United States District Court, S.D. California
September 22, 2005.
MISSION I-TECH HOCKEY LTD., Plaintiff,
OAKLEY, INC., Defendant.
The opinion of the court was delivered by: LEO PAPAS, Magistrate Judge
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS (15-1) AND GRANTING
IN PART AND DENYING IN PART DEFENDANT'S MOTION TO STRIKE (15-2)
This action arises from a Settlement and License Agreement
between Plaintiff Mission I-Tech Hockey Ltd.'s (hereafter
"Plaintiff" or "Mission") predecessor and Defendant Oakley, Inc.
(hereafter "Defendant" or "Oakley") in case number 01-2374, a
case previously litigated in this Court (hereafter "the Oakley
case"). In the Oakley case, on February 18, 2003, the parties
agreed that the undersigned would have jurisdiction to decide,
inter alia, "all disputes arising out of the terms of the
Settlement Agreement once completed and that any decision by the
undersigned shall be FINAL AND BINDING WITH NO APPEAL . . ."
(Consent to Jurisdiction of A Magistrate Judge and Order of
Reference, February 18, 2003, case no. 01-2374) On May 5, 2005, Mission filed the instant action against
Oakley, asserting causes of action for Breach of the Settlement
and License Agreement and for Patent Infringement. On May 26,
2005, the parties stipulated that the instant case be transferred
to the undersigned for all purposes. They further stipulated that
the instant case arises from the terms and conditions of the
Settlement and License Agreement noted above.
Oakely has filed a Motion to Dismiss Mission's Second Cause of
Action for Patent Infringement and a Motion to Strike Mission's
Request and Prayer for Damages and Request for Jury Trial.
Mission has filed an Opposition to the Motions to Dismiss and
Strike. Oakley has filed a Reply to the Opposition.
STANDARD FOR MOTION TO DISMISS
Generally under Federal Rule of Civil Procedure 12(b) (6), a
complaint should not be dismissed for failure to state a claim
unless it appears beyond doubt that the plaintiff could prove no
set of facts in support of his or her claim for relief. Church
of Scientology v. Flynn, 744 F.2d 694, 696 (9th Cir. 1984). In
applying this standard, the court must treat all of the
plaintiff's factual allegations as true. Experimental Eng'g,
Inc. v. United Technologies Corp., 614 F.2d 1244, 1245 (9th Cir.
1980). However, the court is not bound to assume the truth of
legal conclusions simply because they are stated in the form of
factual allegations. Western Mining Counsel v. Watt,
643 F.2d 618, 624 (9th Cir.), cert. denied, 454 U.S. 1031 (1981). To
dismiss with prejudice, it must appear to a certainty that the
plaintiff would not be entitled to relief under any set of facts
that could be proven. Reddy v. Litton Indus., 912 F.2d 291, 293
(9th Cir. 1990), cert. denied, 502 U.S. 921 (1991).
Dismissal is also proper if a complaint is vague, conclusory,
and does not set forth any material facts in support of the
allegation. North Star Intern v. Arizona Corp. Comm'n,
720 F. 2d 578, 583 (9th Cir. 1983). Plaintiff bears the burden of
pleading sufficient facts to state a claim; a court will not
supply essential elements of the claim that were not initially
pled even in the context of a pro se plaintiff. Richards v.
Harper, 864 F.2d 85, 88 (9th Cir. 1988); Ivey v. Board of
Regents of University of Alaska, 673 F.2d 266, 268 (9th Cir.
1982). Although the Federal Rules of Civil Procedure are very
liberal as to pleading, a complaint is subject to dismissal if
the pleading fails to reasonably inform the adverse party of the
asserted cause of action. Haines v. Kerner, 404 U.S. 519, 520
(1972). The court must give a litigant leave to amend his
complaint unless it is "absolutely clear that the deficiencies of
the complaint could not be cured by amendment." Noll v.
