Federal Circuit Holds Sublicensing Veto, Royalty, and Right to Sue Together Satisfy Article III Standing in A.L.M. Holding v. Zydex

On May 19, 2026, the U.S. Court of Appeals for the Federal Circuit issued a precedential opinion in A.L.M. Holding Company et al. v. Zydex Industries Private Ltd. et al. (No. 25-1317), authored by Circuit Judge Chen. The court held that patent owners who retain a sublicensing veto, royalty interests, and the right to sue—even after granting an exclusive license—preserve the exclusionary interest required for Article III constitutional standing. The decision reversed and remanded a ruling by the U.S. District Court for the District of Delaware that had dismissed the patent infringement suit for lack of constitutional standing. The opinion also clarifies the relationship between constitutional standing and statutory standing under 35 U.S.C. § 281, supplying practical guidance for licensing arrangements that have generated years of conflicting district court rulings.

A.L.M. Holding Company and its asphalt-paving partner Ergon Asphalt & Emulsions, Inc. jointly own six U.S. patents covering warm-mix asphalt paving methods and compositions. In 2008, they granted Ingevity an exclusive worldwide royalty-bearing license. The agreement nevertheless required Ergon’s prior review and approval of any sublicensing, gave Ergon shared control over infringement litigation against third parties, and preserved Ergon’s royalty rights. After A.L.M. and Ergon sued Zydex Industries Private Ltd. and Zydex Inc. in 2024, Zydex moved to dismiss on the ground that all exclusionary rights had been transferred to Ingevity. The District of Delaware granted the motion in November 2024, relying on Morrow v. Microsoft Corp., 499 F.3d 1332 (Fed. Cir. 2007), and concluding that the patent owners’ retained right to sue was not exclusionary in itself.

On appeal, Judge Chen devoted a substantial portion of the opinion to acknowledging that the Federal Circuit’s prior cases had not fully defined the scope of patent exclusionary rights and that, before Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225 (Fed. Cir. 2019), the court had often blurred the Article III injury-in-fact inquiry with the § 281 “patentee” inquiry. That blurring, the opinion notes, has “not always been clear, thereby creating a challenge for district courts applying our precedent.” The court emphasized that Article III standing asks whether the plaintiff suffered a constitutionally cognizable injury, while § 281 asks whether the plaintiff qualifies as a patentee. Although the two inquiries are analytically distinct, their factual analyses can overlap, and district courts should not treat statutory standing cases as categorically irrelevant to constitutional standing analyses.

Turning to the present case, the Federal Circuit found that three retained rights together preserved Ergon’s exclusionary interest. The sublicensing veto was decisive: by preventing Ingevity from unilaterally authorizing an accused infringer to practice the patents, the veto kept the patent owners’ right to sue from being “illusory.” The court invoked Alfred E. Mann Foundation for Scientific Research v. Cochlear Corp. and noted that Intellectual Tech, LLC v. Zebra Technologies Corp. (Fed. Cir. May 1, 2024) had already cited Mann approvingly in a constitutional standing analysis, undermining the district court’s view that Mann was confined to statutory standing.

The Federal Circuit also rejected Zydex’s argument that the absence of a unilateral right to grant a license—and thus to settle litigation by issuing one—negates standing. Ergon retains other settlement tools, including monetary payments and infringer concessions to cease practicing the patents. The opinion distinguished Morrow on the ground that the Morrow plaintiff was not a patent owner and the right to sue had been contractually severed from every other exclusionary right held by a different party. Here, Ergon remains the patent owner, retains shared control over enforcement, and holds a sublicensing veto and royalty rights.

The court issued a companion decision the same day in Recor Medical, Inc. v. Medtronic Ireland Manufacturing Unlimited Co. (No. 25-1998), applying the A.L.M. framework to a renal-denervation patent dispute and likewise reversing dismissal for lack of standing. For licensing practitioners, the message is direct: drafting decisions about sublicensing veto rights, royalty interests, and litigation control allocations now have explicit consequences for the patent owner’s ability to bring suit. Global companies that license patents through affiliates or strategic partners should revisit their agreements with A.L.M. in hand.