’
showing that it fully complied with the marking requirements.

In regard to actual notice, Frantz claims that actual notice is required from the patentee,
which Frantz alleges Inzer has not pled and cannot prove. See Lans, 252 F.3d at 1328. Inzer, in
Tesponse, cites to a case that allows for an exclusive licensee and not a patentee to provide actual
notice under the statute. See Aspex Eyewear, Inc. v. E'Lite Optik, Inc., No. Civ.A.
398CV2996D, 2002 WL 1751381, at *27 (N.D Tex. April 4, 2002). Given its conclusion that
marking is a question of fact, the court need not definitively decide this issue on this motion.
These issues surrounding marking and notice are best left for resolution on summary judgment or
at trial. Thus, Frantz’s motion is denied.

CONCLUSION

For the reasons stated above, Frantz’s motion to dismiss is denied [#5]. Frantz is directed
to answer the amended complaint by September 2, 2003. A scheduling conference will be held
on October 2, 2003 at 9:30 a.m. In the meantime, the parties are directed to meet in an effort to

resolve this case short of trial.

ENTER: pe feglm~
GOAN HUMPHREY LEFKOW
United States District Judge

Dated: August 7, 2003

13


14.) Inzer contends that at all relevant times he complied with the marking and notice
requirements of 35 U.S.C. § 287(a), and, therefore, he is entitled to damages including lost
profits. (Compl. ff 15-16).
DISCUSSION

Frantz argues that Inzer’s complaint should be dismissed under Rule 12(b)(1) for lack of
subject matter jurisdiction because Inzer does not have standing and under Rule 12(b)(6) for
failure to state a claim upon which relief may be granted because Inzer did not plead compliance
with the marking and notice requirements of 35 U.S.C. § 287(a).
A. Standing

The question of standing has both constitutional and prudential components.
Constitutional standing under Article I of the United States Constitution requires that only
“cases or controversies” be entertained by courts. To establish constitutional standing a plaintiff
must show (1) injury in fact, meaning an invasion of a legally protected interest that is concrete
and particularized, actual or imminent, and not conjectural or hypothetical; (2) a causal
connection between the injury and the conduct complained of such that the injury is fairly
traceable to the defendant’s actions; and (3) that a favorable decision is likely to redress the
injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Prudential limitations on
standing include

the general prohibition of a litigant’s raising another person’s legal rights, the rule

barring adjudication of generalized grievances more appropriately addressed in the

Tepresentative branches, and the requirement that a plaintiff's complaint fall

within the zone of interests protected by the law invoked.

Allen v. Wright, 468 U.S. 737, 751 (1984).


between the parties was an assignment and not an exclusive license and noting that “[e]ven
though [the patentees] retained the right to sue, that right would not hinder [the assignees”]
enjoyment of the patent rights in any meaningful way.”); Abbott Labs. v. Diamedix Corp., 47
F.3d 1128, 1132 (Fed. Cir. 1995) (finding that agreement was an exclusive license rather than an
assignment because, among other reasons, “although [the exclusive licensee] has the option to
initiate suit for infringement, it does not enjoy the right to indulge infringements, which normally
accompanies a complete conveyance of the right to sue.”).

In Ortho Pharm. Corp., the Federal Circuit addressed the same issue the court confronts
here of whether an agreement is an exclusive or bare license. The agreement in Ortho Pharm.
Corp. gave the grantee the nonexclusive right to use and sell the patented product “at one
location in the United States.” 52 F.3d at 1034. In concluding that the agreement was nothing
more than a bare license, the court noted that the patentee “had the right to license others” to also
sell the invention in the location provided to the grantee. Jd. at 1033. Therefore, because the
grantee had “only a nonexclusive right to use [the patent] at one location in the United States,”
the court concluded that the agreement was a bare license. Jd, at 1034 Significantly, the
agreement granted the “bare licensee” the right to sue. The court minimized the significance of
this clause and noted that “a right to sue clause cannot negate the requirement that, for co-
plaintiff standing, a licensee must have beneficial ownership of some of the patentee’s
proprietary rights. A patentee may not give a right to sue to a party who has no proprietary
interest in the patent.” Jd. at 1034.