Carlson, 809 F.2d 1446, 1447 (9th Cir. 1987).
A. Mission Does Not Have Standing To Assert a Cause of Action
for Patent Infringement
1. Mission's Complaint
Mission contends that it has an exclusive renewable license to
manufacture, sell and offer for sale hockey face shield products
incorporating Oakley's '848 and '705 patent technology, in
exchange for a certain agreed annual royalty payments, or a
minimum annual payment. (Complaint at paragraph 9) Under the
Settlement and License Agreement, Oakley is obligated to enforce
the '848 patent against third party infringers. (Complaint at
paragraph 10) The Settlement and License Agreement provides that Oakley shall not license any
third party infringer nor manufacture for the benefit of any
third party similar products incorporating the '848 and the '705
patents or any foreign equivalent thereof. (Complaint at
paragraph 11) Mission asserts that, during the term of the
Settlement and License Agreement, no party other than Itech
would thereafter have the right to manufacture, sell or offer for
sale products covered by the '848 patent. (Complaint at
paragraph 13, emphasis added) Mission contends that as the
exclusive licensee of the '848 and '705 patents in the limited
field of hockey shield products, it has the standing to assert
the claim of patent infringement against Oakley. (Complaint at
paragraph 20) Mission asserts that Oakley has engaged in
intentional acts to infringe and/or induce infringement of the
'848 and '705 patents by manufacturing hockey shield products
covered by the '848 patent, for the benefit of a competitor,
allowing the competitor to sell and offer for sale such products
to its customers and to the general public. (Complaint at
paragraphs 32, 33) Oakley denies these allegations.
2. Settlement and License Agreement
Since the parties have stipulated that their dispute arises
from the Settlement and License Agreement, the pertinent parts of
that Agreement are stated here: [EDITORS' NOTE: THIS PAGE IS BLANK.] [EDITORS' NOTE: THIS PAGE IS BLANK.] 3. Analysis
a. Mission's Complaint Fails to Allege That It Has Standing to
Sue Oakley for Patent Infringement
The only support for the reference in Mission's Complaint that
it has standing to sue Oakley for patent infringement is that, as
an exclusive licensee of the '848 patent, it has standing to
assert a patent infringement claim. This statement is supported
by Mission's reference to U.S. Valves v. Dray 212 F3d 1368
(Fed. Cir. 2000)
However, U.S. Valves does not discuss an exclusive licensee's
standing to sue a patentee. Rather, it discusses the court's
jurisdiction to hear the appeal in that case. Therefore, the
holding of U.S. Valves does not support Mission's allegation of
standing to sue Oakley for patent infringement. Mission cites no
other cases to buttress its position.
b. Oakley Has Retained Substantial Rights to the Patent
Oakley contends that it has retained substantial rights in the
patent, even though it granted an "exclusive" license to Mission.
Mission asserts that as an "exclusive" licensee, it has standing
to sue Oakley.
It is well settled "that before a federal court can consider
the merits of a legal claim, the person seeking to invoke the
jurisdiction of the court must establish the requisite standing
to sue." Whitmore v. Arkansas 495 U.S. 149, 154, 110 S.Ct. 1717
(1990). A Plaintiff has the burden "clearly to allege facts demonstrating
it is a proper party to invoke judicial resolution of the
dispute." U.S. v. Hays 515 U.S. 737, 743, 115 S. Ct. 2431, 2435
Only a patentee may bring an action for patent infringement.
35 U.S.C. § 281. A patentee is the party to whom the patent issued
or any successors in title to the patent. 35 U.S.C. § 100(d). A
licensee is not entitled to bring suit in its own name as a
patentee, unless the licensee holds "all substantial rights"
under the patent. Textile Productions, Inc. V. Mead Corp.,
134 F.3d 1481, 1484 (Fed. Cir. 1998)
A licensee who has no right to exclude others from making,
using, or selling the licensed products has no legally recognized
interest that entitles it to bring an infringement action.
