03-Licensing Litigation

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Principles Governing Analysis of Arbitrability : 

Principles Governing Analysis of Arbitrability 1. Arbitration is matter of contract. Can arbitrate only disputes parties have agreed to arbitrate. AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986). 2. Court, not arbitrator, decides arbitrability. 3. In deciding arbitrability, court is not able to rule on merits of underlying claim. 4. Where contract contains arbitration clause, there is presumption of arbitrability.

Medtronic AVE, Inc. v. Cordis Corp. : 

Medtronic AVE, Inc. v. Cordis Corp. 1. Plain language of license agreement showed that licensor’s affiliate was subject to its terms 2. Parties had valid agreement to arbitrate, but dispute did not fall within scope of the arbitration provision. Language of arbitration provision showed that affiliate’s patents did not fall within its scope Medtronic AVE, Inc. v. Cordis Corp., 2003 U.S. Dist. LEXIS 23580 (D. Del., Dec. 11, 2003)

Forum Selection for Litigation : 

Forum Selection for Litigation Does license include forum selection clause? Are there state claims, e.g., breach of license agreement? Holmes Group, Inc. v. Vornado Air Circ. Sys., Inc., 535 U.S. 826 (2002)(whether case arises from patent law must be determined from complaint.) If federal claims, what district should be chosen?

Patent Litigation is Concentrated in Specific Districts : 

Patent Litigation is Concentrated in Specific Districts 30% in top 5 of the 94 districts Cal., C.D. N.Y., S.D. Cal., N.D. Ill., N.D. Del., D. 43% in top 10 districts 63% in top 20 districts 76% in top 30 districts

Patent Complaints per District : 

Patent Complaints per District Top 20 Districts 1995-2003

License Related Issues Subject to Litigation : 

License Related Issues Subject to Litigation Grant Clause Assignability Royalty Provisions Bankruptcy Clauses Termination Clauses Part of Settlement Agreement Antitrust Issues Indemnification

Grant Clause : 

Grant Clause Geographic Scope foreign counterparts Technological Scope related patents/applications Have-made rights Rights to sublease affiliates, customers

Right to Make : 

Right to Make Cyrix Corp. v. Intel Corp., 77 F.3d 1381 (Fed. Cir. 1996) No infringement because license gave manufacturer right to make the patented product.

Have-made Rights : 

Have-made Rights Thorn EMI N. Am., Inc. v. Hyundai Elec. Indus. Co., 1996 U.S. Dist. LEXIS 21170 (D. Del. July 12, 1996). – Foreign supplier not liable for inducing infringement. – Restrictive have-made rights in IBM’s license did not preclude its purchase of “off-the-shelf” patented products from foreign supplier.

Rights to Sublicense : 

Rights to Sublicense E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108 (Del. 1985) – Licensee cannot sell products back to own foundry to circumvent agreement precluding sublicensing. – Toll conversion and sale-back agreements formed one contract equal to a prohibited sublicense.

Royalty Provisions : 

Royalty Provisions Most-favored licensee clause Per use fees on method patents Total sales used as royalty base for convenience

Intersection of Patent Law and Bankruptcy : 

Intersection of Patent Law and Bankruptcy Back door license agreement BR law may allow competitor to acquire debtor’s license and access to patented technology License rejection Under IPBPA debtor-licensor may reject license and affirmative duties under license, but licensee retains right to use patent per original agreement.

Intersection of Patent Law and Bankruptcy : 

Intersection of Patent Law and Bankruptcy Perfection of Interest Courts disagree on how to properly perfect security interest in IP C.D. Cal. holds that methods of perfection in Article 9 of UCC are superceded by federal registration systems and state law filings. In re Peregrine Entertainment, 16 USPQ 2d 1017 (C.D. Cal. 1990)

Intersection of Patent Law and Bankruptcy : 

Intersection of Patent Law and Bankruptcy In re: Cybernetic Services, Inc., 252 F.3d 1039 (9th Cir. 2001) Peregrine opinion limited to Copyright Act The Patent Act requires only recording of documents that transfer ownership in a patent The patent office does not consider security interests to be assignments, grants or conveyances which transfer ownership

