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Patent License Extends to Reissue Patents Unless Contrary to Intent of Parties

December 17, 2012

Decision icon Decision

Last Month at the Federal Circuit - January 2013

Judges: Prost, Linn (author), Wallach

[Appealed from: E.D. Tex., Chief Judge Folsom]

In Intel Corp. v. Negotiated Data Solutions, Inc., No. 11-1448 (Fed. Cir. Dec. 17, 2012), the Federal Circuit affirmed the district court’s SJ determinations of license and noninfringement in favor of Intel Corp. (“Intel”), holding that Intel was licensed to practice the patents-in-suit pursuant to a license agreement with Negotiated Data Solutions, Inc.’s (“N-Data”) predecessor-in-interest, National Semiconductor Corp. (“National”).

Intel entered into a patent cross-licensing agreement with National (“the Agreement”) granting Intel nonexclusive royalty-free licenses to all of National’s patents and patent applications having an effective filing date prior to the expiration of the Agreement. During the term of the Agreement, National assigned U.S. Patent Nos. 5,361,261; 5,533,018; 5,566,169; and 5,594,734 (collectively “the Original Patents”), licensed under the Agreement, to Vertical Networks, Inc. (“Vertical”). Vertical filed broadening reissue applications, then assigned the Original Patents and the related reissue applications to N-Data. After expiration of the Agreement, the reissue applications were granted to N-Data with additional claims (“the Reissue Patents”).

N-Data then sued Dell, Inc. (“Dell”), an Intel customer, alleging patent infringement of several patents, including the Reissue Patents. Intel intervened, seeking a DJ that Intel and its customers were licensed to practice the asserted Reissue Patents owned by N-Data, because they derive from the Original Patents, which were part of the licensing agreement with National. On SJ, the district court held that the Agreement applied to the patents-in-suit, protecting Intel from claims of direct infringement and indirect infringement based upon sales by third parties incorporating Intel products.

On appeal, the Federal Circuit first examined the facts under the reissue provisions set forth in 35 U.S.C. § 252. N-Data argued that under its interpretation of § 252, only substantially identical claims reach back to the date of the original patent and that the Agreement only covered patents owned or controlled by National during the term of the license. Thus, N-Data believed that while the Agreement covered the Original Patents, it did not cover the Reissue Patents, which were each issued directly to N-Data after the Agreement had expired. That is, N-Data argued that a reissue patent is a distinct property right that does not simply replace the original patent. In contrast, Intel focused on § 252’s language that “every reissued patent shall have the same effect and operation in law . . . as if the same had been originally granted in such amended form,” arguing that a reissue patent takes the place of the original nunc pro tunc, as the Court has held with regard to 35 U.S.C. §§ 254 and 255. Slip op. at 7-8. The Federal Circuit held that a reissue patent does not replace an original patent nunc pro tunc, noting that reissue applications have different standards in implementation and are not intended to remedy the same kinds of defects as the statutes governing certificates of correction.

Instead, the Court explained that whether the Agreement extended to the Reissue Patents was a question of contract interpretation. Agreeing with the district court, the Federal Circuit held that the key question was whether the intent of the parties demonstrated that the Reissue Patents should be treated as National patents under the Agreement. The Court distinguished related case Intergraph Corp. v. Intel Corp., 241 F.3d 1353 (Fed. Cir. 2001), as dealing only with whether or not the Agreement covered patent applications held momentarily by National, such that the applications never issued as National patents. In addition, the Court distinguished Altvater v. Freeman, 319 U.S. 359 (1943), rejecting N-Data’s argument that surrender and reissue may operate to terminate a license agreement. Rather, the Court held that 35 U.S.C. § 251 suggests that “in the absence of contrary language in the licensing agreement—a license under the patent that is not directed to any specific claims, field of use, or other limited right will extend to the full extent of protection provided by law to the invention which is the subject of that patent.” Slip op. at 11. Therefore, because the patent laws provide for the grant of reissue patents and the Agreement extended broadly to National patents, the Court held that it was reasonable to conclude that the parties’ mutual intent at the time of contracting was that the license extended to any reissues of licensed patents.

Finally, citing recent cases involving a licensee’s rights when the patent holder received a continuation patent, the Court recognized that “allowing the patent holder to sue on subsequent patents, when those later patents contain the same inventive subject matter that was licensed, risks derogating rights for which the licensee had paid consideration.” Id. at 12. Accordingly, whether the case involves reissue patents or continuation patents, where the full extent of an invention disclosed in a patent is licensed, the license should extend to those reissue or continuation patents derived therefrom. As the Agreement “evinces the parties’ intent that the license so granted extend not only to the claims then in existence but also to the full scope of any coverage available by way of reissue for the invention disclosed,” the Court affirmed the SJ ruling that Intel was licensed to practice the Reissue Patents. Id. at 13.

Summary authored by John A. Hevey, law clerk at Finnegan.