Lowe v. ShieldMark, Inc., 1:19-cv-748
| Court | United States District Courts. 6th Circuit. United States District Court of Northern District of Ohio |
| Writing for the Court | JAMES S. GWIN, UNITED STATES DISTRICT JUDGE |
| Parties | CLIFFORD A. LOWE, et al., Plaintiffs, v. SHIELDMARK, INC., et al., Defendants. |
| Docket Number | 1:19-cv-748 |
| Decision Date | 23 August 2022 |
CLIFFORD A. LOWE, et al., Plaintiffs,
v.
SHIELDMARK, INC., et al., Defendants.
No. 1:19-cv-748
United States District Court, N.D. Ohio
August 23, 2022
OPINION & ORDER [RESOLVING DOCS. 148 & 169]
JAMES S. GWIN, UNITED STATES DISTRICT JUDGE
With this opinion, the Court primarily considers whether Plaintiffs Clifford Lowe and InSite Solutions, LLC (“Insite North Carolina”) continue to have standing for this patent infringement lawsuit.
When Plaintiffs first brought this case, Lowe owned the relevant patent and InSite North Carolina owned an exclusive license. But in December 2021, and while Plaintiffs' appeal was pending before the U.S. Court of Appeals for the Federal Circuit, Lowe sold his patent ownership to InSite North Carolina. Then, a week later, InSite North Carolina gave InSite Delaware-not a party in this case-a paid-up, permanent, and irrevocable, but nonexclusive, license.
InSite North Carolina's license to InSite Delaware made no restrictions on InSite Delaware's ability to sublicense the patent. While acknowledging that Lowe had earlier given InSite North Carolina all patent rights, Lowe alleges that InSite North Carolina granted Plaintiff Lowe a right to continue this litigation.
Because the Court finds that Plaintiffs Lowe and InSite Solutions, LLC (“InSite North Carolina”) do not have this patent's exclusionary rights, they lack standing to continue this
three-year-old patent infringement case, and the Court DISMISSES this action for lack of subject matter jurisdiction.
For alternative dismissal grounds, the Court GRANTS Defendants' patent invalidity summary judgment motion.[1]
I. Background
The Plaintiffs and Defendants compete in the industrial floor marking tape field. This case began in 2019, when Plaintiffs Lowe and InSite North Carolina sued Defendants ShieldMark, Inc., Advanced Plastics, Inc., and Crown Equipment Corporation. Plaintiffs alleged the infringement of Patent No. 10,214,664 (“‘664 Patent”). Defendants counterclaimed that the ‘664 Patent is invalid. Defendants denied any infringement.
After issuing a Markman decision, this Court gave Defendants summary judgment after the Court construed the ‘664 Patent as including elements that both sides acknowledged were not present in the alleged infringing products. Plaintiffs disagreed with the Court's Markman construction of the ‘664 Patent and took an appeal.
On appeal, the U.S. Court of Appeals for the Federal Circuit disagreed with this Court's Markman construction.[2] The Federal Circuit found this Court's patent interpretation incorrectly used the ‘664 Patent's specifications to put limits on the broader ‘664 Patent's claims. The Court of Appeals then vacated in part, remanded in part and affirmed in part this Court's earlier rulings.[3]
Shortly after the Federal Circuit mandate issued, Plaintiffs filed a Fourth Amended Complaint[4] that re-alleged an earlier-made Lanham Act claim that Plaintiffs had voluntarily dismissed before taking the appeal.[5]
On remand, the Court ordered supplemental summary judgement briefing on Defendants' unresolved patent invalidity counterclaim.
While that briefing was in progress, Defendants found that Plaintiff Lowe had arguably sold the ‘664 Patent. Defendants argued that the Court should dismiss this action because of a change in the ‘664 Patent's ownership.[6]
During earlier discovery, Defendants had requested discovery of all ‘664 Patent ownership materials.[7] Despite its Rule 26 obligation to update discovery, Plaintiffs had not provided any amended discovery responses describing Lowe's ownership sale.[8] The Court then ordered Plaintiffs to produce relevant ownership documents.[9]
In addition, although the documents revealed that there was a change in the ‘664 Patent's ownership while Plaintiffs' appeal was pending before the Federal Circuit, Plaintiffs did not tell the Federal Circuit that there was an ownership change.
Now that the parties completed supplemental invalidity and standing briefing and the Court conducted oral argument,[10] the Court resolves these issues below.
