11th annual patent law institutedownload.pli.edu/webcontent/chbs/186790/186790_chapter14... ·...

© Practising Law Institute

To order this book, call (800) 260-4PLI or fax us at (800) 321-0093. Ask our Customer Service Department for PLI Order Number 186790, Dept. BAV5.

Practising Law Institute1177 Avenue of the Americas

New York, New York 10036

11th Annual Patent Law Institute

INTELLECTUAL PROPERTYCourse Handbook Series

Number G-1316

Co-ChairsScott M. Alter

Douglas R. NemecJohn M. White


14

Strategic Intellectual Property Licensing: Avoiding Pitfalls in View of Recent Case Law Developments

Paul A. Ragusa

Baker Botts LLP

Reprinted from Intellectual Property Licensing Strategies, 2016 Edition: Leading Lawyers on Analyzing Trends in IP Licensing and Drafting Effective Agreements. Copyright © 2016 Thomson Reuters/Aspatore. All rights reserved.

Reprinted with permission.

If you find this article helpful, you can learn more about the subject by going to www.pli.edu to view the on demand program or segment for which it was written.

529


530


I N S I D E T H E M I N D S

Intellectual Property Licensing Strategies

Leading Lawyers on Analyzing Trends in IP Licensing and Drafting Effective Agreements

2016 EDITION

531


532


2016 Thomson Reuters/Aspatore All rights reserved. Printed in the United States of America.

No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, except as permitted under Sections 107 or 108 of the U.S. Copyright Act, without prior written permission of the publisher. This book is printed on acid free paper.

Material in this book is for educational purposes only. This book is sold with the understanding that neither any of the authors nor the publisher is engaged in rendering legal, accounting, investment, or any other professional service. Neither the publisher nor the authors assume any liability for any errors or omissions or for how this book or its contents are used or interpreted or for any consequences resulting directly or indirectly from the use of this book. For legal advice or any other, please consult your personal lawyer or the appropriate professional.

The views expressed by the individuals in this book (or the individuals on the cover) do not necessarily reflect the views shared by the companies they are employed by (or the companies mentioned in this book). The employment status and affiliations of authors with the companies referenced are subject to change. For customer service inquiries, please e-mail [email protected]. If you are interested in purchasing the book this chapter was originally included in, please visit www.legalsolutions.thomsonreuters.com

533


534


3

Strategic Intellectual Property Licensing: Avoiding Pitfalls in

View of Recent Case Law Developments

Paul Ragusa Partner

Baker Botts LLP

535


536


By Paul Ragusa

4

Introduction IP Owners Must Approach Licensing Carefully The ability to license intellectual property (IP) for a royalty on commercially reasonable terms and conditions is often essential to IP owners. For institutions such as universities, research-oriented companies, and smaller businesses that lack the ability to fully commercialize their innovations, licensing may be the only practical way of receiving a return on a potentially heavy investment made in procuring their IP. Even for larger businesses, licensing can provide a beneficial alternative to litigation by permitting an IP owner to forego all or a portion of its exclusionary rights in exchange for some form of remuneration. However, even when carefully crafted, IP owners walk a tightrope between an amicable agreement and a potentially contentious current or future litigation when negotiating a license agreement. Protracted licensing negotiations can negatively impact future attempts to enforce IP rights in the event the agreement is not consummated, or consummated but breached. IP owners may be dragged into costly litigation due to licensee action against third parties, or by a disgruntled licensee that decides to challenge the validity of the licensed IP or the previously agreed to royalty structure. Several recent cases address these and other issues, in some cases providing opportunities for creative licensing strategies, and, in others, providing cautionary warnings for future licensing negotiations. This chapter addresses those recent cases and provides insight on how to avoid pitfalls when licensing IP. Using Laches as an Equitable Defense Laches is an equitable defense to patent infringement, committed to the sound discretion of the trial judge, which can limit the recovery of damages incurred prior to suit.1 In SCA Hygiene Products v. First Quality Baby Products

1 A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1028, 35 Fed. R. Evid. Serv. 505 (Fed. Cir. 1992) (rejected by, SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 807 F.3d 1311 (Fed. Cir. 2015)). (en banc).

