described in the claims of a patent is constitutionally injured by another entity 

that makes, uses, or sells the invention.” Intellectual Prop. v. TCI Cablevision, 248 F.3d 

1333, 1346 (Fed. Cir. 2001). Thus, if a party has the exclusive right to decide to license or 

not to license (i.e., exclude) others from practicing the invention, its interest in the patent

can satisfy the requirement for Article III standing. See Prima Tek II, 222 F.3d at 1379

(implicit in the right to exclude is the ability to waive that right, i.e., to license activities 

that would otherwise be excluded.) 

However, even a licensee with a legally protected interest in the patent for 

constitutional standing to sue still may not have sufficient interest in the patent to sue alone 

in its own name and may need to join the patent owner. See Propat, 473 F.3d at 1193. The 

Court must assess whether a transfer of rights under a patent conveyed “all substantial 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 4 of

 10
5

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

rights in the patent to the transferee” and therefore effects a transfer of ownership for 

standing purposes. Id. at 1189. To do so, the Court must “examine whether the agreement 

transferred all substantial rights to the patent” and “whether the surrounding circumstances 

indicated an intent to do so.” Asymmetrx, Inc. v. Biocare Medical, LLC, 582 F.3d 1314, 

1319 (Fed Cir. 2009) (citing Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A, 

944 F.2d 870, 874 (Fed. Cir. 1991)). 

Although there is no definitive list of rights that determine whether a patentee has 

transferred away sufficient rights to render a transferee the owner of a patent for standing 

purposes, the Federal Circuit has identified certain rights that should be examined:

(1) The exclusive right to make, use, and sell products or services under 

the patent;

(2) The scope of the transferee’s right to sublicense;

(3) The nature of provisions regarding reversion of rights to the transferor;

(4) The right of the transferor to receive a portion of the recovery in 

infringement suits brought by the transferee;

(5) The duration of the rights granted to the transferee;

(6) The ability of the transferor to supervise and control the transferee’s 

activities;

(7) The obligation of the transferor to continue paying patent maintenance 

fees; and

(8) The nature of any limits on the transferee’s right to assign its interests 

in the patent.

See Alfred E. Mann Foun. For Science v. Cochlear Corp., 804 F.3d 1354, 1360-61 (Fed. 

Cir. 2010). Among these, the exclusive right to make, use and sell products or services 

under the patent “is vitally important to an assignment,” while the nature and scope of the 

right of the transferee to bring suit and any retained right of the transferor to sue is “the 

most important consideration.” Id. at 1361.

IV. Discussion

A. SPH America Lacks Article III Standing

SPH America’s standing with regard to the ETRI patents was challenged in a motion 

to dismiss in prior litigation, SPH America LLC v. Acer, Inc. et al. Civil No. 09cv2525. 

[Doc. No. 266-9.] In its response to this Court’s OSC, SPH America relies heavily on the 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 5 of

 10
6

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

district court’s order in that earlier litigation that SPH America had standing as dispositive 

of this issue. [Doc. No. 266-10.] Unlike the previous court, however, this Court finds that 

the requirement that SPH America act in ETRI’s best interests is a significant restriction 

on SPH America’s rights. The surrounding circumstances of the transfer of rights, 

discussed infra, indicate that the intent was for ETRI to retain very substantial control over 

the patents. That intention is expressly described in ETRI’s public statement interpreting 

the contract’s “best efforts” restriction and SPH America’s role as a licensee in light of that 

restriction. The license agreement primarily makes SPH America ETRI’s litigation agent

acting on ETRI’s behalf. [Doc. No. 262-11.]

It is undisputed that ETRI is the owner of each of the patents at issue. Title to each 

patent remains in ETRI’s name. ETRI’s license agreement gives SPH America an 

exclusive license to use each of the asserted patents. Defined in that “use” is SPH 

America’s right to make and sell the patented inventions,

3

as well as to sublicense and 

enforce the patents. This right to use however is not an exclusive right.

First, ETRI retained the right to use the inventions of the patents to prosecute 

continuation, continuation-in-part, and divisional applications of the licensed patents, in its 

own name as the owner of the issued patents. See Asymmetrx, 582 F.3d at 1320 (retention 

of the right by the licensor to use the patented inventions to apply for and prosecute further 

patents is inconsistent with the grant of an exclusive right to practice to invention); Propat, 

473 F.3d at 1190 (retention of the right to seek new patents on the underlying invention is 

an implicit retention of the right to use the invention). 

