Please ensure Javascript is enabled for purposes of website accessibility
Home / Opinion Digests / Business Law / Licensees Can’t Sue for Infringement

Licensees Can’t Sue for Infringement

In this patent infringement case involving systems for monitoring hand washing by health care workers, the Norfolk U.S. District Court dismisses two plaintiffs, related companies, who are bare licensees and do not have sufficient ownership interest to assert claims to the subject patents.

Three plaintiff corporations, Hill-Rom Inc. (HRC), Hill-Rom Services Inc. (HRS), and Hill-Rom Manufacturing Inc. (HRM), filed suit against GE for patent infringement, alleging GE’s AgileTrac Hand Hygiene Monitoring system – which GE has installed in a handful of hospitals – infringes three of HRS’s patents. The court concludes HRM and HRC lack standing and must be dismissed.

The complaints states that HRS is the owner by assignment of all legal rights, title and interest in and to the asserted patents. The agreements between HRS and the other two Hill-Rom plaintiffs explicitly stated that the licenses granted to HRM and HRC are “non-exclusive.” In fact, the next provision in each license agreement guarantees that HRS has the means, capacity and wherewithal to maintain and enforce the intellectual report assets being licensed – including the patents at issue in this case. Finally, the agreements also clarify that HRS remains the owner of the patents, and that nothing in the agreements should be construed to establish ownership in HRM or HRC of any of the patents.

The plain language of the complaint and of the license agreements themselves forces the court to conclude that HRM and HRC are bare licensees of the patents that HRS owns – despite Hill-Rom’s current claims to the contrary. HRM may manufacture products embodying the asserted patents, and HRC may sell such products, but neither HRM nor HRC has a proprietary interest in the patents. They do not have the power to exclude third parties from manufacturing or selling products that embody the asserted patents. That right belongs to HRS, which remains free to license other companies to manufacture or sell products embodying the asserted patents.

Although Hill-Rom argues that HRM and HRC have standing to sue because the license agreements allow HRM and HRC to enforce the patents as co-parties and that HRS cannot settle litigation without their consent, that argument must fail. A contract about ligation rights that does not also convey property rights in the patent cannot confer standing to sue in a patent case. As bare licensees, HRM and HRC lack standing to sue for patent infringement, even as co-plaintiffs with HRS, the undisputed owner of the asserted patents.

The case may proceed with HRS as sole plaintiff. To the extent that HRS seeks damages for the lost profits of either HRM or HRC, they may not do so as a matter of law. HRS will have to prove at trial any lost profits it suffered itself, or else recover under some theory.

Even though, at least on the preliminary record as it now stands, HRS may not be able to recover lost profits, the complaint seeks other forms of relief and so it need not be dismissed. In addition to injunctive relief, Hill-Rom asks for damages under 35 U.S.C. § 284. While lost profits are one form of adequate damages, a reasonable royalty is another form of damages that HRS can recover even if it did not lose any profits. To the extent GE seeks to dismiss the complaint as inadequate, its instance motion is denied.

Hill-Rom Company Inc. v. General Electric Co. (Doumar) No. 2:14cv187, Aug. 6, 2014; USDC at Norfolk, Va. VLW 014-3-414, 6 pp.



Leave a Reply