537


Strategic Intellectual Property Licensing

5

LLC,2 a divided Federal Circuit reaffirmed en banc that laches can be a defense to patent infringement with respect to pre-litigation damages in certain circumstances.3 To successfully raise the laches defense, an accused infringer must prove: (1) the patent owner delayed filing suit for an unreasonable and inexcusable amount of time (measured from when the plaintiff knew or should have known of its claim); and (2) the delay materially prejudiced the accused infringer, due to either evidentiary or economic reasons.4 However, “[l]aches is not established by undue delay and prejudice. Those factors merely lay the foundation for the trial court’s exercise of discretion.”5 A six-year delay raises a presumption of unreasonableness, which can be rebutted if the plaintiff provides an excuse for delay.6 Although there was no licensing agreement at issue in SCA Hygiene Products, negotiations can present a laches pitfall. For example, during ongoing negotiations, when should a party stop trying to reach an agreement and bring a lawsuit to enforce its patent rights? Ongoing negotiations can excuse a delay that would otherwise be considered laches.7 However, the burden is on the patent owner to show the negotiations are progressing and are likely to succeed in reaching an agreement.8 A patent owner may face a laches issue if licensing overtures and negotiations are punctuated by long periods of silence. The question then becomes whether the patent owner slept on his or her rights, or should be excused from bringing suit. A recent case in the Eastern District of New York addressed this factual

2 SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 807 F.3d 1311 (Fed. Cir. 2015). A petition for Certiorari has not been filed as of the writing of this article. 3 Laches is not a defense to copyright infringement, which has a three year statute of limitations. Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 188 L. Ed. 2d 979, 88 Fed. R. Serv. 3d 1139 (2014).4 SCA Hygiene Products Aktiebolag, 807 F.3d at 1317. 5 Aukerman, 960 F.2d at 1036. 6 Past successful excuses have included pending litigation, ongoing negotiations, poverty, illness, war, or disputes over patent ownership. See, e.g., A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1033, 35 Fed. R. Evid. Serv. 505 (Fed. Cir. 1992)(rejected by, SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 807 F.3d 1311 (Fed. Cir. 2015)) (gathering case law).7 Enzo Biochem, Inc. v. Applera Corp., 2012 WL 4092429, *5 (D. Conn. 2012) (“[E]vidence of parties’ negotiations may excuse delay.”).8 Baker Mfg. Co. v. Whitewater Mfg. Co., 430 F.2d 1008, 1012-13 (7th Cir. 1970).

538


By Paul Ragusa

6

situation.9 In Pecorino v. Vutec Corp., the plaintiff became aware of the defendant’s potential infringement in 2005, and contacted the defendant, offering a license.10 The defendant disputed the patent’s validity, and the plaintiff brought suit in 2007, but voluntarily dismissed the suit later that year and brought a reexamination proceeding instead.11 In 2010, the USPTO confirmed patent validity on reexamination, and the plaintiff commenced a new lawsuit in 2011.12 Throughout this time period, the parties intermittently engaged in licensing negotiations.13 The defendant raised laches as a defense to the second lawsuit, but the court held that the delay in bringing the second lawsuit was excused.14 Although the court’s decision was partly based on the fact that the period of time while the first lawsuit was pending did not count towards laches,15 the court also concluded the negotiations were sufficiently continuous and likely to be successful to toll the laches period.16 According to the court, the standard applied in determining whether negotiations are genuine, and therefore excuse laches, is whether negotiations are “continuous and bilaterally progressing, with a fair chance of success.”17 It is important for patent owners to keep laches in mind during licensing negotiations. Patent owners should recognize that offers to license alone may not be considered to be negotiations without reciprocation from the potential licensee.18 Patent owners should ensure licensing negotiations are alive, and should create a paper trail evidencing the progression of discussions. Although

