Court: District Court, D. Delaware; February 28, 2016; Federal District Court
Defendant Pure Storage, Inc. has challenged Plaintiff EMC Corporation's standing to assert U.S. Patent Nos. 7,373,464 and 7,434,015, which pertain to deduplication technology. The Court finds that EMC Corporation has standing to sue for infringement of these patents based on the following background: the deduplication patents, which reduce storage space needs by storing only unique data copies, were originally assigned to Data Domain, Inc. by co-inventors Benjamin Zhu, Kai Li, and Hugo Patterson. In 2009, EMC Corporation acquired Data Domain and subsequently reorganized its structure, transferring Data Domain's assets, including the deduplication patents, to EMC Corporation through a series of assignments and agreements. The legal standards for determining standing emphasize that it is a threshold requirement, with the burden on the party bringing the action to prove standing. A "patentee," defined as the patent owner, has the authority to pursue infringement claims. The Court concludes that EMC possesses the necessary rights to assert these patents following the outlined assignments and agreements.
A patent owner's transfer of "all substantial rights" in a patent to an exclusive licensee equates to an assignment, granting the licensee standing to sue and stripping the patent owner of the right to litigate. If the transfer includes less than "all substantial rights," both the licensee and licensor may sue, but generally must be joined in litigation. The distinction between an assignment and a license hinges on the legal implications of the agreement's terms rather than its label. Determining whether an exclusive license transfers "all substantial rights" requires examining the parties' intentions and the substance of the agreement, including whether the licensee has rights to make, use, and sell products, sublicense, and any obligations of the licensor. The nature of the rights to sue retained by the licensor is crucial, with the existence of an illusory right to sue potentially indicating that substantial rights were not transferred. State law governs the interpretation of these agreements, with Massachusetts law applying here. Under Massachusetts law, unambiguous contracts are interpreted as law, while ambiguity is assessed based on the agreement's language and context. Instruments related to the transaction are read together, and ambiguity is present if a contract permits multiple reasonable interpretations.
Courts can use extrinsic evidence to clarify ambiguities when the language suggests multiple interpretations. In this case, Pure contends that EMC Corporation lacks sufficient rights to the deduplication patents to have standing to sue for infringement. Conversely, plaintiffs assert that EMC Corporation has standing based on the assignment and licensing history, which indicates that EMC holds title to the deduplication patents, the right to sue for infringement, and the rights to make, use, or sell products related to those patents, excluding Data Domain products. Pure argues that EISI has sufficient rights to the patents, claiming ownership over EMC Corporation.
The central issue in determining standing is the extent of the parties' rights to initiate infringement suits. The EIC License Agreement outlines that EIC can request New Data Domain to control actions necessary to protect its intellectual property, with EIC covering related expenses. If New Data Domain does not act in a timely manner, EIC may take control of the actions, with New Data Domain's cooperation. Additionally, New Data Domain assigned all rights to its patents to EMC Corporation, including the right to sue for infringement. Plaintiffs argue that this assignment gives EMC the primary right to sue and control litigation over the deduplication patents, a right that was retained by New Data Domain and later transferred to EMC Corporation.
Pure contends that EMC Corporation lacks the right to sue for infringement of the deduplication patents, asserting that the agreements between New Data Domain and EIC do not confer such rights to EMC. According to Pure, the EIC License Agreement, when interpreted alongside the Reorganization Agreement, indicates that New Data Domain granted EIC an exclusive license encompassing "all substantial rights," including the right to sue. Furthermore, New Data Domain agreed to "control and direct" any infringement litigation on EIC's behalf, effectively delegating the authority to sue but not transferring the primary right to sue to New Data Domain. Consequently, EMC Corporation did not receive this primary right upon the assignment of intellectual property from New Data Domain. Pure cites legal precedent to support the argument that merely delegating litigation control does not confer standing.
Pure also argues that if the EIC License Agreement does not grant EIC all substantial rights, it conflicts with the Reorganization Agreement, which states that New Data Domain licenses all substantial rights to EIC at closing in exchange for cash. This inconsistency suggests ambiguity, requiring interpretation through extrinsic evidence. Pure maintains that the Reorganization and EIC License Agreements should be read together, with the Reorganization Agreement considered the entire agreement regarding the subject matter. Despite the assertion in Exhibit B of the Reorganization Agreement that all substantial rights are licensed, the specific terms of the EIC License Agreement govern. It follows the principle that specific provisions take precedence over general ones in contract interpretation. Thus, the agreements are not ambiguous, and the court must interpret them as a matter of law without extrinsic evidence. Ultimately, New Data Domain retained the primary right to sue for infringement within the EIC License Agreement, which was later assigned to EMC Corporation.
EIC holds a secondary right to initiate infringement litigation if New Data Domain fails to act promptly, but this right is limited to situations where EIC submits a written request to take over litigation, which New Data Domain can consent to but cannot unreasonably withhold. New Data Domain has assigned its primary right to sue to EMC Corporation. Pure contends that New Data Domain did not retain the primary right to sue, asserting that the license agreement merely allows New Data Domain to control infringement litigation rather than conferring a full right to sue. Delegating authority to sue does not grant standing to a licensee, as established in case law. The ability of New Data Domain to enforce its intellectual property without EIC's involvement counters Pure's argument for a principal/agent relationship, especially since both parties agreed that the EIC License Agreement does not create such a relationship. New Data Domain’s right to sue is independent and not just a delegation of EIC's authority. EMC Corporation's primary right to sue is valid and includes the right to engage in infringement without needing to consult EIC, unless EIC requests notification. EIC must cooperate with EMC in litigation but can only request to take over if EMC fails to act. EIC's sublicensing ability is limited to uses related to New Data Domain's operations as of December 31, 2009. Ultimately, EMC's clear and unrestricted right to control infringement litigation is a key factor in its standing to sue for infringement of the deduplication patents.
Possession of rights to make and use products covered by patents bolsters a licensor's claim of retaining substantial rights, as established in Abbott Labs. v. Diamedix Corp. and Delano Farms Co. v. Cal. Table Grape Comm’n. New Data Domain granted EIC exclusive rights to utilize the deduplication patents in the Data Domain business but maintained the right to make, use, or sell products covered by these patents outside this context. EMC Corporation acquired this right through an assignment from New Data Domain. The exclusive license to EIC is limited to the New Data Domain Business, while New Data Domain implicitly retains the ability to license the patents elsewhere, which it assigned to EMC Corporation. This positioning supports EMC Corporation’s standing to assert infringement claims. Pure argues that EMC lacks rights to utilize or license the patents beyond the New Data Domain Business, citing inconsistencies in the agreements. However, the referenced statements do not contradict a limited field of use, and the absence of documentation for reciprocally limited rights does not negate EMC's retained rights. Ultimately, EMC Corporation possesses sufficient rights to initiate and control infringement litigation regarding the deduplication patents, demonstrating that EISI did not acquire all substantial rights, thus affirming EMC's standing to sue for infringement. The Court concludes that EMC Corporation has legal standing to pursue infringement claims related to the deduplication patents.
