Patent transfers and infringement proceedings – who is the “right” plaintiff?

I.          Introduction

With an infringement suit, the patent owner takes action against unauthorized users of the invention. However, because patents are transferable, a defendant cannot always tell whether it is actually being attacked by the materially entitled party. Where there is an indication of such lack of entitlement, the defendant can dispute the ownership of the patent in suit and the rights of the plaintiff derived from it.

In practice, patents are often transferred to subsidiaries or sold to third parties. The ownership of the patent may also change as a result of mergers or acquisitions. Anyone wishing to file an infringement suit should therefore be aware of the consequences of transferring the patent before and after the suit is filed.

The change of the patent owner can have various effects on the patent infringement proceedings.

II.       Formal standing: Authority to conduct proceedings

The authority to conduct court proceedings is the right to assert a right in court in one’s own name. In other words, that person who is the “right” plaintiff is entitled to conduct the case. In the absence of this authority, the infringement action is dismissed, not as unfounded, but as inadmissible.

As an illustrative example, Alice GmbH files a lawsuit against Bob KG alleging that Bob KG infringed the patent of Charlie AG. Alice GmbH would in principle not be authorized to conduct the case because it has no rights to the patent in suit. The lawsuit would be inadmissible.

Pursuant to Section 30 (3)(2) Patent Act, the status of the patent register determines who as patent owner is authorized to conduct proceedings. As long as Alice GmbH is not registered there as the patent owner, it is in principle not entitled to bring an admissible action. This is the case even if Charlie AG has in the meantime sold the patent to Alice GmbH, but the change of ownership has not yet been recorded in the patent register.

The situation is different where the action is first brought by the registered patent owner, who then transfers the patent during the proceedings. The action does not become inadmissible retroactively, just because the new patentee has been recorded in the register in the meantime. Rather, the previous plaintiff remains entitled to conduct the proceedings pursuant to Section 265 (2) Code of Civil Procedure. Although the new proprietor can in principle take over the proceedings as plaintiff, this is subject to the consent of the defendant. In any case, the final judgement will have legal effect also against the new patent owner.

Note: In certain cases the infringement action may also be brought by persons who are not entered in the register as patent proprietors. This applies, for example, to exclusive licensees. Also third parties to whom the registered proprietor has granted the right to bring an action (“gewillkürte Prozessstandschaft”) may bring an action if they can demonstrate a legitimate interest of their own.

III.     Material right to bring an action: Right to sue

Strictly to be distinguished from the authority to conduct court proceedings is the “Aktivlegitimation” or right to sue, i.e. the question of who is entitled to the substantive rights from the patent. This depends solely on the material patent proprietorship and is therefore not based on the status of the patent register.

If the patent is transferred after the lis pendens of the infringement proceedings, the plaintiff must therefore adapt the requested relief to the changed legal situation. This mainly concerns the claims for damages, information and rendering of accounts. However, the claim for injunctive relief (correspondingly also the claims for recall and destruction) is not affected, since the infringer is not ordered to cease and desist with respect to a specific plaintiff, but to cease and desist per se (Federal Court of Justice, GRUR 2013, 713 – Fräsverfahren).

In another illustrative example, Alice GmbH, as the patent owner, sues Bob KG for patent infringement. Among other things, Alice GmbH is seeking a declaratory judgment that Bob KG must compensate it for the damages incurred as a result of the infringement. During the proceedings, Alice GmbH now transfers the patent in suit to Charlie AG. Two months after the transfer, Charlie AG is entered in the register as the new owner, but Alice GmbH continues to conduct the proceedings as plaintiff.

Alice GmbH now has to convert its requested relief, because from the moment of transfer, Charlie GmbH has become the beneficiary of the claim for damages. The time of the transfer transaction, not the time of the entry in the patent register, is decisive. Alice GmbH now only request declaratory relief concerning the obligation to pay damages, as far as it has itself incurred damages up to the transfer to Charlie AG. For the period after the transfer, the request is only directed at the damages that Charlie AG can claim.

However, the entry in the patent register is not completely irrelevant for the right to sue in infringement proceedings. Case law regards the entry in the patent register as an indication of the actual material ownership of the person entered there. The background to this is that an amendment of the register pursuant to Section 30 (3)(1) Patent Act requires proof to the Patent Office. In this respect, the courts presume the registered proprietor to be the holder of the substantive rights.

However, this presumption can be rebutted in infringement proceedings, if the defendant can cast doubt on the presumed validity of the patent transfer, thus alleging the incorrectness of the register. Simply contesting the correctness of the register without any indication to that effect is not sufficient.

Benjamin Rätz LL.M. (Nagoya)

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