September 5, 2011
LES Insights
By John C. Paul; D. Brian Kacedon; Andrew J. Ra Jr.
Authored by D. Brian Kacedon, John C. Paul, and Andrew J. Ra Jr.
U.S. patent owners can correct defects in their patents by asking the U.S. Patent and Trademark Office to reissue the patent. Such defects range from claims to the invention that are overly broad or narrow to errors in the specification or drawings. If the reissue application request is accepted and ultimately allowed by the patent office, the original patent is surrendered, corrected, and "reissued" with a new patent number. This process of surrender and reissue can raise questions as to whether rights to a reissue patent are licensed by an agreement that grants rights under the original patent but is silent as to whether rights are granted under a "reissue" of that patent.
The U.S. District Court for the Eastern District of Texas recently addressed this issue in Intel Corp. v. Negotiated Data Solutions, LLC, No. 2:08-cv-319 (E.D. Tex. June 13, 2011).1 Based on its analysis of the parties' mutual intent, the court ruled that the agreement included reissue patents and that the terms of the license agreement protected the licensee from claims of direct and indirect infringement related to sales of products that include the licensee's products. The court, however, declined to find that the licensee was immune from other forms of indirect infringement.
Intel and third-party NSC entered into a cross-license agreement providing Intel with a license to the patents owned or controlled by NSC ("National Patents") during the term of the agreement. At the expiration of the agreement, Intel was entitled to a royalty-free license for all National Patents for the remaining terms of those patents. The agreement also granted Intel broad rights to make or sell, directly or indirectly, "licensed products," which were defined as any product covered by the National Patents. Notably, the agreement did not mention reissue patents or reissue applications.
The four patents in the case had issued to NSC and were subsequently assigned to Vertical Networks, Inc. Soon after, Vertical filed applications with the Patent Office seeking to reissue three of the four patents. While the reissue applications were pending, Vertical assigned the four patents and the pending reissue applications to Negotiated Data Solutions, LLC ("N-Data"). The Patent Office later issued the three reissue patents to N-Data, several years after the original cross-license agreement between Intel and NSC expired.
Subsequently, Intel filed suit against N-Data asking the court to rule that it did not infringe the four patents because it was licensed to use them. In response, N-Data argued that Intel was not licensed to use the three reissue patents and, alternatively, even if the agreement covered the four patents, it did not protect Intel from all claims of indirect infringement. N-Data argued that the three reissue patents were not National Patents because the license agreement only defined National Patents as patents owned or controlled by NSC during the license agreement. According to N-Data, because Vertical filed the reissue applications and the reissue patents issued in N-Data's name, NSC never owned or controlled the reissue patents. N-Data also argued that the agreement's failure to discuss reissue patents indicated the parties' intent to exclude reissue patents from the agreement.
The court concluded that the mutual intent of the parties was to grant broad rights to all patents owned or controlled by the other party for the life of the patents in order to avoid future infringement suits. Although the agreement failed to mention reissue patents, the court concluded that "the parties' mutual intent would be frustrated if the scope of the License Agreement does not include reissue patents." The court reasoned that under N-Data's interpretation, a party could, in effect, revoke the agreement by putting its licensed patents into reissue. Because such an interpretation would defeat the principal aim of the agreement, to provide the parties a permanent license to each other's patents, the court held that the scope of the agreement included the reissue patents.
As to the issue of non-infringement, the court looked to the language of the agreement and concluded that Intel could not be liable for direct infringement. Since the agreement allowed Intel to "directly or indirectly" sell products covered by the patents, the court also found that Intel could not be found liable for indirect infringement based upon sales activities of third-parties incorporating Intel products. The court, however, decided that the license may not protect Intel against all acts of indirect infringement. Because it was unclear whether and to what extent Intel was otherwise accused of indirect infringement, the court declined to rule on that point.
The Intel decision highlights the importance of carefully defining the scope of licensed patents and using explicit language in an agreement defining what included and what is excluded from the scope of the license. This includes considering whether to include various specific patent rights resulting from divisions, continuations, reissues, reexaminations, and continuations-in-part that include other new subject matter. Even though the court interpreted the agreement in this case to include reissue patents based on the intent of the parties, explicit language in the agreement may have reduced the likelihood that a dispute would arise and require litigation through judgment to resolve the dispute.
Endnotes
1 The Intel decision: http://docs.justia.com/cases/federal/district-courts/texas/txedce/2:2008cv00319/111520/137/.
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.
Conference
2024 Licensing Executives Society USA – Canada Annual Meeting
October 20-23, 2024
New Orleans
Hybrid Conference
2024 Patent Law Institute: Critical Issues & Best Practices
September 30 - October 1, 2024
New York
Virtual Seminar
U.S. Patent Application & Litigation Practice Development and Response
September 6, 2024
Virtual
Due to international data regulations, we’ve updated our privacy policy. Click here to read our privacy policy in full.
We use cookies on this website to provide you with the best user experience. By accepting cookies, you agree to our use of cookies. Please note that if you opt not to accept or if you disable cookies, the “Your Finnegan” feature on this website will be disabled as well. For more information on how we use cookies, please see our Privacy Policy.
Finnegan is thrilled to announce the launch of our new blog, Ad Law Buzz, devoted solely to breaking news, developments, trends, and analysis in advertising law.