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Alice invents a widget and receives a U.S. patent for her invention. In return for payment, she grants Bob an exclusive license to manufacture and sell the widget.

Carol decides to make knock-off widgets without permission from Alice.

Alice decides that, for a number of practical reasons, it's not worth pursuing a claim against Carol.

Now, does Bob have a claim against Alice for not enforcing his exclusivity? Does he have a claim against Carol?

3
  • I'm sure Bob would get the right to enforce his exclusivity, but I'm sure that is also not Bob's concern; Bob probably doesn't want to deal with it having paid his dues for the license.
    – kisspuska
    Jun 1 at 15:16
  • 2
    As a business owner (and not an attorney) who has entered into many agreements, I would imagine it depends on the terms of the contract between Alice and Bob and if there is a clause in it that compels Alice to do such a thing in the event of a Carol or if Bob had a justifiable reason to believe Alice would do such a thing based on the way the contract was written. From all my experience writing business contracts and my interactions with attorneys, intent (and "reason to believe") is what ultimately decides agreement disputes. And I'd imagine Bob and Alice wrote a contract.
    – acidgate
    Jun 1 at 16:27
  • @acidgate Your conjecture is correct and consistent with the dictum in Ind. Wireless at 469 (see below). Jun 1 at 20:33
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does Bob have a claim against Alice for not enforcing his exclusivity? Does he have a claim against Carol?

The licensee primarily has a claim against the infringer of the patent, but see Ind. Wireless Co. v. Radio Corp., 269 U.S. 459, 468 (1926):

The presence of the owner of the patent as a party is indispensable not only to give jurisdiction under the patent laws but also, in most cases, to enable the alleged infringer to respond in one action to all claims of infringement for his act [...]

which is why

[i]f the owner of a patent, being within the jurisdiction, refuses or is unable to join an exclusive licensee as co-plaintiff, the licensee may make him a party defendant by process and he will be lined up by the court in the party character which he should assume.

Id at 469.

That "party character" would be co-plaintiff. See Gentesix v. Board of Regents of Univ. of Texas Sys., 966 F.3d 1316, 1323 (2020):

[A] patentee who refuses to voluntarily join an infringement action initiated by its exclusive licensee can ordinarily be joined as an involuntary plaintiff under Rule 19(a).

For Bob to have a claim against the owner of the patent, the terms of the license agreement would need to establish the owner's responsibility. For instance, Ind. at 469 notes that

exclusive licenses frequently contain express covenants by the patent-owner and licensor to sue infringers that expressly cast upon the former the affirmative duty of initiating and bearing the expense of the litigation.

This reflects that the owner a priori has no duty toward the licensee in regard to enforcement of exclusivity.

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Alice . . . grants Bob an exclusive license to manufacture and sell the widget.

Carol decides to make knock-off widgets without permission from Alice.

Alice decides that, for a number of practical reasons, it's not worth pursuing a claim against Carol.

Now, does Bob have a claim against Alice for not enforcing his exclusivity? Does he have a claim against Carol?

Normally, the exclusive license contract would authorize Bob to sue infringers of Alice's patent licensed to him at Bob's expense, without Alice's post-contractual, post-dispute permission with an irrevocable power of attorney or the equivalent. So, Bob would have a claim against Carol, but not a claim against Alice.

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  • 2
    Would that authorization have to be spelled out in the contract? Suppose the contract was simply "Alice grants Bob an exclusive license to produce this widget, for such-and-such consideration" - would Bob have any right of action?
    – Sneftel
    Jun 1 at 19:30
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    @Sneftel Don't know. It almost never happens that way. It is rare to see a licensing agreement of that type under 5-10 pages, and 20-40 pages wouldn't be uncommon.
    – ohwilleke
    Jun 1 at 19:59

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