Opinion ID: 2748674
Heading Depth: 2
Heading Rank: 2

Heading: Tri-County’s License to Azure

Text: The ’129 patent has passed through many hands of ownership, but it was eventually acquired by Azure, a Texas limited liability company located in the Eastern District of Texas. Azure then sought local charities to join in its patent enforcement activities. Ultimately, it partnered with Court Appointed Special Advocates (CASA) of Harrison County, 1 which formed Tri-County, a Texas nonprofit corporation with its principal place of business in the Eastern District of Texas. In 2010, Azure donated multiple patents and patent applications, including the application that would issue as the ’129 patent, to TriCounty. 2 A few weeks after the donation, Tri-County and Azure entered into an “Exclusive Patent License Agreement” (hereinafter, Agreement), which transferred back to Azure a number of rights in the ’129 patent. In particular, the Agreement granted Azure the exclusive, worldwide, transferable right to (i) make, have made, use, sell, offer to sell, import, and lease any products, (ii) use and perform any method, process, and/or services, and (iii) otherwise practice any invention in any manner under the ’129 patent. It also granted Azure the “full right to enforce or and/or sublicense” the ’129 patent, J.A. 1201 § 1.2, includ- 1 CASA of Harrison County is a member of the Na- tional Court Appointed Special Advocate Association and provides court-appointed advocacy for neglected and abused children in Harrison County. J.A. 454. 2 The Appellees allege that Azure was motivated to donate the patents and patent applications to Tri-County in order in order to further establish venue in the Eastern District of Texas and to deduct from Azure’s tax liability the value of its donation and portions of litigation proceeds owed to Tri-County. Appellees’ Br. 8, 19; see also 26 U.S.C. § 170(m). AZURE NETWORKS, LLC v. CSR PLC 7 ing the authority to reach settlements without TriCounty’s consent. Specifically, the Agreement provided that “Azure will have the exclusive right, but not the obligation, to maintain, enforce, or defend” the ’129 patent, but has the “obligation to exercise good faith business judgment to monetize” the ’129 patent, “including but not limited to licensing [it] to third parties.” J.A. 1204 § 4.4. Azure also received the right to assign the entire Agreement or any of Azure’s rights under the Agreement, without Tri-County’s consent, to any Azure affiliate in connection with the sale of a material portion of any Azure business unit. And, finally, the Agreement gave Azure, not Tri-County, the exclusive right, but not the obligation, to control future prosecution or pay maintenance fees related to the ’129 patent family. In exchange, Tri-County retained the right to receive 33% of the proceeds from Azure’s litigation or licensing activities for the first five years and 5% thereafter. Azure must pay Tri-County the respective percentages within thirty days after each calendar quarter in which Azure receives the proceeds. Tri-County also reserved “a royalty-free, personal, non-transferable, non-exclusive right” to practice the ’129 patent and make Tri-County branded products. J.A. 1201–02 § 2.3. Additionally, Tri-County retained a right to terminate the Agreement if Azure breached its obligations or if Tri-County’s obligations under the Agreement placed Tri-County’s tax-exempt status at risk. Tri-County also reserved reversionary rights in the ’129 patent once the Agreement expires. In particular, the Agreement automatically expires on March 27, 2018, with two years remaining on the patent term, but Tri-County has the option to renew in one-year increments if it notifies Azure at least thirty days in advance. In addition, Tri-County is obligated not to encumber the ’129 patent in any way and to participate in litigation at Azure’s request and in Azure’s sole discretion. 8 AZURE NETWORKS, LLC v. CSR PLC Tri-County and Azure filed suit together against the Appellees, who thereafter sought to dismiss Tri-County from the case. They argued that the significant rights transferred to Azure under the Agreement constituted an effective assignment for purposes of standing, leaving TriCounty with no rights to sue as co-plaintiff. The district court agreed, finding that Tri-County’s title in the patent and financial and reversionary interests therein were not sufficient to confer standing upon Tri-County. J.A. 34–35. On the district court’s dismissal of Tri-County, Azure and Tri-County appealed, and we have jurisdiction under 28 U.S.C. § 1295(a)(1).