A review of this case law counsels the conclusion that Inzer holds some of the proprietary

interests in the patent and can sue so long as the patentee is a co-plaintiff, notwithstanding the



Id. An exclusive licensee has standing to bring suit so long as the three Lujan elements of
constitutional standing are met and the patent owner is joined, either voluntarily or involuntarily,
in any suit brought by the exclusive licensee. Id, at 1346-48. Significantly, the principle that the
patent owner be joined in a suit brought by the exclusive licensee having fewer than all
substantial rights “is prudential rather than constitutional.” Jd. at 1348.

The parties agree that Inzer is not an assignee of ail the rights under the 908 Patent and
that he does not have the right to sue under his own name. Inzer, however, claims the license
with Knecht is an exclusive license and he is, therefore, able to sue so long as the constitutional
standing requirements are met and Knecht is included as a co-plaintiff. For this second
prudential requirement, Inzer amended his complaint to add the patentee, Knecht, as a co-
plaintiff. Frantz, on the other hand, argues that the license between Inzer and Knecht is a bare
license for which Inzer cannot sue regardless of whether he adds Knecht as a co-plaintiff.

To be an exclusive licensee, “a party must have received, not only the right to practice the
invention within a given territory, but also the patentee’s express or implied promise that others
shall be excluded from practicing the invention within that territory as well.” Right-Hite Corp.,
35 U.S.P.Q.2d at 1074. The proprietary rights granted by a patent are “the rights to exclude
others from making, using, or selling the invention in the United States.” Ortho Pharm. Corp. v.
Genetics Inst., Inc., 52 F.3d 1026, 1031-32 (Fed. Cir. 1995). An exclusive license exists when
“the license makes the licensee a beneficial owner of some identifiable part of the patentee’s
bundle of rights to exclude others.” Id. at 1032. On the contrary, a bare license would exist “[i]f
the party has not received an express or implied promise of exclusivity under the patent, i.e., the

right to exclude others from making, using, or selling the patented invention... .” Right-Hite


By comparison, standing in a patent infringement case is derived from the Patent Act, 35
US.C. § 281. See Intellectual Prop. Dev., Inc. v. TCI Cablevision of Calif., Inc., 248 F.3d 1333,
1345 (Fed. Cir. 2001). That Act provides that “A patentee shall have remedy by civil action for
infringement of his patent.” Here, there is no dispute that Inzer is not the owner of the 908
Patent, but he does have certain rights in it under the license entered into with Knecht. Because
he is not the owner of the patent but was granted some rights, Inzer could fall into one of three
categories: (1) he could be the assignee of all rights under the patent; (2) he could hold an
exclusive license in the patent; or (3) he could hold a bare or nonexclusive license in the patent.
Right-Hite Corp. v. Kelley Co. Inc., 35 U.S.P.Q.2d 1065, 1074 (Fed, Cir. 1995). The
determination of whether Inzer has standing in this case depends on which of the three categories
he fits into.

Where a patentee makes an assignment of all significant rights under a patent, the
assignee is considered the “patentee” for the purposes of the Patent Act and “has constitutional
standing . . . to sue another for patent infringement in its own name.” Intellectual Prop. Dev.,
Inc., 248 F.3d at 1345. Conversely, the holder of a non-exclusive license—a covenant by the
patent owner not to sue the licensee for making, using or selling the patented invention~has no
constitutional standing to bring suit under the Patent Act and may not even join a suit with the
patentee “because a nonexclusive (or ‘bare’) licensee suffers no legal injury from the
infringement.” Jd.

