IP News

Azure and Tri-County filed an infringement suit against CSR and other defendants, who subsequently moved to have Tri-County removed from the case. The district court agreed that Tri-County lacked standing. The district court also construed the term “MAC address,” finding that the patentee had acted as his own lexicographer, and had redefined the term to mean “a device identifier generated by the hub device.” Azure Networks, LLC v. CSR PLC, 2013 WL 173788, at 5 (E.D. Tex. Jan. 15, 2013). Based on this construction, the court entered a stipulated judgment of noninfringement, and the parties appealed.

On appeal, the majority first discussed Tri-County's standing, making a two-fold inquiry: “1) whether Tri-County transferred all substantial rights under the [patent-in-suit] to Azure, making Azure the effective owner; and if so, 2) whether Tri-County may nevertheless join in an infringement suit brought by the licensee, but now effective owner, Azure.” Slip op. at 9 (emphasis in original). The majority held that the key factor in determining that Azure was the effective owner of the patent-in-suit was that Azure had been granted the exclusive right to enforce and defend the patent, and that Tri-County had reserved no right to have control over, veto, or be notified of any of Azure's licensing or litigation activities. Id. at 10-11. In addition, because the rights that Tri-County did retain were non-exclusive, they were insufficient to confer standing. Id. at 12-13. Finally, while the license contained a termination clause, the clause allowed rolling renewal, and as such “presumes that the patent would never return to the assignor.” Id. at 17. The majority held that because Tri-County had transferred all substantial rights in the patent, it lacked standing to bring the suit.

Turning to the remaining claim construction issue, the majority found that the parties did not dispute the ordinary meaning of MAC address as a unique identifier, which can either be assigned locally or universally. Id. at 20'21. However, the parties disputed whether the term in the patent is limited to only locally assigned MAC address. Id. at 21'22. The majority disagreed with the lower court's finding that the patentee had acted as his own lexicographer to redefine the term narrowly, finding no clear definition of the term in the patent. Id. at 22. Further, the fact that the specification did not specifically refer to universally generated MAC addresses was insufficient to redefine the term of art. Id. at 24.

For these reasons, the majority upheld the district court's dismissal of Tri-County, but overruled the lower court's construction of MAC address, and vacated the judgment of noninfringement.

In his dissent-in-part, Judge Mayer argued that the majority's construction of MAC address was in error, because nothing in the specification contemplates a universally assigned MAC address. Dissent at 2-3. Further, the specification refers to the MAC address as the Media Access address, rather than the Media Access Control address (as the term is commonly defined), indicating that the patentee was acting as his own lexicographer. Id. at 6. Finally, if the term “MAC address” is ambiguous, Judge Mayer argued that it should be given the definition which would render the claims in which it occurs valid. This supports the narrow construction of the district court, rather than the majority's construction. Id. at 7-8.

Howard Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Wyatt Delfino is an Associate with the firm.

Licensor Lacks Standing to Sue Where No Rights in Patent Were Retained

On Nov. 6, 2014, a divided Federal Circuit panel of Judges Reyna, Mayer, and Chen issued an opinion, filed by Judge Chen, and a dissent-in-part, filed by Mayer, in Azure Networks, LLC v. CSR PLC, Case No. 2013-1459. The majority affirmed the lower court's finding that one plaintiff lacked standing, but reversed construction of the claim term “MAC address,” and vacated the summary judgment of noninfringement and remanded.

The patent-in-suit “describes a network for wireless communications between a central hub device and a number of surrounding peripheral devices in close proximity with the hub device.” Slip op. at 3. Azure, a company located in the Eastern District of Texas, acquired the patent-in-suit, and sought a local charity to join in its patent enforcement activities. Azure found one such charity, and they eventually partnered and formed Tri-County, a Texas nonprofit. In 2010 Azure donated the patent-in-suit, along with other patents and applications, to Tri-County. A few weeks later, Azure and Tri-County entered into a licensing agreement, whereby Tri-County granted Azure the exclusive, worldwide, transferable right to practice the patent, as well as the full right to enforce or sublicense the patent. Azure also had the exclusive right, but not obligation, to maintain, enforce, or defend the patent. Tri-County retained the right to receive a portion of the proceeds from Azure's licensing or litigation activities, as well as the personal right to practice the patent. In addition, Tri-County was obligated to participate in litigation at Azure's request and in Azure's sole discretion.

Azure and Tri-County filed an infringement suit against CSR and other defendants, who subsequently moved to have Tri-County removed from the case. The district court agreed that Tri-County lacked standing. The district court also construed the term “MAC address,” finding that the patentee had acted as his own lexicographer, and had redefined the term to mean “a device identifier generated by the hub device.” Azure Networks, LLC v. CSR PLC, 2013 WL 173788, at 5 (E.D. Tex. Jan. 15, 2013). Based on this construction, the court entered a stipulated judgment of noninfringement, and the parties appealed.

On appeal, the majority first discussed Tri-County's standing, making a two-fold inquiry: “1) whether Tri-County transferred all substantial rights under the [patent-in-suit] to Azure, making Azure the effective owner; and if so, 2) whether Tri-County may nevertheless join in an infringement suit brought by the licensee, but now effective owner, Azure.” Slip op. at 9 (emphasis in original). The majority held that the key factor in determining that Azure was the effective owner of the patent-in-suit was that Azure had been granted the exclusive right to enforce and defend the patent, and that Tri-County had reserved no right to have control over, veto, or be notified of any of Azure's licensing or litigation activities. Id. at 10-11. In addition, because the rights that Tri-County did retain were non-exclusive, they were insufficient to confer standing. Id. at 12-13. Finally, while the license contained a termination clause, the clause allowed rolling renewal, and as such “presumes that the patent would never return to the assignor.” Id. at 17. The majority held that because Tri-County had transferred all substantial rights in the patent, it lacked standing to bring the suit.

Turning to the remaining claim construction issue, the majority found that the parties did not dispute the ordinary meaning of MAC address as a unique identifier, which can either be assigned locally or universally. Id. at 20'21. However, the parties disputed whether the term in the patent is limited to only locally assigned MAC address. Id. at 21'22. The majority disagreed with the lower court's finding that the patentee had acted as his own lexicographer to redefine the term narrowly, finding no clear definition of the term in the patent. Id. at 22. Further, the fact that the specification did not specifically refer to universally generated MAC addresses was insufficient to redefine the term of art. Id. at 24.

For these reasons, the majority upheld the district court's dismissal of Tri-County, but overruled the lower court's construction of MAC address, and vacated the judgment of noninfringement.

In his dissent-in-part, Judge Mayer argued that the majority's construction of MAC address was in error, because nothing in the specification contemplates a universally assigned MAC address. Dissent at 2-3. Further, the specification refers to the MAC address as the Media Access address, rather than the Media Access Control address (as the term is commonly defined), indicating that the patentee was acting as his own lexicographer. Id. at 6. Finally, if the term “MAC address” is ambiguous, Judge Mayer argued that it should be given the definition which would render the claims in which it occurs valid. This supports the narrow construction of the district court, rather than the majority's construction. Id. at 7-8.

Howard Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Wyatt Delfino is an Associate with the firm.