IP Law Daily, PATENT—Fed. Cir.: Injunction and order denying joinder overturned in composites manufacturer’s patent suit against competitor, trucking firm, (Aug 1, 2024)

By Saurabh Kashyap, B.A., LL.B., LL.M.

Lower court erred in findings of ownership and licensing rights of the asserted patent.

The U.S. Court of Appeals for the Federal Circuit vacated a federal district court’s decision in a patent infringement lawsuit filed by a composite manufacturing company against multiple defendants in truck leasing and truck parts manufacturing businesses. The appellate court overturned the district court's grant of a preliminary injunction to the plaintiff and denial of a co-defendant’s motion for joinder of the patent licensor, ruling that the lower court erred in its findings regarding the ownership and licensing rights related to the asserted patent. Thus, the appellate court remanded the case for further proceedings consistent with its opinion (Ridge Corp. v. Kirk National Lease Co., No. 24-1138 (Fed. Cir. August 1, 2024)).

Background. The plaintiff/ appellee, Ridge Corp., is a manufacturing and engineering company specializing in advanced composites used in trucks and trailers. The defendant/ appellant, Kirk National Lease Co. (KNL), leases and maintains commercial trucks and trailers and resells panel doors for such vehicles. The co-defendant/ appellant, Altum LLC, manufactures composites, including reinforced thermoplastic products, utilized by KNL in their truck and trailer doors. The asserted U.S. Patent No. 9,151,084 (the ’084 patent) is titled "Article of Manufacture for Use as an Insulated Overhead Door" and encompasses the design and construction of insulated overhead doors, which are used in various applications, including trucks and trailers, to provide enhanced thermal insulation and durability.

Ridge Corp., the exclusive licensee of the ’084 patent, filed this lawsuit against KNL and Altum on September 20, 2023, alleging infringement of the ’084 patent. Following the complaint, the district court granted Ridge a temporary restraining order and later a preliminary injunction. Altum sought to join Cold Chain, LLC, the patent owner, arguing it was a necessary party. The district court denied this motion, stating Cold Chain had transferred all substantial rights to Ridge, making Cold Chain non-essential under Federal Rule of Civil Procedure 19. Defendants appealed, challenging both the preliminary injunction and the denial of joinder.

Joinder and rights analysis. Referencing Univ. of S. Fla. Rsch. Found., Inc. v. Fujifilm Med. Sys. U.S.A., Inc., 19 F.4th 1315, 1319 (Fed. Cir. 2021), the court highlighted that only a "patentee" may bring a civil action for patent infringement.

Applying the Sixth Circuit's abuse of discretion standard for Rule 19 determinations, the Federal Circuit scrutinized whether Ridge held all substantial rights to the ’084 patent to qualify as a "patentee" under 35 U.S.C. § 281. Citing the importance of the right to sue in determining the transfer of substantial rights, the court found that both Cold Chain and Ridge retained rights to initiate patent infringement actions. This retention by Cold Chain indicated that it had not transferred all substantial rights to Ridge. Thus, Ridge was not the sole patentee.

Right to sue. The court emphasized the inadequacy of Ridge's right to sue, noting the licensor's retained rights under the licensing agreement. The agreement required Ridge to notify Cold Chain before initiating any infringement action, and Cold Chain retained significant control over the litigation. Ridge's inability to control litigation unilaterally without Cold Chain's involvement further supported the conclusion that Cold Chain had not transferred all substantial rights. The court cited Alfred E. Mann Found. for Sci. Rsch. v. Cochlear Corp., 604 F.3d 1354, 1358-59 (Fed. Cir. 2010), to emphasize the significance of transferring all substantial rights as tantamount to assignment.

Sublicensing rights. The agreement restricted Ridge's sublicensing rights, only allowing sublicenses to entities purchasing and using Ridge's door panels, which undermined Ridge's argument for holding all substantial rights. The Federal Circuit noted that a patentee-licensor retained significant interests in the patents-in-suit even where the licensee had the right of first refusal in suing alleged infringers, referencing AsymmetRx, Inc. v. Biocare Med., LLC, 582 F.3d 1314, 1316–17, 1320–21 (Fed. Cir. 2009).

Royalty obligations. Ridge's obligation to pay royalties to Cold Chain further demonstrated that Cold Chain retained a substantial economic interest in the patent. The court cited Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1251 (Fed. Cir. 2000), which held that a licensee's right to grant royalty-free sublicenses to defendants sued by the licensor rendered the licensor's right to sue illusory. However, in this case, Ridge's sublicensing rights were fettered and thus did not render Cold Chain’s right to sue illusory.

Conclusion. Finally, the Federal Circuit concluded that the district court erred in determining that Cold Chain transferred all substantial rights to Ridge. As Ridge did not meet the statutory requirement of being a patentee, the denial of the joinder and grant of the preliminary injunction was improper. Thus, it vacated the lower court’s order and remanded for proceedings consistent with this opinion, emphasizing that Cold Chain should be joined as a necessary party to the infringement action.

The Case is No. 24-1138.

Judge: Stoll, K.

Attorneys: Christopher Warren Tackett (Bailey Cavalieri LLC) for Ridge Corp. Donald E. Burton (Faruki PLL) for Kirk National Lease Co. and Truck & Trailer Parts Solutions, Inc. Tiffany L. Carwile (Arnold & Clifford LLP) for Altum LLC.

Companies: Ridge Corp.; Cold Chain, LLC; Kirk National Lease Co.; Truck & Trailer Parts Solutions, Inc.; Altum LLC

Cases: Patent FedCirNews OhioNews