Pitt’s Late Invite Crashes Infringment Party With Varian

Posted on | July 11, 2008 | 3 Comments

2008-1441/1454 Univ. of Pittsburgh v. Varian Medical
WD/PA 07-CV-491
Judge Arthur J. Schwab

There are standing issues and then there are standing issues. 

Both parties have appealed from Judge Arthur J. Schwab’s final order dismissing University of Pittsburgh’s infringement case against Varian Medical Systems–with prejudice–for lack of standing. 

Still basking in the glory of its stunning upset victory in the 2007 Backyard Brawl, Pitt faced another challenge last December in federal court.  After conducting several months of intensive discovery and completing a Markman hearing, Varian moved for summary judgment, arguing that Pitt failed to join Carnegie Mellon University as a necessary party to the suit and thus lacked standing.   

Signaling the gravity of the issue, Judge Schwab promptly referred the motion to a Special Master–former Chief Judge of the Western District of Pennsylvania, Donald E. Ziegler.  In response, Pitt simultaneously filed an opposition to Varian’s motion and a separate motion to join Carnegie Mellon under Rule 19.  Less than a week later, the Court denied the motion to join Carnegie Mellon (citing the Court’s Scheduling Order), leaving only the pending motion for summary judgment. 

The Special Master submitted a Report and Recommendation on March 10, 2008 recommending that Varian’s motion for summary judgment be granted because the patents-in-suit (5,727,554 and 5,784,431) were the joint development of Pitt and Carnegie Mellon and thus jointly owned.

Special Master Ziegler concluded that it is "well-settled that a co-owner of a patent must voluntarily join in any action or the case will be dismissed for lack of standing." While Pitt argued that Carnegie Mellon had transferred its rights to the patents under several joint development agreements, the Special Master found otherwise.  According to his R&R, the operative agreements (1) did not show that Carnegie Mellon relinquished its right to sue for infringement, (2) allowed Carnegie Mellon to license the patents, (3) did not assign the right to exclude solely to Pitt, and (4) allowed Carnegie Mellon to continue practicing the patents.  Thus, Special Master Ziegler determined that Carnegie Mellon had retained "substantial rights" in the patents and that Pitt lacked standing to bring the suit in its own name.

Judge Schwab adopted the Special Master’s recommendation–with one wrinkle.  The Special Master recommended that the case be dismissed without prejudice given Carnegie Mellon’s willingness to join (and possibly the 250-plus docket entries noted in his report): 

Although we recommend that the motion for summary judgment be granted, we recommend that it be granted without prejudice to UPitt to file an amended complaint, within thirty days, in which CMU is added as a party plaintiff, which would correct the standing deficiency. The interests of justice and judicial economy weigh in favor of permitting an amendment to the complaint given the substantial time and resources that the parties have devoted to this case, the apparent willingness of CMU to join in the action, and the fact that CMU is subject to the jurisdiction of the Court.

Judge Schwab disagreed. Citing recent Federal Circuit law, the Court held that timing of adding a party matters (Opinion, p. 4):

The majority of the authority holds simply that the co-owners must be joined and is silent on the issue of at what point they must be joined to the suit. However, one case from the Federal Circuit provides some guidance. In International Gamco, Inc. v. Multimedia Games, Inc. the Court stated:

Allowing a licensee, even one with exclusive rights to the patent for a particular field of use, to sue in its own name alone poses a substantial risk of multiple suits and even multiple liabilities against an alleged infringer for a single act of infringement. To alleviate this risk, this court’s prudential standing requirement compels an exclusive licensee with less than all substantial rights, such as a field of use licensee, to join the patentee before initiating suit.

International Gamco, Inc. v. Multimedia Games, Inc., 504 F.3d 1273, 1278 (Fed Cir. 2007). Also, the requirement that the plaintiffs be joined at inception of the suit may be implied from the lack of authority found holding that the plaintiffs need not be joined at the inception of the lawsuit.

The Court also rejected the recommendation to allow Pitt’s motion to join Carnegie Mellon under Rule 19–chiefly because Pitt knew that Carnegie Mellon retained rights in the asserted patents from the outset.  In declining the Special Master’s recommendation, Judge Schwab wrote:

Whether plaintiff’s very sophisticated patent counsel made this tactical decision not to join CMU in order to make discovery of CMU as a non-party more difficult for defendant, or for some other tactical reason, the Court does not know. However, plaintiff’s argument that since some discovery has been conducted relating to CMU, CMU can be added as a party, and the case can simply proceed, is not credible, as any review of the docket will establish. The request to add CMU was untimely and unfair to defendant on December 5, 2007, and it is even more so now four (4) months later.

Varian has cross-appealed the Court’s decision not to sanction Pitt. 

More Reading

Special Master Ziegler’s Report and Recommendation

Judge Schwab’s Order

Counsel

For University of Pittsburgh:  Morgan, Lewis & Bockius, Palo Alto, CA (Daniel Johnson, Jr., Rita E. Tautkus, and Darcy Paul), Philadelphia, PA (David W. Marston, Jr.), and Pittsburgh, PA (Christopher K. Ramsey)

For Varian: Orrick, Herrington, & Sutcliffe, Menlo Park, CA (William L. Anthony, Jr., Matthew H. Poppe, and Zheng (Jen) Liu), Picadio, Sneath, Miller & Norton, Pittsburgh, PA (Henry M. Sneath and Shannon M. Clougherty)

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