Nutrition 21 v. U.S., 90-1382

• Decision Date: 29 March 1991
• Docket Number: No. 90-1382,90-1382
• Citation: 930 F.2d 862
• Parties: NUTRITION 21, Plaintiff-Appellee, v. The UNITED STATES, Plaintiff-Appellant, v. THORNE RESEARCH, INC., Albert F. Czap, Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

Page 862

930 F.2d 862

18 U.S.P.Q.2d 1351

NUTRITION 21, Plaintiff-Appellee, v. The UNITED STATES, Plaintiff-Appellant, v. THORNE RESEARCH, INC., Albert F. Czap, Defendants.

No. 90-1382.

United States Court of Appeals Federal Circuit.

March 29, 1991.

William C. Rooklidge, Knobbe, Martens, Olson & Bear, Newport Beach, Fla., argued, for plaintiff-appellee. With him on the brief, were Don W. Martens and Lowell Anderson.

Douglas Letter, Dept. of Justice, Washington, D.C., argued, for plaintiff-appellant. With him on the brief, were Stuart M. Gerson, Asst. Atty. Gen., and Vito J. DiPietro, Director.

Paul T. Meiklejohn, Seed & Berry, Seattle, Wash., for defendants.

Before NIES, Chief Judge, and RICH and MAYER, Circuit Judges.

RICH, Circuit Judge.

This interlocutory appeal comes to us under 28 U.S.C. Sec. 1292(b), the United States District Court for the Western District of Washington, Dimmick, J., having certified to this court the existence of a potentially controlling question of law as to which there is substantial ground for difference of opinion, the answer to which may advance the ultimate determination of this ongoing patent infringement litigation. See Nutrition 21 v. Thorne Research, Inc., 130 F.R.D. 671, 14 USPQ2d 1244 (W.D.Wash.1990). The certified question is whether Nutrition 21, an "exclusive" licensee under the patent in suit, title to which is in the United States (U.S.), may, under the circumstances of this case, maintain a patent infringement action without the U.S. as a party, when the U.S. has authorized Nutrition 21 to sue for patent infringement in its own name and on its own behalf. We have jurisdiction under 28 U.S.C. Secs. 1292(c)(1), 1295(a)(1), and 1338(a). We answer the certified question affirmatively.

BACKGROUND

A. Procedural History

The lawsuit underlying this appeal is for infringement of U.S. Patent No. 4,315,927 ('927 patent), titled "Dietary Supplementation with Essential Metal Picolinates," owned by the U.S. as represented by the Secretary of Agriculture. ¹ The Department of Commerce is responsible for administration

of the '927 patent. Plaintiff Nutrition 21, a California limited partnership and a licensee of the '927 patent, alleges that Thorne Research, Inc. (Thorne), a Washington corporation, and Albert F. Czap (Czap) infringe the '927 patent by their sales of chromium picolinate. ²

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Having previously notified the U.S. of possible infringement by Thorne, Nutrition 21 invited the U.S. to join its planned infringement suit in December, 1989. When the U.S. refused, Nutrition 21 filed suit against Thorne in January, 1990, naming the U.S. as a party defendant pursuant to Fed.R.Civ.P. 19(a). ³

The U.S. then moved to be dismissed from the case, taking the position that the suit could be maintained by Nutrition 21 without the need for the U.S. as a party. The U.S. based its argument on (1) the enforcement rights granted to Nutrition 21 by the U.S. under the license agreement, and (2) the authorization provided to federal agencies under 35 U.S.C. Sec. 207(a)(2) to grant patent enforcement rights to licensees. Section 207(a)(2) was enacted as part of "An Act to Amend the Patent and Trademark Laws," Pub.L. No. 96-517, 94 Stat. 3015 (1980) (Sec. 6(a) of which is codified at 35 U.S.C. Secs. 200-11). We discuss both the terms of the license agreement and 35 U.S.C. Sec. 207(a)(2) in greater detail below.

Opposing the U.S. motion to be dismissed, Nutrition 21 moved for realignment of the U.S. as an involuntary plaintiff, again pursuant to Fed.R.Civ.P. 19(a). Nutrition 21 acknowledged that it would not otherwise object to proceeding without the U.S., but feared that if it did so it might be caught in a "Catch-22" situation, i.e., wherein after the district court had dismissed the U.S. as an unnecessary party, and a judgment had been rendered, this court might on appeal dismiss Nutrition 21's infringement action for want of an indispensable party under Fed.R.Civ.P. 19(b). ⁴

After oral argument, the district court issued an order denying the U.S. motion to be dismissed as a party and realigning the U.S. as an involuntary plaintiff. Nutrition 21, 130 F.R.D. at 671, 14 USPQ2d at 1244. The court stated, first, that the U.S. "owns the patent in question here" and, second, that the owner of a patent is a necessary party to a suit by an exclusive licensee for patent infringement, relying on Independent Wireless Telegraph Co. v. Radio Corp. of America, 269 U.S. 459, 46 S.Ct. 166, 70 L.Ed. 357 (1926). Therefore, the court found, the U.S. has "in effect consented to its necessary joinder in this action." Nutrition 21, 130 F.R.D. at 673, 14 USPQ2d at 1246.

