Plastronics Socket Partners Ltd. v. HighRel Inc.

          ORDER

          HONORABLE SUSAN M. BRNOVICH UNITED STATES DISTRICT JUDGE.

         Pending before this Court is a Motion to Dismiss Claims for Lack of Subject-Matter Jurisdiction filed by Defendants HighRel, Inc. (“HighRel”) and HiCon USA, LLC (“HiCon USA”) (collectively “Defendants”).^[1] (Doc. 31, Mot.). Plaintiffs Plastronics Socket Partners Limited and Plastronics H-Pin Limited^[2] (“Plaintiffs” or “Plastronics”) filed an opposition, (Doc. 43, Resp.), and Defendants filed a reply, (Doc. 52, Reply).

         I. Factual Background

         Plastronics Socket is a provider of technology and innovation for the semiconductor industry, including burn-in sockets and related components. (Doc. 11 ¶ 2, “FAC”). In 2003, Defendant Dong Weon Hwang was an engineer based in Korea. (FAC ¶ 36). In 2004, he joined Plastronics Socket as its Chief Technology Officer (FAC ¶ 36). Before joining Plastronics, Hwang had an idea for a new contact pin (the “Invention”), which became the subject of U.S. Patent No. 7, 025, 602 (the “'602 Patent”). (FAC ¶¶ 9, 39). The '602 Patent was issued April 11, 2006 and entitled “Contact for Electronic Devices.” (FAC ¶ 9). On September 24, 2005, prior to obtaining the patent, Hwang and Plastronics executed a royalty agreement (the “Royalty Agreement”), under which Plastronics agreed to pay for the development of the Invention and worldwide patent rights where needed, and Plastronics was to be assigned the patent jointly with Hwang. (FAC ¶ 40). The Royalty Agreement also prohibited both Plastronics Socket and Hwang from granting a license for the Invention without approval from the other party. (FAC ¶ 40).

         On October 4, 2005, also prior to obtaining the patent, Hwang and Plastronics Socket executed an assignment agreement, assigning half of the right, title, and interest in and to the Invention and any letters patent that may issue thereon (the “Assignment and Agreement”). (FAC ¶ 41). The other half was assigned to Hwang. (FAC ¶ 41). Additionally, both Hwang and Plastronics Socket agreed to not transfer any interest in or license the Invention without the written consent of all Assignees. (FAC ¶ 42).

         In April 2008, Hwang decided to return to Korea and resigned his position with Plastronics. (FAC ¶ 56). Also in April 2008, Hwang formed HiCon Ltd. to manufacture and sell competing products. (FAC ¶ 57). On or about July 27, 2009, Hwang formed HiCon Co. to design and sell competing products. (FAC ¶ 60). In 2016, Hwang and Defendant Paul Schubring formed HiCon USA, ^[3] which signed an exclusive distribution agreement with HiCon Ltd. and/or HiCon Co. for the territory of North America. (FAC ¶ 65).

         On October 10, 2018, Plaintiffs filed their First Amended Complaint (FAC) alleging counts of patent infringement against Defendants HiCon USA and HighRel, as well as a count of tortious interference with business expectancy, prospective business relations. Plaintiffs also alleged various counts against Defendants Hwang and Shubring, all but one of which was dismissed by this Court's May 9, 2019 order, (Doc. 58). Defendants now move to dismiss, asserting that Plaintiffs lack standing because this patent infringement suit was not brought by both owners of the patent. (Mot. at 2).

         II. Legal Standard

         Under Federal Rule of Civil Procedure 12(b)(1), a party may move to dismiss a claim for lack of subject-matter jurisdiction. “A defect in standing is a defect in subject matter jurisdiction, for ‘standing in its most basic aspect can be one of the controlling elements in the definition of a case or controversy under Article III.'” Knowles Elecs. LLC v. Iancu, 886 F.3d 1369, 1380 (Fed. Cir. 2018) (quoting ASARCO Inc. v. Kadish, 490 U.S. 605, 613 (1989)). “The doctrine of standing limits federal judicial power and has both constitutional and prudential components.” Media Techs. Licensing, LLC. v. Upper Deck Co., 334 F.3d 1366, 1369 (Fed. Cir. 2003). Constitutional standing requires that a plaintiff suffer an injury-in-fact, that there be a causal connection between the plaintiff's injury and a defendant's conduct, and that the plaintiff's injury be capable of redress by a favorable court decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). “In addition to the three-prong Article III standing test delineated in Lujan, standing doctrine embraces judicially self-imposed limits, known as prudential limits, on the exercise of jurisdiction.” Intellectual Prop. Dev., Inc. v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1348 (Fed. Cir. 2001).

         “Standing to sue for infringement stems from the Patent Act, which provides: ‘[a] patentee shall have remedy by civil action for infringement of his patent.'” Israel Bio-Eng'g Project v. Amgen, Inc., 475 F.3d 1256, 1264 (Fed. Cir. 2007) (quoting 35 U.S.C. § 281). “Where one co-owner possesses an undivided part of the entire patent, that joint owner must join all the other co-owners to establish standing.” Id. “[O]ne co-owner has the right to limit the other co-owner's ability to sue infringers by refusing to join voluntarily in the patent infringement suit.” Id. (citing Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1468 (Fed. Cir. 1998) (holding that “as a matter of substantive patent law, all co- owners must ordinarily consent to join as plaintiffs in an infringement suit”)).

         Courts have, however, recognized at least two exceptions to the rule that all co-owners must consent to join as plaintiffs in an infringement suit. “‘First, when any patent owner has granted an exclusive license, he stands in a relationship of trust to his licensee' and can be involuntarily joined as a plaintiff in the licensee's infringement suit.” STC.UNM v. Intel Corp., 754 F.3d 940, 946 (Fed. Cir. 2014) (quoting Ethicon, 135 F.3d at 1468 n.9). Second, “[i]f, by agreement, a co-owner waives his right to refuse to join suit, his co-owners may subsequently force him to join in a suit against infringers.” Id. (quoting Ethicon, 135 F.3d at 1468 n.9). Courts have also recognized a possible third situation in holding that “an exclusive licensee that does not have all substantial rights does have standing to sue in his own name when ‘necessary to prevent an absolute failure of justice, as where the patentee is the infringer, and cannot sue himself.'” Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) (quoting Waterman v. Mackenzie, 138 U.S. 252, 255 (1891)).

         III. Analysis

         Both parties agree that Plastronics and Hwang retain equal shares of all the rights in the '602 patent. (Mot. at 2) (Resp. at 3). Therefore, the inquiry here is not one involving an exclusive licensee, but rather two co-owners. Neither party argues that Plastronics does not have constitutional standing to sue. See Evident Corp. v. Church & Dwight Co., 399 F.3d 1310, 1314 (Fed. Cir. 2005) (holding that plaintiff with significant rights to the patent “[c]learly . . . had constitutional standing to sue under the patent”). The question is one of whether Plastronics has prudential standing to bring a patent infringement action without Hwang joined as a plaintiff. As noted above, it is well-settled law that “[w]here one co-owner possesses an undivided part of the entire patent, that joint owner must join all the other co-owners to establish standing.” Israel Bio-Eng'g Project, 475 F.3d at 1264. Defendants argue that Plaintiffs do not have standing for two reasons. First, Defendants argue that Hwang's involvement as a defendant does not confer standing. Second, Defendants argue that none of the recognized exceptions to the rule that all co-owners must be joined as plaintiffs apply to this action.

         A. Hwang's Status as a Defendant Does ...