9 Pecorino v. Vutec Corp., 6 F. Supp. 3d 217 (E.D. N.Y. 2013).10 Pecorino, 6 F. Supp. 3d at 223. 11 Pecorino, 6 F. Supp. 3d at 220.12 Pecorino, 6 F. Supp. 3d at 225. 13 Pecorino, 6 F. Supp. 3d at 227-28. 14 Pecorino, 6 F. Supp. 3d at 224. 15 Pecorino, 6 F. Supp. 3d at 225. 16 Pecorino, 6 F. Supp. 3d at 228 (The longest period of silence during negotiations was eight months). 17 Pecorino, 6 F. Supp. 3d at 227 (citing A.C. Aukerman Co. v. Miller Formless Co., Inc., 693 F.2d 697, 700 (7th Cir. 1982)).18 See, e.g., New Medium LLC v. Barco N.V., 612 F. Supp. 2d 958, 967 (N.D. Ill. 2009) (Eighty-six letters to defendant offering a license and requesting payment were not sincere negotiations where defendant either ignored or refused offer every time). But see, e.g., Meyers v. Asics Corp., 974 F.2d 1304, 1307 (Fed. Cir. 1992) (concluding the delay was reasonable where plaintiff offered license in 1983 and again in 1985, but did not bring suit until 1988, even though defendants explicitly refused offer of license).

539



7

a few months of delay may be excusable,19 years may not be.20 Patent owners also must be cognizant of when negotiations have broken down and further discussions will be fruitless. Once there is no longer a likelihood of successfully reaching a licensing agreement, any further time spent on discussions may not be found to be an excuse against a laches defense.21 Licensee Standing to Enforce a Patent Once licensing negotiations are underway, it is important for the parties to ensure that license terms protect their respective interests. A potentially thorny area of the law involves licensee standing to bring an infringement action against a third party. Depending on the relationship between the parties, it may be desirable to pass the responsibility (and costs) of patent enforcement to a licensee. In certain circumstances, the licensee may be in the best position to enforce a patent, either because it is active in the field related to the patent and will be more aware of potential infringement or because it has a greater interest in enforcing the patent against competitors. However, a licensor cannot simply confer standing by granting the right to enforce the patent in the licensing agreement.22 The standing requirement is grounded in Article III of the Constitution, which limits judicial power to hearing “cases” and “controversies.”23 Generally, standing requires that the plaintiff has suffered an injury-in-fact that was caused by the defendant, and which is redressable in the courts.24 In the patent context, 35 United States Code, Section 281 grants a “patentee” standing to bring an infringement action.25

19 See, e.g., Pecorino, 6 F. Supp. 3d at 228 (concluding an eight-month silence during negotiations does not trigger a laches period). 20 See, e.g., Baker Mfg. Co. v. Whitewater Mfg. Co., 430 F.2d 1008, 1013-14 (7th Cir. 1970) (finding an eight-year period between cease-and-desist letter offering a license and bringing suit is unreasonable despite intermittent correspondence between parties).21 See, e.g., Motorola, Inc. v. CBS, Inc., 672 F. Supp. 1033, 1037 (N.D. Ill. 1986) (concluding that even if sporadic offers to license are considered negotiations, the laches period began after the final meeting between the parties).22 See Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24, 39, 43 S. Ct. 254, 67 L. Ed. 516 (1923) (holding the right to enforce a patent without the transfer of any “part of the title to the patent or interest in it conferred no right to sue”).23 U.S. Const. Art. III, § 2. 24 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992).25 35 U.S.C.A. § 281 (2012) (“A patentee shall have remedy by civil action for infringement of [the patentee’s] patent.”).

540


By Paul Ragusa

8

In licensee standing cases, a licensee can be considered a “patentee” for standing purposes. This is because a patent confers the exclusive right to make, use, or sell an invention, and therefore a party holding one or more of those exclusive rights can bring the patent infringement suit because infringement harms that exclusive right.26 In most cases the party with standing is the patent owner—either the original owner or an assignee. However, certain licensees have been found to hold sufficient rights to provide for standing to sue for infringement. Thus, a patent owner that wishes to avoid becoming a named party27 in a patent litigation may need to compromise by granting its licensee broader rights. There are circumstances under which a licensor grants “all substantial rights” such that the license is basically an assignment.28 Because assignees have standing, licensees who are assignees-in-fact also have standing. There is no globally accepted definition of “all substantial rights,” and courts will conduct a fact-intensive inquiry into the terms of the licensing agreement and surrounding circumstances. At a minimum, “all substantial rights” typically requires the licensee to have an exclusive license.29 It may also require additional rights, including to freely transfer, assign, or sublicense the agreement. Additionally, courts have looked to whether the patent owner explicitly retains the right to sue for infringement.30