The district court also considered whether it was proper to force joinder of the U.S. in light of 28 U.S.C. Sec. 516, which reserves to the Attorney General the conduct of litigation to which the U.S. is a party. ⁵ The Attorney General's authority is not at issue here, the court concluded, because 35 U.S.C. Sec. 207(a)(2) operates as an exception to 28 U.S.C. Sec. 516.

Accordingly, the district court realigned the U.S. as an involuntary plaintiff. In addition, the court sua sponte certified its order for immediate appeal pursuant to 28 U.S.C. Sec. 1292(b).

By order dated May 24, 1990, this court granted the U.S. permission to appeal from the district court's order. Thorne submitted a memorandum in support of the U.S. position, which we refused to consider in the absence of a petition for permission to appeal. However, our order recognized that Thorne would presumably be arguing in companion appeal No. 90-1283 that if the U.S. were not made an involuntary plaintiff, the suit should be dismissed. Accordingly, we will in this appeal address Thorne's position as stated in its Reply Brief filed in companion appeal No. 90-1283.

Happily, at oral argument before this court both Nutrition 21 and the U.S. adopted the position that the U.S. is not a necessary party to this action, and that Nutrition 21 can bring the action without the presence of the U.S. Thorne, however, maintains that the underlying lawsuit cannot go forward without participation by the U.S. Thorne's interest in stopping the suit is self-evident.

B. Nutrition 21's Rights Under the License Agreement

Answering the legal issues raised by the foregoing facts requires an understanding of the license agreement between Nutrition 21 and the U.S. Paragraph 2.1 of the agreement grants Nutrition 21

an exclusive license, under the Licensed Patent, to make, have made, use and sell Licensed Products which do not contain zinc picolinate as their sole metal picolinate complex....

(Emphasis added). The chromium picolinate complexes allegedly sold by Thorne come within the purview of paragraph 2.1. Paragraph 2.2 grants Nutrition 21

a nonexclusive license under the Licensed Patent to make, have made, use and sell Licensed Products which contain zinc picolinate as their sole metal picolinate complex....

(Emphasis added). The license agreement provides for a reservation by the U.S. of

an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of all inventions encompassed within the Licensed Patent....

Of great importance here, paragraph 7.2 of the license contains the following enforcement provision (emphases ours):

During the exclusive term of this Agreement, as provided under Paragraph 2.1 above, LICENSEE is empowered pursuant to the provisions of Chapter 29 of Title 35, United States Code or other statutes

(a) to bring suit in its own name, at its own expense, and on its own behalf for infringement of presumably valid claims in a Licensed Patent;

(b) in any such suit, to enjoin infringement and to collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and

(c) to settle any claim or suit for infringement of the Licensed Patent.

provided, however, that NTIS ⁶ and appropriate U.S. Government authorities shall have a continuing right to intervene in such suit.

DISCUSSION

We proceed to answer the certified question in the context of the narrow fact situation presented. That is, we consider whether a combination of (1) the authority granted to federal agencies by 35 U.S.C. Sec. 207 and (2) the rights granted under the particular license agreement involved here justify the maintenance of the underlying infringement suit without the presence of the U.S., holder of the legal title to the patent and licensor.

I.

Section 207 of Title 35, titled "Domestic and Foreign Protection of Federally Owned Inventions," states in pertinent part:

(a) Each Federal agency is authorized to--

...

(2) grant nonexclusive, exclusive, or partially exclusive licenses under federally owned patent applications, patents, or other forms of protection obtained, royalty-free or for royalties or other consideration, and on such terms and conditions, including the grant to the licensee of the right of enforcement pursuant to the provisions of chapter 29 of this title as determined appropriate in the public interest;

(3) undertake all other suitable and necessary steps to protect and administer rights to federally owned inventions on behalf of the Federal Government either directly or through contract....

(Emphases added).

Section 207(a)(2) is somewhat ambiguous in that the phrase "right of enforcement" is undefined; the statute does not expressly address whether "right of enforcement" encompasses a right of the licensee to maintain an infringement suit without the federal agency licensor as a co-party. Such a definition would admittedly be contrary to the import of Independent Wireless, relied upon by the district court to keep the U.S. in this lawsuit. That case held that "both the owner and the exclusive ⁷ licensee are generally necessary parties in the [patent infringement] action in equity." 269 U.S. at 466, 46 S.Ct. at 168. However, Independent Wireless did not involve a...