CAFC Reverses Dismissal of TexasLDPC’s Infringement Suit Against Broadcom

The U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision today in TexasLDPC Inc. v. Broadcom Inc., reversing a district court’s dismissal of a patent and copyright infringement lawsuit brought by an exclusive licensee that had not joined the patent owner as a co-plaintiff. The court held that TexasLDPC Inc.’s license agreement with Texas A&M University (A&M) did not automatically terminate when TexasLDPC shifted its business to patent enforcement. The agreement conveyed “all substantial rights” in the asserted patents to TexasLDPC, making A&M “not otherwise a necessary party” under Federal Rule of Civil Procedure 19.

TexasLDPC held an exclusive license to five patents and three copyrights covering low density parity check (LDPC) code technology, a type of error correction code used to detect and correct errors in transmitted data signals. Dr. Kiran Gunnam developed the underlying technology as a doctoral candidate at A&M, which patented the innovations and granted Marvell International, Ltd. a non-exclusive license. After earning his degree, Dr. Gunnam worked for LSI Corporation, one of the defendants in this case, where he urged the company to license his inventions from A&M. After leaving LSI, Dr. Gunnam’s wife, Annapurna Yarlagadda, co-founded TexasLDPC in late 2014.

Under a June 2015 agreement, A&M granted TexasLDPC an exclusive license to make, use, sell, and sublicense the patented technology. The agreement also gave TexasLDPC the exclusive right to sue infringers and collect damages in exchange for equity in TexasLDPC, a share of sublicense royalties and a share of any enforcement recovery. It also reserved to A&M a limited right to practice the patents for research and education purposes, the sole right to sue Marvell for infringement, and the right to approve any assignment of the agreement.

TexasLDPC filed a lawsuit against Broadcom Inc. for patent and copyright infringement in the U.S. District Court for the District of Delaware in December 2018, later amending the complaint to add Avago Technologies U.S. Inc. and LSI Corporation. By that point, TexasLDPC had exhausted its capital, had not secured any customers or sublicensees, and had refocused its efforts solely on enforcing its rights through litigation. Broadcom, Avago, and LSI moved to dismiss, arguing that A&M was a necessary party under Rule 19 and that TexasLDPC had failed to join it. The district court ultimately dismissed the case in September 2023 on two grounds. It found that the license agreement automatically terminated when TexasLDPC ceased business operations by pivoting to enforcement, and that even if the agreement remained in effect, TexasLDPC lacked “all substantial rights” in the patents and could not proceed without A&M.

On appeal, the Federal Circuit disagreed with the district court’s reading of the termination provision. The court, applying Texas contract law, explained that the agreement’s definition of “commercially reasonable efforts” expressly included enforcing the patents and copyrights. A separate provision barred termination for failing to record sales or sublicensing revenue by 2021, as long as TexasLDPC was exercising commercially reasonable efforts to enforce its rights or seek collections. The court found that the district court gave too much weight to the agreement’s recital clauses describing A&M’s interest in commercializing the technology, since under Texas law such recitals cannot override an agreement’s operative terms. The court held that TexasLDPC’s enforcement activity remained a business operation under the agreement and concluded the agreement had not terminated in 2019.

The Federal Circuit next addressed whether TexasLDPC held sufficient rights to sue in its own name. Since a patent owner that transfers “all substantial rights” in a patent renders the transfer tantamount to an assignment, conferring standing on the licensee alone, the court examined the totality of the agreement. It found that TexasLDPC held an exclusive right to make, use, and sell the licensed products, to grant sublicenses, and, critically, “the first and only right to enforce the patent rights and copyrights against any infringement by a third party.”

Moreover, the court determined that these rights placed the case closer to Luminara Worldwide, LLC v. Liown Electronics Co., where a similar rights grant was found to convey all substantial rights, than to Propat International Corp. v. Rpost, Inc., where a retained veto power over licensing and litigation decisions defeated a claim of all substantial rights. A&M retained certain rights, including limited research and education use, the sole ability to sue Marvell, and consent rights over assignment. These rights did not substantially restrict TexasLDPC’s enforcement authority.

The Federal Circuit also rejected the district court’s alternative finding that A&M was a necessary party under Rule 19(a)(1)(A) because its absence prevented the court from according complete relief. The district court reasoned that Broadcom, Avago, and LSI needed licensing information held by A&M to evaluate a reasonable royalty under the Georgia-Pacific factors, and that information became harder to obtain after A&M successfully quashed a subpoena by asserting sovereign immunity. The Federal Circuit explained that the “complete relief” inquiry under Rule 19(a)(1)(A) asks only whether meaningful relief remains available, not whether every piece of evidence remains accessible. “Rule 19 is not a discovery tool,” the court said, adding that A&M had already produced the two license agreements most relevant to the asserted patents and that Broadcom’s own damages expert had prepared a report analyzing the Georgia-Pacific factors without the additional information the district court deemed necessary.

Ultimately, the Federal Circuit found that the license agreement remained in effect, that it conveyed all substantial rights to TexasLDPC, and that A&M was not a necessary party under Rule 19. Accordingly, the court reversed the district court’s dismissal of TexasLDPC’s patent and copyright infringement claims against Broadcom, Avago, and LSI.

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Author: almoond