Do Nonexclusive Licensees Have Standing to Sue for Patent Damages?

A couple of recent posts on other blogs has led me to consider a topic that Roger Blair and I addressed long ago in our paper The Elusive Logic of Standing Doctrine in Intellectual Property Law, 74 Tulane L. Rev. 1323 (2000).  In that paper, we noted that under U.S. law exclusive licensees have standing to sue for patent infringement (though normally the patentee must be a named party as well), whereas nonexclusive licensees do not.  Doctrinally, the limitation imposed on nonexclusive licensees stems from the fact that under U.S. law a nonexclusive license is merely a permission to use, and conveys no promise that the licensor will refrain from licensing others.  On this logic, there is no legal injury to the nonexclusive licensee when that entity is forced to compete with an infringer (though of course the patentee suffers a cognizable injury, if only from the loss of an opportunity to license the infringer).  On a policy basis, moreover, it may be unduly difficult to ascertain ex post the extent to which the infringer diverted sales that otherwise would have gone to the nonexclusive licensee (since, again, the licensor was free to license others, including the infringer, and may well have done so absent the infringement).  Awarding the nonexclusive licensee an unfettered right to sue also could put the patent at risk, if the nonexclusive licensee initiates litigation without the consent of the patent owner and/or other licensees, though I suppose the license contract itself could impose some limitations on the nonexclusive licensee’s ability to do this.  Where the patentee has granted an exclusive license, by contrast—meaning, in the simplest case, that the patentee has promised not to license anyone other than the exclusive licensee—the exclusive licensee can sue for its own lost profits, and the patentee can recover whatever additional royalty it would have obtained from the exclusive licensee on the latter’s lost sales.

What prompted me to consider these issues again was, as I noted above, two recent posts, one on JUVE Patent and one on Sufficient Description.  The JUVE Patent post, titled No damages for Lilly France in Pemetrexed dispute with Viatris, states that a recent decision by the Judicial Court Paris rejected Lilly France’s request for infringement damages, because Lilly France is merely a subsidiary of the Eli Lilly Group, and neither the patent holder itself nor a licensee; and the French I.P. Code limits standing to sue to patent holders and licensees.  The post does not link to the decision itself, though Law360's UK edition has a story and a link to an English-language translation of the decision.  According to the decision, Lilly France "expressly states that it is not a licensee of the patent," and article 615-2 of the French Intellectual Property Code requires that one be either an owner or a licensee to assert an action for infringement.  It does allow even a nonexclusive licensee to sue, however, if the license contract expressly permits this and it informs the patent owner first ("si le contrat de licence l'y autorise expressément, à condition, à peine d'irrecevabilité, d'informer au préalable le titulaire du brevet").  I have to admit, I'm not sure why Lilly France wouldn't be considered some sort of licensee, given that "it claims to manufacture pemetrexed disodium in France on behalf of the companies of the Eli Lilly group."  If any readers can enlighten me on this point, I would appreciate it.

Over in Canada, Norman Siebrasse published a recent post titled Can the Election Between Damages and an Accounting Be Made After Discovery?, discussing a Canadian case, Angelcare Canada Inc. v. Munchkin Inc., 2023 FC 1111, in which the court held that two plaintiff companies in addition to patentee plaintiff Angelcare (Edgewell and Playtex) may recover infringement damages, even though there were never any formal licenses in place.  The decision states that under § 55(1) of the Canadian Patent Act, a person “claiming under the patentee” can claim damages, and the trend in Canadian law (as discussed in the decision in great detail) has been to interpret this provision broadly.  "The law does not require a license, be it exclusive or nonexclusive; it does not require that it be in writing, yet in this case we have the proof of such unwritten license through a variety of instruments" (para. 124).  (As the post notes, the decision also permits the patentee to elect for an accounting or damages after discovery has been completed; and denies a request for punitive damages, citing authority for the proposition that willful and knowing infringement is, by itself, insufficient to sustain an award of punitive damages.)

For what it’s worth, as I noted in my book (p.294 n.25) the rules in Japan are somewhat complicated, though as in the U.S. nonexclusive licensees cannot sue.