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Automatically Terminated License Terminated Standing

Posted by James Juo | Oct 05, 2023 | 0 Comments

It is a constitutional requirement for a party to have standing. TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021). For parties to have standing, there must be a legally recognized injury in fact to the plaintiff, traceable to the defendant, and redressable by the court. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992).

Parties must “maintain a personal interest in the dispute” for the duration of the case. Uzuegbunam v. Preczewski, 141 S. Ct. 792, 796 (2021). If the plaintiff loses all legal ties to its interest in a case, a federal court lacks jurisdiction and must dismiss the case. See West Virginia v. EPA, 142 S. Ct. 2587, 2607 (2022); Moore v. Harper, 143 S. Ct. 2065, 2076–79 (2023).

Texas A&M License

TexasLDPC was founded in 2014 to develop and sublicense certain “low-density parity check” technology from Texas A&M. The company got a licensing contract from Texas A&M that gave TexasLDPC the power to enforce Texas A&M's patent rights in this technology. But the contract said it would automatically terminate when TexasLDPC “cease[d] its business operations.” The contract contained several whereas clauses expounding on commercialization and development, but they never mention enforcement.

TexasLDPC sued Broadcom for patent infringement in 2018. TexasLDPC Inc. v. Broadcom Inc., No. 1:18-cv-01966 (D. Del. Sept. 29, 2023).

Unfortunately, by summer 2019, the company ran out of money to develop and license the product, and all development and licensing ceased. But the patent infringement lawsuit against Broadcom continued with lawyers on a contingency fee.

            That change is fatal to the contract. The business operations at the time of the contract were development and licensing. So when the business model changed to enforcement alone, . . . in 2019, none of the business operations contemplated at the time of the contract remained.

            Because the contract ended automatically when TexasLDPC “ceases its business operations,” I hold that the licensing contracted ended when TexasLDPC changed its business to just enforcement. . . . As a result, TexasLDPC lost its legal interest in this case four years ago.

Nine months before the contract was finalized, however, there was an email between TexasLDPC and Texas A&M that listed litigation as the third possible revenue stream in a list of three. But the Court found that “a single email so early in negotiations has limited probative value. And a possible income stream is not the same as a business operation.”

Nunc Pro Tunc

TexasLDPC and Texas A&M also had executed a supplemental contract that was allegedly retroactive in an attempt to cure this standing problem during the litigation. But while nunc pro tunc agreements can remedy limited deficiencies in justiciability by expanding previously limited patent rights, see, e.g., Mas-Hamilton Grp. v. LaGard, Inc., 156 F.3d 1206, 1211 (Fed. Cir. 1998) (letting a nunc pro tunc agreement cure an incapacity to sue for past infringement when the plaintiff already had standing to sue for current and future infringement); these agreements cannot cure a complete lack of standing or eliminate a need to join patent owners. See Alps S., LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 1384–85 (Fed. Cir. 2015.

            Despite their best efforts, Texas A&M and TexasLDPC cannot resurrect the licensing contract. Without that contract, TexasLDPC no longer has a legal interest. And without the legal interest, there is no surviving case or controversy.

So, the Court dismissed the federal claims and counterclaims without prejudice for lack of subject matter jurisdiction and failure to join a necessary party without prejudice, noting that “as TexasLDPC tacked away from the Scylla of subject-matter jurisdiction, it ran headlong into the Charybdis of joinder.”

Thomas P. Howard, LLC litigates nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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