A License Under "Existing Patents" May Not Extend to Later Divisional Patents Even if the Inventions Were Disclosed in the Existing Patents

Abstract

An Illinois court found that an agreement licensing "existing patents" did not extend a license to divisional patents filed after the agreement was signed, even though the divisional patents did not add any new matter and claimed priority to the earlier licensed patents. The court distinguished between (1) later "continuation patents," which relate to inventions that are different from those claimed in the original patent and that could possibly be covered by the license agreement and (2) later "divisional patents," which relate to inventions that are different from those claimed in the original patent and that were not covered by the license agreement.

Background 

James Carl Cooper granted Evertz a covenant not to bring lawsuits "based upon or arising out of . . . any existing patent presently or formerly owned or controlled by him or by any company owned or controlled by him or that might hereafter revert to him." Several years later, Cooper formed a new company, Cascades, and obtained three new patents. These patents were based on divisional applications claiming priority to Cooper patents existing at the time of the license agreement. Cascades then sued Evertz for infringing the three new patents.

The Cascades Decision 

Evertz tried to dismiss the litigation, making four arguments as to why the license agreement with Cooper provided it with a license under the three new patents. The court, however, rejected all four arguments.

First, Evertz argued that the license agreement "applies broadly not only to Cooper's patent portfolio that existed at the time the Agreement was executed," but also to claims arising from future patents that "are progeny of … a Cooper Patent that existed as the time of the Agreement." The court disagreed, finding that a licensed "Cooper Patent" was expressly defined as "any existing patent" meeting certain conditions. The court also looked to the fact that Evertz knew how to negotiate agreements with broader scope, citing licenses Evertz made with others around the time of the agreement with Cooper that had broader language to cover divisionals patents and that Evertz did not use such language in the license agreement with Cooper.

Second, Evertz argued that the covenant not to sue on claims "arising out of" the existing Cooper Patents was broad and should cover divisionals of existing patents. Again, the court disagreed, finding that the broad term only applies to the scope of claims covered by the covenant, not the patents covered covenant. Third, Evertz argued that it has an implied license to practice the asserted patents based on earlier court decisions where licensors were estopped from "taking back in any extent that for which it has already received consideration." The court disagreed and distinguished the earlier court decisions as involving "continuation patents," which relate to inventions that were the same as those claimed in the original patent and could possibly be covered by the license agreement rather than "divisional patents," which relate to inventions that were different from those claimed in the original patent and were not covered by the license agreement. The court also distinguished the earlier court decisions as involving infringement allegations against the same products, rather than new products.

Fourth, Evertz argued that the implied license doctrine should apply to all progeny of licensed patents, rather than just continuations covering the same product. The court again disagreed but did discuss the possibility of an implied license arising if the accused product launched prior to the license agreement and where, by practicing the licensed patents, Evertz would necessarily practice the asserted patents.

Based on the limited record before it, the court refused to dismiss the patent infringement litigation.

Strategy and Conclusion 

A license agreement for "existing patents" may possibly be interpreted to apply to patents subsequently granted or be limited to patents that currently exist. More expressly detailing the intention of the parties and the legal effect of the agreement may avoid future disputes, for example, as to whether continuation patents are licensed and whether divisional patents are licensed.

Further Information 

The Cascades decision can be found here.