Somewhere between an “assignee” and the holder of a “bare license” is an “exclusive
licensee.” “An exclusive licensee receives more substantial rights in a patent than a

nonexclusive licensee, but receives fewer rights than an assignee of all substantial patent rights.”


field of use, and it does not limit Inzer’s exclusive rights within that field. For these reasons,
Inzer argues that he must be held to be an exclusive licensee within the granted field of use and
has standing to sue as a co-plaintiff with the patentee.

In support of his assertion that Inzer lacks standing, Frantz relies heavily on Vaupel
Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 876 (Fed. Cir. 1991). The
issue in that case, however, was not whether a grant of rights under a patent formed an exclusive
or bare license but rather whether it constituted an assignment or an exclusive license. Jd. at 873.
In concluding that the grant of rights was an assignment for which the assignee was not required
to join the patentee as a co-plaintiff, the court noted that the agreement specifically transferred
the “right to sue.” /d. at 875. The court found that portion of the agreement “particularly
dispositive” in concluding that the agreement was an assignment because the “question
confronting the court is whether [the assignee} can bring suit on its own or whether (the patentee]
must be joined as a party.” Jd. Contrary to Frantz’s suggestion, this case does not support its
argument that the “absence of language granting a right to sue . . . should similarly be
dispositive” of the issue here. The inclusion of the right to sue language in Vaupel created an
assignment, not an exclusive license. Indeed, if the agreement at issue in Vaupel lacked the
“right to sue” language the court might have been persuaded that the agreement was an exclusive
license rather than an assignment. See also, Mentor H/S Inc. v. Medical Device Alliance, 240
F.3d 1016, 1018 (Fed. Cir. 2001) (noting that “in light of [the patentee’s] substantial retained
tights, particularly its initial right and obligation to sue for infringement, we conclude that [the
grantee] did not receive all substantial rights in the patent [and is thus an exclusive licensee]}.”);

Speedplay, Inc. v. Bebop, Inc., 2\1 F.3d 1245, 1251 (Fed. Cir. 2000) (concluding that agreement

8


Minute Onder Form (06/97)

United States District Court, Northern District of Minois

Name of Assigned Jud; Sitting Judge If Oth
vor Magistrate Judge Joan H. Lefkow than Assigned Judge
CASE NUMBER 03 C $52 DATE 8/7/2003
CASE Inzer vs. Frantz
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above,]

(2) o Brief in support of motion due

3) a Answer brief to motion due, . Reply to answer brief due.

(4) o Ruling/Hearing on set for at

(5) a Status hearing{held/continued to] (set for/re-set for] on set for at

(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at .

(©) ad Trial[set for/re-set for] on at

(8) oO {Bench/Jury trial] [Hearing] held/continued to at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) CLocal Rule 41.1 COFRCP41(a)(1) [1 FRCP41(a)(2).

(10) ME [Otherdocketentry) Enter Memorandum Opinion and Order. Defendant’s motion to dismiss [5-1]
is denied. Defendant is directed to answer the amended complaint by 9/2/03. Status hearing is set for
scheduling conference on 10/2/03 at 9:30 a.m. In the meantime, parties are directed to meet in a effort
to resolve this case short of trial.

(il) ff (For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.

ov | Notices mailed by judge's staff.

Notified counsel by telephone.

Docketing to mail notices.

Mail AO-450 form. funoo roisia “sn
Copy to judge/magistrate judge. wua9
$2:9 Rd L-9Nv ed
courtroom
wp depuly's ONI3N900 YO4 DIMA

initials

Date/timdreddeed in
central Clerk's Office

rer com Ua |



Further, Inzer’s injury is directly related to Frantz’s infringement and meets the “fairly traceable”
standard of causation. See id. at 1347. Inzer’s injury is also redressable because Inzer may
recover damages against Frantz pursuant to 35 U.S.C. § 284. Jd. Thus, the Lujan factors for
constitutional standing are met.

