April 9, 2013
LES Insights
Authored by D. Brian Kacedon, John C. Paul, and Robert D. Wells
In Intel Corp. v. Negotiated Data Solutions, Inc.,1 the Federal Circuit held that reissue patents should be treated as covered by a license agreement for the original patents from which the reissue patents were derived. An agreement between Intel and National Semiconductor granted Intel a broad license to all patents and patent applications owned or controlled by National before the agreement expired, referred to in the agreement as the "National Patents." Stated otherwise, the agreement provided a license for the duration of any patent that was filed before expiration of the agreement.
In 1998, before the agreement expired, National assigned several patents covered by the agreement to a third party. That third party then filed broadening reissue applications for three of the original patents. A few years later, the third party assigned the original patents and the reissue applications to Negotiated Data Solutions ("N-Data"). The agreement expired in 2003, after which, the USPTO granted the applications for broadening reissue in 2005 and 2006.
N-Data, the owner of the reissue patents, sued Dell—an Intel customer—alleging infringement of the reissue patents. In response, Intel sought a declaratory judgment that Intel and its customers were licensed to practice the reissue patents as they had been for the original patents. According to NData, however, Intel's rights to the original patents did not extend to the reissue patents because they covered unique property rights distinct from the rights covered by the original patents. For support, N-Data argued that the reissue patents issued directly to N-Data after Intel's agreement had expired and were therefore not covered by the agreement. Intel disagreed with N-Data, arguing that the agreement naturally extended past the original patents to reissue patents derived from those original patents.
The district court looked to the intent of the parties, which it viewed as avoiding future infringement suits between one another by granting broad rights to all patents owned or controlled by the other party for the life of the patents. N-Data's interpretation of the agreement, the district court reasoned, would allow a licensor to remove a licensed patent from a license agreement by obtaining a reissue patent. Thus, the district court agreed with Intel that the reissue patents were licensed under the agreement.
On appeal, both parties relied on 35 U.S.C. § 252—"Effect of reissue"—to support their positions. According to N-Data, § 252 defines a nuanced arrangement where only substantially identical reissue claims reach back to the date of the original patent, and only such claims fell within the scope of the agreement, which covered only patents owned or controlled by National during the term of the license.
Intel, on the other hand, read § 252 as establishing that the reissue patent takes the place of the original patent, as if the reissue patent had been issued at the time of, and instead of, the original. Therefore, in Intel's view, the reissue patents should be treated as the original patents, and because the original patents were covered by the agreement, so too are the reissue patents.
The Federal Circuit held that the scheme set forth in §252 does not support Intel's proposition that a reissue patent universally replaces the original patent. But the real question, according to the court, was whether the agreement, as properly interpreted under California law according to the parties' intent, covered only patents issued to National during the license term or instead covered the licensed invention such that the reissue patents should be treated as National patents under the license.
On this question, N-Data argued that the parties could have licensed National's interest in any potential reissue patents, but did not. Thus, according to N-Data, the agreement showed the parties' intent not to cover reissue patents. Intel argued that the parties intended to avoid future patent-infringement litigation and therefore broadly licensed all of National's patent rights, rather than specific claims of any patent. Therefore, according to Intel, the district court correctly interpreted the agreement as including any reissue patents derived from the original patents and directed to the inventions disclosed in the original patent.
The Federal Circuit agreed with Intel that the parties intended the agreement to extend to the full scope of reissue claims directed to the invention disclosed in the original patents. To maintain that intent, the agreement must be interpreted to treat reissue patents as "National Patents." Although the agreement did not explicitly discuss reissue patents, it granted a license to the "National Patents" without limitation and without reference to any specific claims. As the court reasoned, to interpret the agreement otherwise would allow the unilateral act of the licensor to place the licensee in a position of being exposed to further risk relating to the precise inventions that were subject to the license.
This case illustrates that, absent language limiting license rights, a broad grant of a license to a patent may extend to the entire invention disclosed—not just to the issued claims. Licensors and licensees should consider potential reissue patents when negotiating and drafting license agreements. To the extent that parties to a license agreement do not intend for the agreement to extend to reissue patents or continuations, the licensor should include language to explicitly limit the extent of the license. Licensees should also consider and identify such limiting language as they evaluate potential license agreements.
1 The Federal Circuit's Intel Corp. v. Negotiated Data Solutions, Inc. decision can be found here.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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