Abbott Laboratories v. Diamedix Corp. 47 F.3d 1128, 1131 (Fed.
Cir. 1995), Arachnid, Inc. V. Merit Industries 939 F.2d 1574,
1579 n. 7 (Fed. Cir. 1991)
An exclusive licensee that does not have all substantial rights
has standing to sue third parties only as a co-Plaintiff with the
patentee. Textile, supra at 1484, citing Abbott
47 F.3d at 1130-1133. However, 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, supra at 1484, citing Waterman v. MacKenzie
138 U.S. 252, 255 (1891).
To determine whether a licensee is an exclusive licensee, the
court must ascertain the intent of the parties to the license as
manifested by the terms of their agreement and examine the
substance of the grant. The use of the word "exclusive" is not
controlling; what matters is the substance of the arrangement. Textile,
supra at 1484. Therefore, the Court must determine whether
Mission is actually an "exclusive" licensee of Oakley's '848
Here, Mission does not have "all substantial rights" to the
patent. Instead, Oakley has retained many substantial rights to
First, Oakley is obligated to enforce the patent and any
foreign equivalents thereof, at its cost, against third party
infringers, including using litigation to do so. (Settlement and
License Agreement, V, paragraph 2) Further, Oakley is obligated
to stop a third party infringer from selling infringing products,
including using litigation to do so. (Settlement and License
Agreement, V, paragraph 3)
Second, Oakley retained the rights to review and approve or
disapprove of Mission's advertisements that include references to
the features or technology described in the patent, and/or any
rights received under the License Agreement. (Settlement and
License Agreement, VI, paragraph 5)
Third, Oakley agreed to obtain and maintain the equivalent of
the patent in foreign countries where it has sought, or is
seeking, patents. (Settlement and License Agreement, VI,
Fourth, Mission does not have the right to sublicense or
transfer any rights it may have under the License Agreement.
(Settlement and License Agreement, VI, paragraph 7)
Mission argues however, that the Settlement and License
Agreement contains "no reservation of rights, express or implied,
by Oakley in the field of hockey shields. Hence Mission . . . is
expressly the exclusive licensee to the exclusion of Oakley
within the field of hockey shields and thus has standing to sue Oakley
for patent infringement. (Mission's Points & Authorities in
Support of its Opposition to Motion to Dismiss, at 9, emphasis
Mission cites Dreamlite Holdings, Ltd. v. Kraser,
705 F.Supp. 98 (E.D.N.Y. 1988) in support of its position. However, in
Dreamlite, the license agreement gave Dreamlite the exclusive
right, inter alia, "to defend and enforce the Patent and to
prevent infringement of the patent." Dreamlite, supra at 100.
In this case, Mission does not enjoy the exclusive right to
enforce the patent and/or prevent infringement of the patent. In
fact, the opposite is true. Oakley is specifically obligated to
enforce the patent and prevent infringement of the patent.
(Settlement and License Agreement, V, paragraphs 2, 3) Moreover,
Dreamlite is not binding on this Court.
Mission also cites Sanofi, S.A. v. Med-Tech Veterinarian
Products 565 F.Supp. 931 (D.N.J. 1983). However, in Sanofi,
the court noted "(e)xclusive licensees have the right to enjoin
acts of infringement and, because the presence of the patentee is
usually necessary to pursue such relief, may compel the patentee
to become a party to the lawsuit." Again, here, Mission does not
have the exclusive right to enjoin acts of infringement; Oakley
retained that right. Moreover, Sanofi is not binding on this
Mission also cites Research Frontiers, Inc. v. Marks Polarized
Corp. 290 F.Supp. 725 (E.D.N.Y. 1968). While the court in
Research Frontiers noted that a licensee may sue his licensor
under the patent laws, even though the licensor is the owner of
the patents, Research Frontiers, supra at 727, the case does
not discuss the specific rights given to the licensee, nor the
specific rights retained by the licensor. Therefore, Research Frontiers is not
helpful in this Court's analysis. This case is also not binding
on this Court.
