The distinction between an assignee and licensee is crucial to determining whether a party has standing to sue for infringement. Whether through ownership or assignment, those parties that hold all substantial rights to a patent – and those who hold all exclusionary rights but not all substantial rights – generally enjoy the ability to enforce the patent. A “bare” licensee, on the other hand, possesses no right of enforcement. But what happens when a patentee conveys, as part of a non-exclusive license, the exclusive right to sue a particular entity, but otherwise retains title to the patent? Who is the proper party: the non-exclusive licensee that holds the right to sue, or the patentee that has contracted away the ability to bring suit? According to district judge Joseph J. Farnan, neither has standing to sue.
In the underlying litigation, the Court addressed the question whether the rights conveyed “elevated [the transferee's] status from that of a bare licensee to the second category of plaintiffs, those who hold exclusionary rights and interests created by the patent statutes, but not all substantial rights to the patent such that a law suit may be maintained with the presence of the patent owner.” Because the license limited the transferee’s right to sue – it could only pursue a single entity, the defendant – and imposed other restrictions, the patentee failed to “provide [the transferee] with a sufficient cloak to cover its status as a bare, nonexclusive licensee.”
Having struck down this “hunting license,” the Court then held that the patentee itself failed to establish standing to bring suit by contracting away the right to sue: “That [the licensee] lacks standing to take advantage of that right does not mean that [the patentee] regains it.” In other words, the parties’ chosen “contractual division” of the patent rights defeated their standing, leaving no party available to enforce the patent.