Docket No. 2015-1671
MOORE, O’MALLEY, TARANTO
February 29, 2016
Brief Summary: Luminara found to possess “substantially all rights” in Disney’s patent such that joinder was not required. Preliminary injunction was vacated due to error in DC’s claim construction.
Summary: Liown appealed DC grant of SJ barring it (preliminary injunction) from supplying Distributors with artificial candle products that infringe Disney’s US 8,696,166 relating to improved techniques for making the light from artificial candles flicker like real flames. In 2008, Disney granted Candella, LLC (which later merged with Luminara) a four-year license to the several patents including the ‘166 patent which was renewed in 2012 until 2020. Under the original license, Candella was not allowed to assign, sublicense or transfer its rights, or sue on the patents, without Disney’s consent. In 2010, Candella approached Liown about manufacturing the candles, negotiations broke down, and Liown filed its own patent application in China, allegedly using Candella’s confidential information, and eventually obtained a US patent. The Disney-Candella license terms were subsequently broadended four times, giving Candella the right to sublicense, assign, or sue without Disney’s consent, extend the agreement, select and retain counsel to respond to PGR or reexamination, among other things. Candella and Liown again entered negotiations which again broke down, and Liown started selling its own candles. Candella sued Liown and Liown challenged the suit for lack of standing but Luminara obtained a preliminary injunction. The opinion explains that “only parties with exclusionary rights to a patent may bring suit for patent infringement” (Morrow, FC 2007). Liown argued Luminara does not have such rights “because Disney retained the right to freely license the technology to any entity by creating new Affiliates” (in the Disney-Candella agreement, “Disney expressly reserve[d] for itself and its affiliates the right to make, have made, use, sell, offer for sale and import the Licensed Products”). One category of “affiliate” in the agreement is “any entity ‘operated by or under license from The Walt Disney Company or any of its Affiliates.’” Liown argued this “effectively allow[s] Disney Enterprises to freely license the patent.” The FC panel disagreed that “Affiliate” has such a “broad meaning” since “the plain language of the ‘operated…under license’ provision requires the license to releate to the operation of an Affiliate in some way, such as with a franchise agreement” and “the Amended Agreement repeatedly states that Candella would have ‘exclusive’ rights” to the technology. It therefore held Candella does have the required exclusionary rights. Liown also argued Luminara was required to join Disney (i.e., Luminara does not have “all substantial rights” and may not “be deemed the effective ‘patentee’ under 35 USC § 281” and cannot bring suit alone) (Prima Tek II, FC 2000; Aspex Eyewear, FC 2006). The FC concluded Disney “has not retained the right to sue here” and “need not be joined to protect Liown from the possibility of facing multiple lawsuits on the same patent.” In addition, the rights retained by Disney were found not to be “substantial enough to preclude Luminara from bring suit in its name alone” (joinder may be required where licensor risks “losing substantial rights if its claims are invalidated or the patent is rendered unenforceable” and “a financial interest…without more does not amount to substantial right forcing joinder” (ProPat, FC 2007) (nor does title, responsibility to pay maintenance fees, or a right to notice of litigation and/or licensing fees)). Liown also argued the PI was improperly granted because there is a substantial question of validity of the patent. The FC panel concluded the DC improperly construed the claim term “free to pivot” inconsistent with the ordinary meaning thereof and there was no “lexicography or disavowel” (Thorner, FC 2012; GE Lighting Sols., FC 2012). Based on this error, the FC panel granted Liown’s request to vacate the PI.