Termination Clauses : 

Termination Clauses License provisions authorizing licensor to terminate license if licensee challenges patent validity may be unenforceable under Lear v. Adkins, 395 U.S. 653 (1969). Texas Instruments Inc. v. Tandy Corp., 1992 Del. Ch. LEXIS 184 (Del. Ch. June 29, 1992)

License as Part of Settlement Agreement : 

License as Part of Settlement Agreement Lear Inc. v. Adkins, 395 U.S. 653 (1969) Licensee not estopped from attacking validity of licensed patent But read narrowly: does not apply to agreements incorporated in consent judgments

Enforceability of Settlement Agreement : 

Enforceability of Settlement Agreement Hallco v. Foster, 256 F.3d 1290 (Fed. Cir. 2001) – If 2nd device same as, or only “colorably” different from 1st adjudicated infringing device, issue of validity (as well as infringement) is barred by settlement and consent judgment regarding first device. – To determine whether litigation is barred by res judicata, the 2 devices must be compared to determine whether they are “more than colorably different.”

Enforceability of Settlement Agreement : 

Enforceability of Settlement Agreement Hemstreet v. Spiegel, Inc., 851 F.2d 348 (Fed. Cir. 1988) – Settlement in patent infringement case has res judicata effect where it adjudges both validity and infringement. – Settlement agreement that royalty payments would be made notwithstanding future determination of patent invalidity enforceable after patents held invalid several years later.

Antitrust Concerns : 

Antitrust Concerns Per se illegality Pooling arrangements Standard setting bodies

Per se Illegality : 

Per se Illegality Valley Drug Co. v. Geneva Pharm., Inc., 344 F.3d 1294 (11th Cir. 2003) – District court held that such agreements are per se violations of §1 of the Sherman Act. – As part of patent litigation settlements, patentee and generic manufacturers entered agreements that generics would not be marketed until expiration of patents or introduction of generic by another entity.

Per se Illegality, cont. : 

Per se Illegality, cont. Eleventh Circuit reversed: – “Exclusionary effects are at the heart of the patent right and cannot trigger the per se label. – [T]he exclusionary effect of the patent must be considered before making any determination as to whether the alleged restraint is per se illegal.”

Per se Illegality : 

Per se Illegality In re: Cardizem CD Antitrust Litigation, 332 F.3d 896 (6th Cir. 2003) – Sixth Circuit held: Agreement was a horizontal market allocation and per se illegal under § 1 of Sherman Act and state antitrust laws. – Patentee agreed to pay generic manufacturer not to market generic drug after FDA approval.

Patent Pooling Arrangements : 

Patent Pooling Arrangements May serve valid competitive objectives Blocking patents Complementary patents Matsushita Elec. Indus. Co. v. Cinram Int’l, Inc., 2004 U.S. Dist. LEXIS 141 (D. Del. Jan. 5, 2004) May restrain trade “[O]pportunity to acquire a pool of rights does not restrain trade if an alternative opportunity to acquire individual rights is realistically available.” Buffalo Broad. Co. v. Am. Soc. Composers, Authors, & Publishers, 744 F.2d 917 (2d Cir. 1984).

Standard Setting Committees : 

Standard Setting Committees Rambus v. Infineon Tech. AG, 318 F.3d 1081 (Fed. Cir. 2003) – Rambus failed to disclose patents and patent applications covering SDRAM standard adopted by JEDEC. – Under JEDEC policy, JEDEC members should disclose patents necessary to practice potential standards. – Jury found actual fraud for nondisclosure of patents.

Standard Setting Committees : 

Standard Setting Committees Rambus v. Infineon Tech. AG, 318 F.3d 1081 (Fed. Cir. 2003) – Duty of disclosure did not arise until formal consideration of standard. – JEDEC’s disclosure policy too vague to impose duty of disclosure on Rambus. – Since Rambus was not a member of JEDEC during formal consideration of the SDRAM standard, Rambus had no duty of disclosure. On appeal, Federal Circuit held:

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