 

3 The agreement provides that SPH America is required to pay ETRI 2.5% of the total proceeds from its 

manufacture and sale of products using the licensed patents. This provision however is illusory. SPH 

America does not make or sell any products. SPH America’s counsel acknowledged that SPH America is

a licensing/litigation entity. [See Doc. No. 283 at 10-11, “SPH’s revenue stream is derived entirely –

almost entirely from licensing. ... So it doesn’t have another way to make money other than pursuing 

action.”] ETRI’s commercial arrangement with SPH America is essentially the retention of a contingencybased legal counsel company. [Doc. No. 262-11.] SPH America bears all the burden and expense of 

enforcing ETRI’s patents while ETRI gets 50-70% of the proceeds without the inconvenience and risk of 

protecting its own patents in a foreign forum. 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 6 of

 10
7

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Second, SPH America’s rights are significantly encumbered and constrained by its 

contractual obligation to act in ETRI’s best interests coupled with its substantial guarantee

of annual payments to ETRI of proceeds from the sublicensing and enforcement of ETRI’s 

patents.4 With its tremendous annual financial obligation to ETRI for the proceeds from 

the use of the patented inventions, SPH America cannot realistically choose to exclude any 

potential sublicensee. See generally Abbott Laboratories v. Diamedix Corp., 47 F.3d 1128, 

1132 (Fed. Cir. 1995) (it is not an exclusive right to sue if it is subject to an obligation not 

to prejudice or impair the patent rights in connection with prosecution or settlement).

ETRI even summarized this relationship as substantially a contingency fee-based 

agreement with important decisions made per ETRI’s will so its rights as patentee are 

sufficiently protected. [See Doc. No. 262-11 at 4.] Propat, 473 F.3d at 1190 (an agreement 

that gives the licensee the responsibility to license the patent to third parties, to enforce the 

licensing agreements and to sue infringers in exchange for a defined percentage share of 

the proceeds of licensing royalties and any judgment or settlement arising out of litigation 

did not transfer all substantial rights). Indeed, SPH America has little, if any, right to act 

independently or in its own interests, if those interests diverge from ETRI’s. See id. at 

1191 (retention of a substantial share of the proceeds from commercial exploitation is 

consistent with the retention of ownership rights in the patent, while allocating to the 

licensee the duty to provide licensing and enforcement services); VirnetX, Inc. v. Microsoft 

Corp., No. 6:07 CV 80, 2008 WL 8894682 at *5 (E.D. Tex. Jun. 4, 2008) (35% right to net 

litigation proceeds and the obligation to protect that equity interest did not support an 

exclusive right to sue). 

The Court is not persuaded by the argument that SPH America and ETRI necessarily 

have common interests so the economic reality of this restraint on SPH America’s ability 

 

4

It cannot reasonably be argued that it was ever the intention or expectation of the parties that the payment 

guarantees would be met in whole or in part by SPH America selling products. SPH America’s license 

rights can be terminated if it does not meet its guaranteed payments, and it can only make those payments 

by licensing and enforcing the patents on behalf of ETRI. 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 7 of

 10
8

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

to act independently is inconsequential. Although ETRI has given SPH America the right 

to select targets for licenses and litigation, the agreement requires SPH America to do so 

in ETRI’s best interests protecting the significant equity interest ETRI reserved to itself. 

Such rights to sue and grant licenses may accord SPH America “broad authority to act as 

[ETRI’s] agent for purposes of licensing and litigation” but does not transfer substantial 

rights to the patents. Propat, 473 F.3d at 1192; Prima Tek II, 222 F.3d at 1379 (Fed. Cir. 

2000) (a license to license falls short of transferring all substantial rights to the patents). 

Moreover, ETRI may want SPH America to pursue an infringer for royalties, but the cost 

of such litigation (borne solely by SPH America) may outweigh any benefit to SPH 

America. Pursuant to the license agreement, however, it would be a breach for SPH 

America to decline to pursue litigation based on costs that would be born entirely by SPH 

America.

5

That SPH America does not actually have substantial rights in the patents is reflected 

in ETRI’s retention of control of licensing decisions with respect to the settlement of the 

lawsuit SPH America filed against Samsung. ETRI, not SPH America, negotiated the 

Samsung License, which included the patents purportedly exclusively held by SPH 

America, without evidence of any direction or input from SPH America. An email 

communication from ETRI to Samsung attaches a term sheet “reflecting the discussion 

exchanged so far between the two organizations.”6 What it also reflects is that SPH 

America is not included in the communication.

