By: Garth Mashmann
In its recent opinion General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., 2011-1115, 2011 WL 2666222 (Fed. Cir. July 8, 2011), the Court of Appeals for the Federal Circuit affirmed the district court’s grant of a preliminary injunction to enforce a forum selection clause in a settlement agreement and provided a reminder that care should be used when drafting a licensing agreement. Consistent with its holding in Transcore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009), the Federal Circuit provided that where “continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well.” Thus, where a patent license is silent as to related applications, the licensee is not liable for infringement with the same products when the related applications issue as patents. Through careful drafting, a license agreement can grant whatever rights the parties intend.
However, if a licensor is not careful he may give away more than desired or intended.
In 2007 General Protecht Group and Leviton Manufacturing ended a patent infringement lawsuit by signing a settlement agreement, which included a covenant not to sue with respect to certain patents. Subsequently, Leviton Manufacturing received additional related patents that were filed as continuation applications of the patents involved in the 2007 action. The continuation patents in question included identical disclosures, but narrower claims. In 2010, Leviton Manufacturing sought to enforce these later issued patents against General Protecht and others for the same products that were alleged to infringe the earlier patents.
In response, General Protecht informed Leviton that it believed it had a license to practice the asserted patents under the settlement agreement and that Leviton was required to bring its case in the district court agreed upon pursuant to the forum selection clause of the same agreement. General Protecht further insisted that it could not be sued for infringement of the later continuation patents because that would deprive them of the benefit of the bargain from the settlement agreement. Citing its earlier TransCore decision, the Federal Circuit stated that Leviton’s actions have derogated General Protecht’s rights under the settlement agreement by taking back the rights granted in any extent after it had received consideration. A licensor must make clear that it does not intend the license to include related patents that have not yet issued.
In General Protecht, the claims of the subsequently issued patents were narrower than the claims of the earlier issued patent. The opposite situation is also plausible as addressed by the Federal Circuit in Transcore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). In Transcore, the Federal Circuit held that the licensed rights extended to the all of the patents in the family, even though there was no mention of the applications in the agreement. Thus, if a licensor wants to reserve rights under applications that have not yet issued but are related to patents that are licensed, they must make their intentions clear in the license agreement. Such reservation will certainly put the licensee on notice that there are additional related applications pending and it will also serve to inform the licensee of the scope of their rights. Although these cases serve as a general reminder to use precision in licensing agreements, they also reveal that a license should address related pending applications. If such applications are not specifically addressed in a license agreement, they will generally be considered to be impliedly licensed as a part of the agreement.