Intel Is Not Licensed Under Intergraph’s Patents
March 01, 2001
Last Month at the Federal Circuit - April 2001
Judges: Newman (author), Rader, and Gajarsa
In Intergraph Corp. v. Intel Corp., No. 00-1048 (Fed. Cir. Mar. 1, 2001), the Federal Circuit reversed a district court decision of SJ that held that Intel Corporation (“Intel”) was licensed to practice the inventions of Intergraph Corporation’s (“Intergraph”) four U.S. patents.
The license issue arose from a history of mergers and acquisitions between companies dealing with semiconductor and microprocessor technology. The patents at issue were developed by the Advanced Processor Division of Fairchild Semiconductor Corporation (“Fairchild”). In 1987, Intergraph arranged to purchase the Advanced Processor Division from Fairchild, including the technology of the relevant patents and pending patent applications. Intergraph and National Semiconductor Company, the parent of Fairchild, entered into a Purchase Agreement whereby Fairchild was to transfer and deliver to Intergraph all assets of the Advanced Processor Division. These transactions were carried out at a closing on October 8, 1987.
The issue on appeal was whether, during the course of the asset transfer, the relevant patents granted to Intergraph became included in an existing cross-license agreement (“the Agreement”) between National Semiconductorand Intel that had been entered in 1976. Intergraph argued that National Semiconductor did not acquire ownership or control of the patents during the asset transfer and no license occurred because the Agreement requires consent by any subsidiary before its patents are included in the cross-license.
The Federal Circuit ruled that although the transfer of Fairchild to National Semiconductor and of the Advanced Processor Division to Intergraph were conducted in sequence on the same day, the order of the proceedings did not vest National Semiconductor with the right to encumber any property that it momentarily possessed until the next document was signed. Intel’s contrary interpretation, the Court ruled, is too strained to be supported. The Purchase Agreement, dated a week before the closing, makes clear that National Semiconductor would cause Fairchild to sell the Advanced Processor Division assets directly to Intergraph, free and clear of all encumbrances not assumed by Intergraph.