The term sheet with Samsung stated that it covered patents “ETRI (including 

exclusive licensees or licensing agencies of ETRI) may assign the license to a third party,” 

 

5 The agreement provides that SPH America controls litigation decisions at SPH America’s sole expense, 

for a portion of any litigation recovery. Such decisions while left to SPH America, must protect ETRI’s 

interests. The intention, as unequivocally stated by ETRI, was to license SPH America, an “expert legal 

counsel company,” because it has the experience to manage litigation to protect ETRI’s rights as the 

patentee in legal proceedings. [Doc. No. 244-2, at 4.]

6 This document produced to the Defendants by SPH America, was submitted to the Court during the oral 

argument and subsequently filed under seal. [Hrg. Transcript, Doc. No. 283 at 17-20; Doc. No. 286.] 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 8 of

 10
9

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

indicating ETRI is licensing patents to which SPH America claims exclusive control. The 

term sheet furthers stated that Samsung must make a separate agreement with SPH America 

for certain patents (the 3G patents)7at an amount specified by ETRI. Nothing about this 

communication suggests that ETRI was acting simply as a conduit on SPH America’s 

behalf to relay terms set by SPH America to Samsung. To the contrary, it corroborates 

SPH America’s discovery response that ETRI negotiated the license to the patents 

purportedly held by SPH America. [Doc. No. 244-3.] 

In sum, SPH American cannot act in a manner contrary to ETRI’s interests without 

being subject to a breach of contract claim and loss of the license arrangement. See Propat, 

473 F.3d at 1192 (patent owner’s right to terminate the licensee’s rights to the patents if it 

fails to perform up to the specified benchmarks is an indication of retention of significant 

ownership interest in the patent). Thus, although ETRI has made SPH America its agent 

for licensing and litigation, ETRI has not transferred substantial ownership of the patents 

to SPH America. Id. (“A patent owner may give another responsibility to select targets for 

suit – a power of attorney, in effect – without surrendering ownership of the patent. The 

same principle applies to [the] right to select licensees. While the rights to sue and grant 

licenses accord ... broad authority to act as the [patentee’s] agent for purposes of licensing 

and litigation, they do not transfer ownership.”). As a result, SPH America lacks Article 

III standing to sue for infringement.

B. Because SPH America Lacks Article III Standing, Joinder of 

ETRI Would Be Futile

SPH America argued should the Court find it does not have standing to sue alone, it 

be allowed join ETRI in the litigation to correct that deficiency. “[A]n exclusive licensee 

 

7 Notably, the term sheet did not indicate that a separate agreement with SPH America must be entered 

for the WiFi Patents (‘346 patent and ‘231 patent). These are the patents that were subject to being 

“deemed to have been returned” to ETRI if SPH America failed to make annual guaranteed royalty 

payments. [Doc No. 266-6 at 5.] It is undisputed SPH America has not met the guaranteed payments. The 

term sheet prepared by ETRI supports the conclusion that it deems those patents returned and no longer 

subject to the requirement of even a pro forma separate agreement with SPH America for ETRI to license 

them. 

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 9 of

 10
10

13-CV-2323-CAB-KSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

having fewer than all substantial patent rights (that is not subject to an exception) that seeks 

to enforce its rights in a patent generally must sue jointly with the patent owner. 

Intellectual Prop., 248 F.3d at 1347–48. In this case, however, despite the labels used by 

SPH America and ETRI, SPH America is not an exclusive licensee. SPH America is 

merely ETRI’s agent to enter into licenses and litigate on ETRI’s behalf. SPH America 

does not have an exclusive license to any patent rights because: (1) SPH America is 

required to act to protect ETRI’s interests; (2) ETRI retained title to the patents; (3) ETRI 

retained use of the inventions to further its portfolio; (4) ETRI has the dominant equity 

interest in the proceeds of the inventions; and (5) ETRI controls licensing negotiations. 

ETRI’s grant of a “hunting license” is not a proprietary interest or exclusive license in the 

patents. Because SPH America does not have a proprietary interest in the patents, it does 

not suffer any injury in fact fairly traceable to infringement of the patents. Cf. Lujan v. 

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). SPH America, therefore, lacks Article 

III standing meaning it cannot even be a co-plaintiff in an infringement action under the 

ETRI patents. Accordingly, SPH America’s request it be permitted to amend to add the 

patent owner and continue the action is denied.

V. Conclusion

In light of the foregoing, the Court finds that SPH America has not satisfied its 

burden to establish standing to bring this lawsuit. Accordingly, the lawsuit is DISMISSED 

for lack of Article III standing.8

It is SO ORDERED.

Dated: April 10, 2017

 

8

In light of this decision, Huawei’s motion for summary judgment [Doc. No. 259] is DENIED AS 

MOOT.

Case 3:13-cv-02323-CAB-KSC Document 287 Filed 04/10/17 PageID.<pageID> Page 10 of

 10