Finally, Inzer has amended his complaint to add Knecht as a co-plaintiff, thereby
fulfilling the requirement that an exclusive licensee can sue only as a co-plaintiff with the owner
of the patent. Frantz, in a last ditch effort to show that no standing exists, asserts that standing

must exist on the date the lawsuit was filed and cannot be fixed by adding or substituting a party.
See Lujan, 504 U.S. at 571 n.4. While this is certainly true for constitutional standing, as
mentioned above the joining of a patentee as a co-plaintiff is a prudential limitation on standing.
Only constitutional standing is required from the outset of a suit. Intellectual Prop. Dev. Inc.,
248 F.3d at 138-49. The court in Intellectual Prop. Dev. Inc. addressed and rejected this very
argument. The court noted that “this court has recognized the principle that a patent owner may
be joined by an exclusive licensee” so long as the licensee meets “the constitutional requirements
for standing from the outset of its suit.” Jd. Thus, Frantz’s argument on this ground is rejected.
For the reasons stated above, Frantz’s motion to dismiss for lack of standing under Rule

12(b)(1) is denied.!

‘Frantz also apparently argues that this case should be dismissed under Rule 12(b)(6) because Inzer cannot
be afforded relief due to the fact that he is not the patent owner. However, as exclusive licensee he is entitled to
recover damages so long as he sues with the patentee as a co-plaintiff. See Intellectual Prop. Dev. Inc., 248 F.3d at
1347 (“Indeed, this court has awarded damages to exclusive licensees as compensation for patent infringement
injuries.”). This argument, therefore, is rejected.

11



agreement lacking any express “right to sue” that Frantz finds dispositive. The agreement
expressly provides that Inzer has the right “to the exclusion of Grantor and all others” to use the
patent for the limited purpose of manufacturing, distributing and selling the shirts for the sports
of power lifting and weight lifting. The use of the term “limited purpose” properly illustrates that
Inzer does not have all rights under the patent but only the right to manufacture, distribute or sell
the shirts for the sports of power lifting and weight lifting. Moreover, in contrast to Ortho
Pharm. Corp., the agreement is not limited in geographic territory and does not otherwise give
the patentee the ability to license others to have the same rights, Here Inzer is the only party that
has the right to make, use or sell the products in the sports of power lifting and weight lifting. In
addition, a limited “field of use” (i.e., in the sports of power lifting and weight lifting) is different
from an exclusive geographic territory. See, e.g., Independent Wireless Tel. Co. y. Radio Corp.
of Am., 269 U.S. 459 (1926) (concluding that a licensee of exclusive right to use and sell
patented invention “for radio purposes” was permitted to sue for infringement and join patent
owner). Finally, the “right to sue” for which Frantz argues is not dispositive. Sufficient
proprietary rights were transferred in the license to the exclusion of others to illustrate that Inzer
is an exclusive licensee.

Since Inzer is an exclusive licensee, he may maintain this suit so long as the Lujan factors
for constitutional standing are met and Knecht, the patent owner, is added as a co-plaintiff. In
terms of the Lujan factors, it is apparent that Inzer meets the requirements for constitutional
standing. Because he has the exclusive right to make, use, and sell the shirts in the “field of use”
of power lifting and weight lifting, Inzer is “constitutionally injured by another entity that makes,

uses or sells the invention” in those areas. Intellectual Prop. Dev. Inc., 248 F.3d at 1346.

10



Corp., 35 U.S.P.Q.2d at 1074. In such situations the licensee receives “only the patentee’s
promise that that party will not be sued for infringement.” Jd.

To resolve the issue of whether Inzer was an exclusive or bare licensee, the court “must
examine the licensing agreement to determine whether the parties intended to effect a transfer of
proprietary rights to the licensee as an incident to protection of its interests.” Ortho Pharm.
Corp., 52 F.3d at 1032. Frantz argues that Inzer is a “bare licensee” because Inzer does not own
the patent and his license agreement with Knecht does not transfer the “right to sue” or the
resulting remedies. Frantz contends that in order for an exclusive license to exist there must be a
“right to prevent others” from making, using or selling the patent. In order to have this “right to
prevent others” from using the patent, Frantz submits that the license must grant the licensee the
right to sue, which the license at issue here does not do. According to Frantz, because by it terms
the license is for the limited purpose of “manufacturing, distributing, and selling” the patent at
issue in the sports of power lifting and weight lifting, Inzer is “inherently excluded from other
activities such as suing or collecting remedies.”