26 See generally, WiAV Solutions LLC v. Motorola, Inc., 631 F.3d 1257, 1264-65 (Fed. Cir. 2010) (“Because the legally protected interests in a patent are the exclusionary rights created by the Patent Act, a party holding one or more of those exclusionary rights . . . has standing to sue.”).27 The patent owner is still at risk for third-party discovery. 28 See, e.g., Alfred E. Mann Foundation For Scientific Research v. Cochlear Corp., 604 F.3d 1354, 1359 (Fed. Cir. 2010).29 “Exclusive license,” for this purpose, does not mean the licensee is the only licensee, but rather it has exclusionary rights. See, e.g., WiAV Solutions LLC v. Motorola, Inc., 631 F.3d 1257, 1267 (Fed. Cir. 2010) (concluding plaintiff had standing although the patent owner retained the right to grant future licenses to other parties); Intellectual Property Development, Inc. v. TCI Cablevision of California, Inc., 248 F.3d 1333 (Fed. Cir. 2001) (holding plaintiff was exclusive licensee even though license was subject to preexisting non-exclusive license to another party).30 See, e.g., Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1342 (Fed. Cir. 2006) (“(1) [T]he exclusive right to make, use, and sell products covered by the patent; (2) the right to sue for infringement of the patent; and (3) a virtually unrestricted authority to sublicense its rights under the agreement . . . strongly favor a finding of an assignment, not a license.”).

541



9

In certain circumstances, an exclusive licensee who has less than all substantial rights may have standing to bring suit; in these cases, the patent owner can be a necessary and indispensable party and must be joined to the lawsuit.31 To be eligible for this sort of standing, courts have found that the licensee must have at least one exclusionary right; in contrast, a non-exclusive licensee typically lacks standing.32 Several recent cases shed further light on which licensees have standing to sue third parties for infringement. In Keranos LLC v. Silicon Storage Tech.,33 the plaintiff sued as an exclusive licensee to enforce several patents that expired prior to the licensing agreement and prior to the lawsuit.34 The court concluded Keranos possessed all substantial rights, which, in this case, included past, present, and future rights to make, use, import, and sell products, the right to sue for infringement, and a catch-all provision transferring “all other substantial rights.”35 Nonetheless, the defendant argued that for expired patents, a licensee must have legal title to have standing. The court rejected a distinction between expired and unexpired patents, and concluded that because Keranos had all substantial rights, it had standing to enforce the patents.36 The Federal Circuit also recently decided Alps South, LLC v. Ohio Willow Wood Co.,37 finding that a field-of-use licensee has no standing to sue, because a field-of-use license is not an exclusionary right. The plaintiff had the exclusive right to practice the patents, but the rights were restricted to the field of prosthetic products.38 The plaintiff also had the right to enforce the patent against third parties, although it needed

31 See Alfred E. Mann Found. for Sci. Research v. Cochlear Corp., 604 F.3d at 1359-60 (“When there is an exclusive license agreement, as opposed to a nonexclusive license agreement, but the exclusive license does not transfer enough rights to make the licensee the patent owner, either the licensee or the licensor may sue, but both of them generally must be joined as parties to the litigation.”). 32 See Propat Intern. Corp. v. Rpost, Inc., 473 F.3d 1187, 1192-93 (Fed. Cir. 2007) (concluding that if licensee is granted no exclusive rights, it lacks standing to sue for infringement).33 Keranos, LLC v. Silicon Storage Technology, Inc., 797 F.3d 1025 (Fed. Cir. 2015). 34 Keranos, LLC v. Silicon Storage Technology, Inc., 797 F.3d 1025, 1029 (Fed. Cir. 2015).35 Keranos, LLC., 797 F.3d. at 1031--32. 36 Keranos, LLC., 797 F.3d. at 1033. 37 Alps South, LLC v. Ohio Willow Wood Co., 787 F.3d 1379 (Fed. Cir. 2015). 38 Alps South, LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 1383 (Fed. Cir. 2015).