Mission also cites Rite-Hite Corp. v. Kelley Company, Inc.
56 F.3d 1538 (Fed. Cir. 1995). However, in Rite-Hite, the court
Generally, one seeking money damages for patent
infringement must have held legal title to the
patent at the time of the infringement. A conveyance
of legal title by the patentee can be made only of
the entire patent, an undivided part or share of the
patent, or all rights under the patent in a
specified geographical area. A transfer of any of
these is an assignment and vests in the assignee with
title in the patent, and a right to sue infringers. A
transfer of less than one of these three interests is
a license, not an assignment of legal title and it
gives the licensee no right to sue for infringement
at law in the licensee's own name.
Rite-Hite, supra, at 1551-1552 (emphasis added, citations and
Here, Mission does not have legal title to the patent because
all rights in the patent were not conveyed to it in the
Settlement and License Agreement. Further, Mission does not have
the right to sue third parties for infringement of the patent;
Oakely retained that right.
Finally, Mission's attempt to characterize itself as an
exclusive licensee to the exclusion of Oakley is unavailing.
While Mission notes that the Settlement and License Agreement
contains no reservation of express or implied rights in the field
of hockey shields, the Settlement and License Agreement shows
otherwise. For example, Section VI, paragraph 4 of the Settlement
and License Agreement provides that if the wholesale price of an
Oakley hockey shield featuring '848 patent technology is reduced
from the price as of the date of the Agreement, the royalty on
the corresponding Itech product shall also be reduced. The
logical conclusion to a reading of that language is that Oakley retains the rights to, and will
continue to, manufacture and sell hockey shields featuring '848
patent technology. The wholesale price of the patented product
can be reduced only if Oakley retains the right to manufacture
and sell the product. To interpret this provision any other way
would mean that Oakely would have no control over the pricing of
the patented hockey shields, which does not comport with the
language nor logical interpretation of the provision. Further, to
interpret this provision any other way would render it
incompatible with the other terms of the Agreement. A license
agreement in which Mission holds all exclusive rights would not
need § IV, paragraph 4, because Mission would have "exclusive"
control over manufacture and sale of the licensed hockey shields.
Mission would therefore have "exclusive" control over the
wholesale pricing of the hockey shields. Therefore, the
Settlement and License Agreement had to envision Oakely
manufacturing and selling the hockey shields. Moreover, Mission
attempts to point to language that is not in the Settlement and
License Agreement, when ample language is present to
demonstrate that substantial rights to the patent have been
retained by Oakley.
As a result, the Court concludes that Mission is not an
"exclusive" licensee of the patent and does not have standing to
sue Oakley for patent infringement. The Court does not see any
way Mission could amend its Complaint to comport with this
ruling. Therefore, Oakley's Motion to Dismiss Mission's cause of
action for Patent Infringement is GRANTED with
prejudice.*fn1 B. Motions to Strike
Oakley also requests that Mission's demand for damages and its
Request for Jury Trial, be stricken from the Complaint.
1. Mission's Demand for Damages
Mission claims that it has and will continue to suffer monetary
damages as a result of Oakley's conduct. (Complaint at paragraph
34) Therefore, it seeks damages against Oakley (Complaint, Prayer
at paragraph 1) Oakley contends that since Mission is not the
owner of the patent, it cannot be awarded damages.
One seeking to recover money damages for patent infringement
must hold legal title to the patent during the time of the
infringement. While a licensee may be able to obtain equitable
relief from the patentee, a licensee cannot obtain monetary
relief. Arachnid 939 F.2d at 1579-1580; Rite-Hite
56 F.3d at 1551-1552.
Mission holds a mere license to manufacture, sell and offer for
sale hockey shield products incorporating Oakley's '848 patent.
