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Court Restricts Rights of Patent Licensees

When Propat International licensed a patent for e-mail authentication technology from Authentix, the company thought it was getting robust rights to use and enforce the patent. The agreement gave Propat, a Houston-based licensing company, authority to sell licenses and sue infringers, sharing the profits with Authentix.

But when Propat went after RPost Inc. for infringement, it discovered it didn't have the strong rights the licensing agreement seemed to confer. In January the Court of Appeals for the Federal Circuit (CAFC) affirmed summary judgment for RPost in Propat International v. RPost Inc., finding Propat lacked standing to sue because its license did not give it an ownership interest in the patent. And despite the district court's earlier judgment that RPost had infringed the patent, the CAFC said Propat, as a "bare licensee," couldn't salvage the case by joining Authentix as co-plaintiff.

The court ultimately decided Propat had a bare license. Because the license left Authentix in control of licensing and litigation decisions and gave Propat no right to practice the patent, the court determined Propat lacked standing.

In effect the ruling expands the traditional definition of a bare license, calling into question the rights of other patent licensees with agreements similar to Propat's--agreements that give the licensee significant authority to make money from the patent, but no explicit right to manufacture it.


Michael T. Burr

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