542


By Paul Ragusa

10

written consent from the patent owner to settle infringement actions, and the patent owner retained the right to pursue litigation if the plaintiff declined to do so.39 The Federal Circuit held that because the field-of-use licensee owned only a portion of an exclusionary right, the licensee did not have standing to sue for infringement without joining the patent owner.40 Additionally, the court held that a nunc pro tunc agreement eliminating the field-of-use restriction cannot confer retroactive standing.41 This case is instructive to parties considering a field-of-use license. According to the court, a field-of-use license cannot grant standing to a licensee to bring an enforcement action without joining the patent owner. This case also suggests that if a licensee wishes to bring suit, a retroactive agreement may not be sufficient to solve a standing problem. Because licensee standing to enforce a patent is dependent on the rights granted to the licensee, a patent owner should consider which rights it wants to confer, including whether to grant exclusive rights. Licensee Standing to Challenge Patent Validity Although a patent owner may want a licensee to be able to sue others for infringement, it probably does not want its own licensee to initiate litigation against the owner itself. In the wake of MedImmune, Inc. v. Genentech, Inc.,42 which held that a licensee need not repudiate the license prior to challenging patent validity, patent owners have attempted to craft licensing agreement provisions that can deter invalidity actions. In MedImmune, the licensing agreement did not include a no-challenge clause, but subsequent decisions in the lower court suggest that a bare no-challenge clause in a licensing agreement may be unenforceable.43

39 Alps South, LLC., 787 F.3d. at 1383.40 Alps South, LLC., 787 F.3d. at 1384. 41 Alps South, LLC., 787 F.3d. at 1384-85. 42 MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 S. Ct. 764, 166 L. Ed. 2d 604 (2007). 43 For now, no-challenge clauses in settlement agreements reached after instituting litigation are enforceable. See, e.g., Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362, 1367-70

543



11

One recent case addressing this point is the Second Circuit’s decision in Rates Technology Inc. v. Speakeasy, Inc.44 The plaintiff in Rates Technology notified the defendant (Speakeasy) that it was infringing its patents, and offered a release in exchange for a one-time payment.45 The parties entered into a covenant not to sue, in which the plaintiff promised not to sue for any past or future infringement and Speakeasy warranted it would not challenge or assist a challenge to the validity of the patents.46 Speakeasy was acquired by Best Buy, which later announced its intention to sell Speakeasy to be merged into Covad. Around the same time, the plaintiff became aware that Covad was infringing its patents and offered Covad a similar deal. Covad responded by filing for a declaratory judgment that the patents were invalid. The plaintiff alleged Speakeasy provided information to Covad in the course of the merger that amounted to assisting an invalidity challenge of the patents.47 Speakeasy argued that the no-challenge clause was unenforceable. The Second Circuit concluded there is “strong policy ‘favoring the full and free use of ideas in the public domain’” and therefore, the no-challenge clause was void.48 In reaching its decision, the Second Circuit relied in part on the Ninth Circuit’s decision in Massillon–Cleveland–Akron Sign Co. v. Golden State Adver. Co.49 In Massillon-Cleveland-Akron, the Ninth Circuit faced a similar factual scenario. The plaintiff notified the defendant of suspected infringement and the parties entered into a written agreement wherein the defendant agreed not to challenge the patent’s validity.50 The plaintiff became aware of subsequent infringement and sued the defendant, who raised invalidity as a defense.51 The Ninth

(Fed. Cir. 2001) (upholding no-challenge clause in agreement after alleged infringer “had an opportunity to conduct discovery on validity issues”).44 Rates Technology Inc. v. Speakeasy, Inc., 685 F.3d 163 (2d Cir. 2012). 45 Rates Technology Inc. v. Speakeasy, Inc., 685 F.3d 163, 165 (2d Cir. 2012).46 Rates Technology Inc., 685 F.3d. at 165. 47 Rates Technology Inc., 685 F.3d. at 166.48 Rates Technology Inc., 685 F.3d. at 172 (quoting Lear, Inc. v. Adkins, 395 U.S. 653, 674, 89 S. Ct. 1902, 23 L. Ed. 2d 610 (1969)).49 Massillon-Cleveland-Akron Sign Co. v. Golden State Advertising Co., 444 F.2d 425 (9th Cir. 1971). 50 Massillon-Cleveland-Akron Sign Co. v. Golden State Advertising Co., 444 F.2d 425, 425 (9th Cir. 1971).51 Massillon-Cleveland-Akron Sign Co., 444 F.2d. at 426.