It does not hold legal title to the patent. Therefore, it cannot
recover monetary damages for patent infringement.
Oakley also argues that a clause in the Settlement and License
Agreement is a liquidated damages clause that precludes Mission
from obtaining money damages for breach of the Agreement. Mission
contends that Oakley's characterization of the clause as a
liquidated damages clause is erroneous. The clause debated by the
parties states in pertinent part:
". . . Should Oakley fail to take action against a company on
the Mandatory Enforcement List*fn2 . . . then Itech shall be
relieved of its obligation to pay the royalties required under
this . . . Agreement."
Contrary to Oakley's contention, the clause is not a liquidated
damages clause. The clause simply states that if Oakley fails to
take action against certain third party infringers, Itech is
relieved of its obligation to pay royalties. The clause does not
state any particular amount of monetary damages shall be paid in
the event of breach of the Agreement. Therefore, the Court
concludes that Mission may maintain its demand for damages for
breach of the Agreement. As a result, Oakley's Motion to Strike
Mission's Demand for Damages is GRANTED in part and DENIED in
2. Mission's Request for Jury Trial
Oakley argues that Mission's Request for Jury Trial should be
stricken because Mission has waived that right by entering into a
stipulation vesting jurisdiction of this case with this Court.
Mission argues that the stipulation to jurisdiction in this Court
does not waive its right to a jury trial.
In the Oakley case (case no. 01-2374), the parties stipulated,
and the Court ordered, that the undersigned would have
jurisdiction to decide all disputes arising out of the settlement
agreement, and that any decision by the undersigned would be
final, binding, with no appeal. (Consent to Jurisdiction of A
Magistrate Judge & Order of Reference, February 18, 2003, case
no. 01-2374, emphasis added) After the instant case was filed,
the parties stipulated that the instant case would be transferred
to the undersigned for all purposes.
Oakley asserts that where the undersigned is endowed with all
authority to resolve this matter, a jury trial has been waived by
the parties as to all matters arising out of the Agreement. (Mot.
at 16) Oakley mischaracterizes the issue as one of waiver of a
The Consent to Jurisdiction of A Magistrate Judge & Order of
Reference, that counsel signed on January 31, 2003 and February
3, 2003 and which was ordered on February 18, 2003, states in
pertinent part ". . . The intent of the parties is to provide the
Magistrate Judge with plenary authority to achieve finality
regarding disputes between/among the parties, to reduce the risk
of future litigation, minimize expense, and afford a venue for
the parties to solve disputes with a minimum of expense." As part
of the undersigned's authority is the ability to impose sanctions
or penalties as deemed appropriate, that are commensurate with
the nature and severity of the dispute and resolution thereof.
The authority includes, but is not limited to, monetary or
injunctive relief and the imposition of sanctions.
The Court does not interpret the Consent to Jurisdiction of A
Magistrate Judge & Order of Reference to waive a request for a
jury trial. However, the Consent to Jurisdiction of a Magistrate
Judge & Order of Reference expressly states that the undersigned
would have jurisdiction to decide all disputes arising out of the
Settlement Agreement and any decision by the undersigned would be
final, binding, with no appeal. A jury trial would not comport
with the Consent to Jurisdiction of A Magistrate Judge & Order of
Reference. The parties expressly gave the undersigned the jurisdiction to decide future disputes. The parties did not
contemplate a jury deciding future disputes. Therefore, Oakley's
Motion to Strike Mission's Request for Jury Trial is GRANTED.
The Court, having reviewed the Motion of Defendant Oakley, the
Opposition to the Motion of Mission, the Reply to the Opposition
of Oakley, and GOOD CAUSE APPEARING, hereby:
1. GRANTS with prejudice Oakley's Motion to Dismiss Mission's
cause of action for Patent Infringement; and
2. GRANTS in part and DENIES in part Oakley's Motion to Strike
Mission's Demand for Damages and Request for Jury Trial.
IT IS SO ORDERED.
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