Background
A.L.M. Holding Company and Ergon Asphalt & Emulsions jointly own six patents covering warm-mix asphalt paving methods and compositions. In 2008, they licensed exclusive commercialization rights—manufacturing, importing, using, selling, and sublicensing—to MeadWestvaco (later succeeded by Ingevity Corporation) under a royalty-bearing worldwide license. Critically, the patent owners retained several rights: the right to sue third parties for infringement (either jointly with Ingevity or independently if Ingevity declined), veto authority over Ingevity’s sublicenses (consent not to be unreasonably withheld), royalty interests on all sales including sublicensee sales, the right to terminate the agreement for material breach, and continued control over patent prosecution and maintenance.
When A.L.M. and Ergon sued Zydex Industries for infringing the licensed patents, the District of Delaware dismissed for lack of Article III standing. The district court relied heavily on Morrow v. Microsoft Corp. (Fed. Cir. 2007), concluding that the patent owners’ retained right to sue was not a sufficient “exclusionary right” to confer constitutional standing.
The Court’s Holding
The Federal Circuit reversed. Writing for a unanimous panel, Judge Chen held that A.L.M. retained an exclusionary right sufficient for the “irreducible constitutional minimum of standing” under Lujan v. Defenders of Wildlife. The key question was whether the patent owners kept any exclusionary right—the ability to exclude others from practicing the invention or to forgive otherwise-prohibited activities.
The court identified three retained rights that, taken together, satisfied the constitutional standard: (1) the right to sue for infringement, (2) veto authority over sublicenses, and (3) royalty interests. The sublicensing veto was particularly important because it prevented Ingevity from unilaterally authorizing an accused infringer to practice the patents without A.L.M.’s approval. Because Ingevity could not grant a royalty-free sublicense to moot any infringement suit, A.L.M.’s right to sue was not “illusory.”
The court distinguished Morrow, where the plaintiff held only a bare right to sue severed from all other patent rights—including ownership itself. There, the patent owner could grant a royalty-free sublicense to any accused infringer, rendering the right to sue meaningless. Here, A.L.M. remained the patent owner and its suite of retained rights preserved a meaningful enforcement capability.
Notably, the court clarified that statutory standing cases analyzing “all substantial rights” under 35 U.S.C. § 281—particularly Alfred E. Mann Foundation v. Cochlear Corp.—are instructive for Article III standing analysis. While the two inquiries are distinct (constitutional standing is jurisdictional and incurable; statutory standing is curable by joinder), the same factual analysis about whether a licensee’s rights render the patent owner’s enforcement right illusory applies under both frameworks.
Key Takeaways
- Patent owners who grant exclusive licenses can retain standing. The combination of a right to sue, sublicensing veto, and royalty interests is sufficient for Article III standing—even when the licensee holds exclusive commercialization rights.
- Morrow is narrow. That decision applies where a plaintiff holds only a bare right to sue, separated from patent ownership and all other patent rights. It does not bar standing for patent owners who retain meaningful enforcement and economic rights.
- Statutory standing precedent informs constitutional standing. The Federal Circuit confirmed that cases like Mann analyzing “all substantial rights” are relevant to Article III analysis, resolving confusion in the district courts about whether to treat these lines of authority as completely separate.
- Sublicensing controls matter. A patent owner’s veto over sublicenses (even with a “not to be unreasonably withheld” qualifier) preserves the non-illusory character of the right to sue.
Why It Matters
This precedential decision provides important clarity for patent licensing transactions. Companies that license their patents exclusively while retaining enforcement rights now have Federal Circuit confirmation that this common arrangement preserves their ability to sue infringers in their own name. The decision is especially significant for patent holding companies, universities, and other entities that monetize patents through licensing but want to retain the option to enforce against unlicensed competitors.
The ruling also resolves a growing split among district courts about how Morrow and Mann interact, giving clearer guidance on when a retained right to sue is “illusory” versus meaningful. Patent owners should ensure their license agreements include sublicensing consent provisions and royalty pass-throughs—features the court found critical to preserving standing.
Your browser cannot display this PDF inline.