544


By Paul Ragusa

12

Circuit concluded the agreement was void as against public policy, regardless of the fact it was styled as a settlement agreement rather than a licensing agreement.52 Recently enacted agency proceedings such as inter partes review can provide alternative means to challenge patent validity. Will a no-challenge clause preclude the Patent Trial and Appeal Board (PTAB) from conducting an inter partes review? The early answer is “no.”53 In a recent inter partes review, Dot Hill Systems v. Crossroads Systems, the patent owner tried to prevent institution of the review by raising a no-challenge clause in a settlement agreement reached by the parties in a previous litigation.54 Nonetheless, the PTAB concluded it was not bound by contractual estoppel to deny the petition and instituted the review. Based on these new developments, a bare no-challenge clause may not be an effective mechanism to prevent a licensee from challenging patent validity, but there are other options. For example, patent owners may be able to include a “defensive suspension” clause that will automatically terminate a license if the licensee challenges patent validity. Since many licenses exchange a release of infringement liability for a promise not to challenge validity, a similar option can be to automatically terminate any release if the licensee challenges the underlying patent(s). Other strategies used by certain patent owners include liquidated damages type clauses that increase royalties or require the licensee to pay the licensor’s attorneys’ fees if there is an invalidity challenge, and alternative dispute resolution clauses.

52.Massillon-Cleveland-Akron Sign Co., 444 F.2d. at 427. Note that generally, the federal courts have equated covenants not to sue and licensing agreements. See, e.g., De Forest Radio Telephone & Telegraph Co. v. U.S., 273 U.S. 236, 47 S. Ct. 366, 71 L. Ed. 625 (1927); TransCore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). 53 See Dot Hill Sys. Corp. v. Crossroads Sys., Inc., No. IPR2015-00822 (P.T.A.B. Sept. 17, 2015). 54 See Patent Owner’s Preliminary Response at 2, Dot Hill Sys. Corp. v. Crossroads Sys., Inc., No. IPR2015-00822 (P.T.A.B. June 18, 2015).

545



13

Post-Expiration Royalties

Another recent decision that bears mentioning is Kimble v. Marvel Entertainment, LLC.55 In Kimble, the Supreme Court reaffirmed its decision in Brulotte v. Thys Co.,56 holding that post-expiration royalties are per se impermissible.57 However, Kimble does not mean patent expiration cuts off all opportunity to monetize the patent. For example, Kimble notes that parties are free to defer payment for pre-expiration uses to post-patent expiration.58 Agreements covering multiple patents can extend royalties until the expiration of the final patent. Additionally, while Kimble forbids royalties tied to activities that occur after patent expiration, creative arrangements can avoid the prohibition. For example, royalties can be tied to use of a trade secret, even if the trade secret is closely related to the patent.59 Royalties can also be tied to other longer-lasting IP, such as copyrights and trademarks. To avoid the per se rule against post-expiration royalties, parties should specifically recite the basis for any post-expiration payments to avoid characterization as post-expiration royalties. One approach is to provide a “step down” in the royalty rate after patent expiration to show royalties beyond the expiration have been discounted. In a situation where royalties during the patent term may be insufficient due to the time required to bring the product to market, parties can negotiate milestone or lump sum payments. Conclusion Ultimately, IP licensing is important, because it is a key way for new technology to be brought into the marketplace, and an important means for IP owners to realize a return on their investment in procuring such IP. Given the recent case law addressed in this article, entities engaged in IP licensing should keep a close eye on the pace of license negotiations, and

55 Kimble v. Marvel Entertainment, LLC, 135 S. Ct. 2401, 192 L. Ed. 2d 463 (2015). 56 Brulotte v. Thys Co., 379 U.S. 29, 85 S. Ct. 176, 13 L. Ed. 2d 99, 3 A.L.R.3d 761 (1964). 57 Kimble v. Marvel Entertainment, LLC, 135 S. Ct. 2401, 2415, 192 L. Ed. 2d 463 (2015).58 Kimble, 135 S. Ct. at 2408. 59 Kimble, 135 S. Ct. at 2408.