In response, Inzer argues that Frantz incorrectly concludes that an exclusive license must
expressly grant the right to sue for infringement in order to have co-plaintiff standing. Instead
Inzer maintains that an exclusive license is achieved with simply the patentee’s express or
implied promise that others shall be excluded from practicing the invention contrary to the
licensee’s proprietary interests. Inzer points out that the license at issue grants all of the patent
owner’s statutory rights to exclude others, including even the patent owner, from making, using
or selling the patented invention in the sports of power lifting and weight lifting. Further, Inzer

argues that the phrase “limited purpose” in the licensing agreement merely defines the exclusive


forward of the body.” (Compl. 7.) The shirt’s sleeves assist the wearer in the sport of power
lifting when performing bench press lifts, and the shirts are sometimes called “bench press
shirts.” (Jd.)

Inzer entered into a license with Knecht which states as follows,

That Gabriele Knecht, Patent Holder, grants to John W. Inzer, Grantee, the

exclusive right to the exclusion of Grantor and all others and concerns, to use this

Patent for the limited purpose of manufacturing, distributing, and selling

competitive athletic garments for the sports of powerlifting and weightlifting.

(Def. Ex. A.) Inzer alleges that the contract was an “exclusive license” from Knecht for the 908
Patent in the sports of power and weight lifting. Inzer therefore claims that he possesses the right
to enforce and collect damages for infringement of the 908 Patent in those areas. (Compl. { 6.)
Inzer also alleges that during the period when the "908 Patent was still in force and licensed to
him, Frantz infringed the patent by making, selling and offering for sale bench press shirts
covered under the patent. (Compl. { 9.)

Frantz’s infringement of the ’908 Patent was the subject of a prior patent infringement
action in this court, case number 91 C 4228. (Compl. 10.) That case ended in a settlement and
a Consent Judgment in 1996. Under the terms of that Judgment (Compl. Ex. B), Frantz admitted
that he had sold infringing bench press shirts, (/d.) The settlement entitled Frantz to continue to
sell such shirts for a limited time under license in exchange for payment of a royalty. (/d.) Inzer
now alleges that Frantz continued to sell infringing slightly redesigned shirts beyond the
expiration of the limited license. (Compl. ff] 10-11.) Inzer also alleges that this violation of the

°908 Patent constituted willful infringement because Frantz sold the shirts with full knowledge

and callous disregard of the ’908 patent and Inzer’s rights as an exclusive licensee. (Compl. |



Tl. Sept. 18, 2002). “When evidence pertinent to subject matter jurisdiction has been submitted,
however, ‘the district court may properly look beyond the jurisdictional allegations of the complaint
.., to determine whether in fact subject matter jurisdiction exists.” Sapperstein, 188 F.3d at 855,
quoting United Transp. Union v. Gateway W. Ry. Co., 78 F.3d 1208, 1210 (7th Cir. 1996) (internal
citations omitted).

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the
sufficiency of the complaint for failure to state a claim upon which relief may be granted. General
Elec, Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). Dismissal is
appropriate under Rule 12(b)(6) only if it appears beyond a doubt that the plaintiff can prove no set
of facts in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46
(1957); Kennedy v. Nat’l Juvenile Det. Assoc., 187 F.3d 690, 695 (7th Cir. 1999). In ruling ona
12(6)(6) motion, the court accepts as true all well pleaded facts alleged in the complaint, and it draws
all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486
(7th Cir. 2002); Jackson v. E.J. Brach Corp., 76 F.3d 971, 977 (7th Cir. 1999).