II. Article III Standing
Patents include various rights that can be divided and assigned, or retained in whole or part.[11] As the inventor, Lowe initially held all the rights but he alienated some or more of them through transfers, assignments, and licenses. However, “[w]hile parties are free to assign some or all patent rights as they see fit based on their interests and objectives, this does not mean that the chosen method of division will satisfy standing requirements.”[12]
In a patent infringement lawsuit, “[t]he touchstone of constitutional standing [. . .] is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury.”[13]Exclusionary rights “involve the ability to exclude others from practicing an invention or to forgive activities that would normally be prohibited under the patent statutes.”[14]
The right to exclude needs be measured for each defendant.[15] A plaintiff may have standing to sue some infringers but not others. If the accused infringer has or may obtain a license from a third party, the patent infringement plaintiff does not have exclusionary rights against that infringer, and does not have standing to sue that arguable infringer.[16]
The issue presented here is properly described as mootness: “[t]he question of whether the [c]ourt loses jurisdiction over a case where a plaintiff has standing at the outset.”[17] Additionally, under Supreme Court precedent, “[t]he party invoking federal jurisdiction bears the burden of establishing [standing].”[18]
A. Factual Background
i. Fourth Amended Complaint
On June 6, 2022, Plaintiffs Lowe and InSite North Carolina filed the Fourth Amended Complaint.[19] In that complaint, Plaintiffs alleged:
Lowe is the owner of all rights, title, and interest in and to the ‘664 Patent.
[InSite North Carolina] is an exclusive licensee under the ‘664 Patent engaged in the manufacture, distribution and sales of floor marking tape pursuant to its license and under the name “Superior Mark.” Lowe and [InSite North Carolina] share rights of enforcement and recovery under the ‘664 Patent.[20]
Plaintiffs now acknowledge that the Fourth Amended Complaint does not accurately reflect the June 6, 2022, patent-in-suit ownership.[21]
The Court describes the recently disclosed patent ownership documents below.
ii. The Patent Rights Assignment (Lowe to InSite North Carolina)
On December 9, 2021, Lowe signed a contract with InSite North Carolina.[22] In that contract, Lowe “[sold], assign[ed], convey[ed] and transfer[red]” to InSite North Carolina his “entire right, title, and interest” in the ‘664 Patent.[23] Lowe also convey[ed] all of [his] rights arising under [ . . . ] any [ . . . ] United States laws [ . . . ], including but not limited to any cause(s) ofaction and damages accruing prior to this assignment.”[24]
iii. The Patent License Agreement (InSite North Carolina to InSite Delaware)
One week later, on December 16, 2021, InSite North Carolina entered into a license agreement with InSite Solutions, LLC of Delaware (“InSite Delaware”).[25] InSite Delaware has never entered an appearance as a party in this case.
With the December 16, 2021 agreement, InSite North Carolina gave InSite Delaware:
[A] worldwide, non-exclusive, fully transferable, fully sublicensable (through multiple tiers), royalty-free, fully paid-up, perpetual, irrevocable, and non-terminable license under [‘664 Patent] to practice any methods or systems described in or claimed by the [‘664 Patent], and to make, have made, use, sell, and otherwise distribute, offer to sell, or import and export any technology, products or services described in or claimed, in whole or in part, by the [‘664 Patent].[26]
InSite North Carolina also granted to InSite Delaware an “exclusive option” to purchase the ‘664 Patent for no additional cost.[27] If InSite Delaware exercises the option, InSite North Carolina agreed to give InSite Delaware “all causes of action (whether known or unknown or whether currently pending, filed, or otherwise).”[28]
Also in the December 16, 2021 agreement between InSight North Carolina and InSight Delaware, InSite Delaware “acknowledges and agrees that Lowe [ . . . ] and [InSite North Carolina] retain the exclusive rights to elect to maintain, control, and settle [this litigation]. Lowe and [InSite North Carolina] also retain the exclusive rights to enforce the [‘664 Patent] for recovery of damages for infringement prior to [December 16, 2021].”[29]
iv. InSite North Carolina's Alleged Exclusive License to Lowe
According to Plaintiffs' brief, InSite North Carolina “granted Lowe the exclusive right to continue to assert infringement against alleged infringers of the ‘664 Patent during his [InSight North Carolina's] ownership of the ‘664 Patent, expressly including against ShieldMark.”[30] Plaintiffs say that the InSite North Carolina-InSite Delaware agreement gives evidence of this license.[31] Although Plaintiffs do not cite a specific provision, they presumably refer to the above-described section regarding the right to control this action. They also say that the license agreement was not in writing.[32] They do not affirmatively state that there was an oral agreement.
B. Analysis
i. Plaintiff Lowe
Plaintiff Lowe no longer has standing for this lawsuit. In the Lowe-InSite North Carolina agreement, Lowe gave up his entire interest in the ‘664 Patent, including all causes of action. The Court finds Lowe's arguments that he re-gained his ability to pursue this lawsuit unpersuasive. And, even if InSite North Carolina could transfer InSite North Carolina's right to sue Defendants, the transfer would not give Lowe...
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