546


By Paul Ragusa

14

understand the potential consequences of both the royalty structure that they would like to receive and the scope of rights that they are willing to grant. IP owners and licensees can take direction from recent court decisions to avoid the pitfalls made by past litigants. Practitioners should also keep in mind that the law relating to IP licensing is continuously evolving. For example, many members of the patent bar anticipate that a petition for certiorari will be filed and granted in the SCA Hygiene Products case addressed above.60 If the petition is granted, it is likely that the Supreme Court will alter the law concerning laches in patent cases, or even abolish it as it did for copyrights in its Petrella decision. Likewise, the full Federal Circuit will reconsider the scope of the so-called on-sale bar in 2016 in The Medicines Co. v. Hospira, Inc., Fed. Cir. 2014-1469, vacated panel opinion, __ F.3d __ (Fed. Cir.2015). That decision may shed further insight regarding whether and when an IP related agreement can be considered commercial sales and this trigger the one year period for filing a patent application or losing the right to do so.61 Key Takeaways

Caution patent owner clients to keep licensing negotiations alive, and to create a paper trail evidencing the progression of discussions to protect themselves from a laches defense. Because licensee standing to enforce a patent is dependent on the rights granted to the licensee, counsel your patent owner clients to consider carefully which rights they want to confer. To prevent a licensee from challenging patent validity, consider including in your license agreements certain clauses and options,

60 On November 23, 2015, the Supreme Court granted an application for an extension of time within which to file a petition for a writ of certiorari, extending the period to January 19, 2016. SCA Hygiene Products v. First Quality Baby Products LLC, Application No. 15A546 (U.S. 2015). 61 The question presented in the court’s order granting en banc review was: “[s]hould this court overrule or revise the principle in Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), that there is no “supplier exception” to the on-sale bar of 35 U.S.C.A. § 102(b)?” The rule can be troubling for companies that do not have the capabilities or resources to manufacture their inventions themselves.

547



15

e.g., to automatically terminate any release if the licensee challenges the underlying patent. To avoid the per se rule against post-expiration royalties, provide a “step down” in the royalty rate after patent expiration to show royalties beyond the expiration are discounted to reflect the absence of a patent.

Paul Ragusa is a partner in the Intellectual Property section of Baker Botts LLP’s New York office. His practice encompasses high technology and Hatch-Waxman patent litigation, patent portfolio management, counseling and licensing. His diverse technical experience spans audiovisual compression and transmission, semiconductor device fabrication, nanotechnology, software, techniques for delivering pharmaceutical products and medical devices. He was part of the team that drafted the patent licensing agreements directed to the MPEG-2 digital video compression standard, and continues to focus on Standards Setting Organizations (SSOs) and related licensing, including 802.11, ATSC, AVC, Blu-ray, LTE, MVC and HEVC. He serves on the Advisory Board at IP Litigator and Chairs the American Intellectual Property Law Association’s Antitrust Law Committee, using both positions to address the practical implications of important changes to the law. Acknowledgment: Allyson Mackavage, co-author, is an associate in the New York office of Baker Botts LLP, where her practice encompasses patent-related licensing, litigation, and counseling.

548


Aspatore Books, a Thomson Reuters business, exclusively publishes C-Level executives and partners from the world's most respected companies and law firms. Each publication provides professionals of all levels with proven business and legal intelligence from industry insiders direct and unfiltered insight from those who know it best. Aspatore Books is committed to publishing an innovative line of business and legal titles that lay forth principles and offer insights that can have a direct financial impact on the reader's business objectives. Each chapter in the Inside the Minds series offers thought leadership and expert analysis on an industry, profession, or topic, providing a future-oriented perspective and proven strategies for success. Each author has been selected based on their experience and C-Level standing within the business and legal communities. Inside the Minds was conceived to give a first-hand look into the leading minds of top business executives and lawyers worldwide, presenting an unprecedented collection of views on various industries and professions.

549


550


NOTES

551


NOTES

552

11th annual patent law institutedownload.pli.edu/webcontent/chbs/186790/186790_chapter14... ·...

Documents