BACKGROUND

At all relevant times Inzer was an individual residing in Longview, Texas who
manufactured and sold equipment and products in the health and fitness industry, including
garments used in the sport of power lifting. (Compl. J 1.) On October 2, 1984, the ’908 Patent,
entitled GARMENT, was issued to Gabriele Knecht (“Knecht”). (Compl. 15.) The ’908 Patent
claims “a shirt in which the natural axis of the sleeves is set at a forward angle to the axis of the
shoulders of the shirt, and the low point of the armhole of each sleeve is forward of the shoulder

high point of the armhole so that, when worn, the shirt tends to pull the arms of the wearer


UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
JOHN INZER, )
)
Plaintiff, )
)
vs. ) No. 03 C 0552
) Judge Joan H. Lefkow
ERNIE FRANTZ, )
Defendant. } DOCKE TED
)

AUG 0 8 2003
MEMORANDUM OPINION AND ORDER

Plaintiff, John Inzer (“Inzer”), has filed this patent infringement law suit against
defendant, Ernie Frantz (“Frantz”), alleging that Frantz is liable for infringing United States
Patent No. 4,473,908 (the “’908 Patent”). Inzer claims to be the exclusive licensee of the *908
Patent in the sports of power lifting and weight lifting and alleges that Frantz’s infringement has
caused him damages. Further, Inzer alleges, pursuant to 35 U.S.C. § 284, that he is entitled to
treble damages because Frantz’s violation constituted willful infringement. Jurisdiction is
invoked over Inzer’s claims under 28 U.S.C. §§ 1331 and 1338. Presently before the court is
Frantz’s motion to dismiss. For the reasons set forth below, the motion is denied.

MOTION TO DISMISS STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the court’s
subject matter jurisdiction. In determining whether subject matter jurisdiction exists, the court must
accept all well pleaded facts alleged in the complaint as true, and it draws all reasonable inferences
from those facts in the plaintiff's favor. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999);

Meridian Rail Prods. Corp. v. Amsted Indus., Inc., No. 02 C 3708, 2002 WL 31103479, at *2 (N.D.

\S


B. Marking and Notice Requirements

Frantz argues that Inzer’s complaint should be dismissed because Inzer has not pled
compliance with the notice and marking requirements under 35 U.S.C. § 287(a). Frantz argues
that because the patent at issue has expired, only monetary, as opposed to injunctive, relief may
be sought. Under § 287(a), monetary relief is available only if either (1) constructive notice has
been provided to the infringing party through patent marking on all patented products or (2)
specific actual notice has been provided by the patentee. Lans v. Digital Equip. Corp., 252 F.3d
1320, 1326-27 (Fed. Cir. 2001).

It is no doubt true that the patentee bears the burden of proving compliance with the
marking and notice provisions by a preponderance of evidence. Nike, Inc. v. Wal-Mart Stores,
Inc., 138 F.3d 1437, 1446 (Fed. Cir. 1998). It is also true, however, that at this stage of the
litigation the Federal Rules require only a “short and plain statement of the claim.” Fed. R. Civ.
P. 8(a). Inzer’s statement in his complaint concerning notice and marking was that “[a]t all times
relevant hereto, Inzer has complied with the notice and marking requirements of 35 U.S.C. §
287(a).” (Compl. ¥ 15.)

Starting with the issue of marking, Frantz is correct that the “constructive notice
provisions” must be in “full compliance,” that is, its marking must be “substantially consistent
and continuous.” American Med. Sys., Inc. v. Medical Eng’g Corp., 6 F.3d 1523, 1537 (Fed. Cir.
1993). However, whether the marking or “constructive notice provisions” have been met is a
question of fact. Nike, Inc., 138 F.3d at 1446. To the extent that Frantz urges dismissal on
grounds that the complaint states only that Inzer complied with the marking requirements and

Knecht did not, its motion is denied. The court cannot say that Inzer can prove no set of facts

12