Abbott Laboratories v. Diamedix Corp.

Diamedix Corp. (defendant) was the assignee of two patents that covered certain blood-testing systems. Before 1988, Diamedix granted eight nonexclusive licenses under the patents. In 1988, Diamedix entered a license agreement with Abbott Laboratories (Abbott) (plaintiff), under which Diamedix transferred an exclusive worldwide license to make, use, and sell products covered by the patents, except that Abbott’s license was subject to the preexisting licenses that had been granted by Diamedix, and Diamedix reserved for itself the right to make, use, and sell products covered by the patents. The agreement lasted for the life of the patents. The agreement also contained a clause that addressed the parties’ rights against third parties in the event of infringement. Under the clause, Abbott had the right to file infringement suits, but if Abbott declined to file suit, Diamedix had the right to file suit. The party that filed suit controlled the litigation, and Abbott could not prejudice or impair Diamedix’s patent rights in the event of a settlement. In 1994, Abbott filed a patent-infringement action against a third party. Diamedix moved to intervene as a plaintiff, arguing that it was the legal owner of the patents and, possibly, an indispensable party to the suit. The court denied the motion to intervene, reasoning that Diamedix’s interests were adequately protected by Abbott. Diamedix appealed.