Article III Jurisdiction: No Leg to Stand on in Patent Litigation
An important issue in any litigation is “standing” — the right of a party to bring a suit in court. A lawsuit will be dismissed if the plaintiff cannot establish standing. In a recent patent infringement case, Cirba, Inc. v. VMWare, Inc., No. 1:19-cv-00742-LPS (D. Del. 2020), Judge Stark ordered a new trial after finding that one of the plaintiffs lacked standing after a jury finding in favor of the patentee, so this issue has assumed new importance. Until recently, federal courts lacked precision in articulating whether jurisdictional standing or statutory standing should be required to bring a patent infringement case. However, the U.S. Supreme Court’s decision in Lexmark resolved any debate by requiring that federal courts adopt a statutory approach to standing. See Lexmark Int’l Inc. v. Static Control Components, Inc., 572 U.S. 118, 126 (2014) (holding that the correct inquiry is whether there is a cause of action under the statute). Before, some courts admittedly treated “statutory standing” as jurisdictional, but the Lexmark court held that defects in statutory standing do not implicate subject matter jurisdiction. See Lone Star Silicon Innovations LLC v. Nanya Technology Corp., 925 F.3d 1225, 1236 (Fed. Cir. 2019) (“Lexmark is irreconcilable with our earlier authority treating § 281 as a jurisdictional requirement”). Courts have since ruled that motions to dismiss infringement cases should be brought for failure to state a claim (Fed. R. Civ. Procedure 12(b)(6)), rather than for lack of subject matter jurisdiction (Fed. R. Civ. Procedure 12(b)(1)), further illustrating that statutory standing has prevailed. Minden Pictures, Inc. v. John Wiley & Sons, Inc., 795 F.3d 997, 1001 (9th Cir. 2015).
Jurisdictional standing derives from two sources, the Constitution (Article III) and statute (28 U.S.C. § 1331) and grants federal courts the authority to hear cases “arising under” federal law. Article III is quite broad—even broader than the subject matter jurisdiction statute—so courts have set a minimum threshold for Article III standing. There must be a “case” or “controversy,” where the plaintiff suffers an actual or threatened injury, the defendant is the cause of that injury, and there is a great likelihood that redress will result from a favorable decision. Lujan v. Defs. Of Wildlife, 504 U.S. 555, 560 (1992).
While Article III and federal question jurisdiction are relevant to all federal claims, recent decisions indicate courts have recognized that having a statutory basis implies standing under Article III. If a plaintiff prevails in establishing that they have a cause of action under the Patent Act, the plaintiff will have proven they have a claim arising under federal law. The Schwendimann court’s holding communicates this point. See Schwendimann v. Arkwright Advanced Coating, Inc., 959 F.3d 1065, 1071 (2020) (“As long as a plaintiff alleges facts that support an arguable case or controversy under the Patent Act, the court has both the statutory and constitutional authority to adjudicate the matter”).
Nevertheless, in Cirba, the plaintiffs are appealing Judge Leonard P. Stark’s dismissal for lack of Article III standing after a jury finding in the plaintiff’s favor, so there seems to be debate over this issue. A parent corporation and its subsidiary jointly sued for patent infringement, but since the parent had transferred the rights to its subsidiary, Judge Stark held the parent did not have standing to bring the case and granted dismissal under Rule 12(b)(1). Judge Stark held that since the parent is a “bare licensee,” rather than an exclusive licensee, it was impermissibly joined. See Lone Star Silicon Innovations LLC, 925 F.3d at 1238 (Exclusive licensees not possessing “all substantial rights” may sue for infringement, so long as the patentee is joined in compliance with Fed. R. Civ. Procedure 19).
Cirba’s appeal is a petition for a writ of mandamus (an order from the court) to reverse Judge Stark’s order for a new trial, asserting that Judge Stark dismissed the case on an outdated interpretation of jurisdictional standing. The petitioners claim the outcome should have been clear because “exclusionary rights in a patent are no longer required for Article III standing.” Pet. for a Writ of Mandamus, at 4, In re Cirba, No. 21-154 (Fed. Cir., filed June 14, 2021). According to the petitioners, Judge Stark misconstrued the license. By joining the “patentee,” the parent had standing under the Patent Act.
By dismissing the case on jurisdictional grounds, Judge Stark blatantly diverges from recent decisions. However, his analysis is fundamentally similar. Judge Stark dismissed the case because one plaintiff was not a “patentee” and did not possess rights necessary to bring the claim, an analysis that would also require dismissal on statutory grounds. It is unclear whether this departure from recent case law will grant the plaintiffs a new trial, but the debate surrounding standing is certain to continue.
Isabella J. Brodie