Clause in Agreement Providing for Survival of License as to Activities Occurring During the License Term Did Not Grant a Perpetual License Covering Infringing Activities Occurring after the License Term

Abstract

A grant clause in a license agreement had a clarification that licensed activities engaged in during the term of the license survive expiration of that license. The court concluded that the clarification did not mean the agreement granted a perpetual license, so infringing activities that occurred after the term of the license were not covered under the license.

Background

In 2011, Wi-LAN licensed Intel to make and sell chipsets that enabled Voice over Long‑Term Evolution (VoLTE). That license shielded Intel and its customers from liability on devices containing Intel chipsets that Intel sold during the license term.

In May 2014, Apple (an Intel customer) asked a court to find that the Wi-LAN patents were invalid and not infringed by Apple devices using the LTE wireless communication standard.

The parties agreed that the license agreement shielded Apple from liability for sales of iPhones containing Intel chipsets, but Wi-LAN disagreed that the license applied to sales of iPhones after the term of the license.

The license agreement states:

3.2 Term License for Wi-LAN Patent Portfolio. For the Term License Period, Wi-LAN . . . grants to Intel . . . a worldwide . . . license, without the right to sublicense, under the Licensed Patents to directly or indirectly engage in Licensed Activities. For clarity, . . . the licenses granted pursuant to this Section 3.2 with respect to Licensed Activities that were actually engaged in during the Term License Period shall survive the expiration of the Term License Period . . . .

Relying on the portion referring to survival of the expiration of the License Term, the district court agreed with Apple and found that all sales of iPhones containing Intel chipsets were shielded under the 2011 Intel–Wi-LAN license agreement.

A jury found all other Apple iPhones infringed the Wi-LAN patents and awarded $145 million in damages, and in a retrial, the jury awarded Wi-Lan $85 million in damages.  

The Apple–Wi-LAN Order

On appeal, the Federal Circuit found the agreement was a term license—not a perpetual license, contrary to the finding of the district court. Explaining that contracts must be read as a whole, giving meaning to every term, and avoiding interpretations that render terms as mere “surplusage,” the Federal Circuit held that the first sentence of Section 3.2 of the license agreement unambiguously grants a worldwide license for “the Term License Period,” which expired in 2017. Then, the next sentence clarifies that license granted survives that period, but only for Licensed Activities that were engaged during that Term License Period. Therefore, the license agreement does not provide “a perpetual license for any future Licensed Activities.” Rather, it provides protection for activities that occurred during the period the license was in place.

The Federal Circuit explained that Apple’s interpretation of a perpetual license would cause the second sentence to contradict the first sentence, insert uncertainty, and go against the purpose of providing clarity. 

Strategy and Conclusion

To avoid ambiguity in an agreement, parties can introduce phrases and clarify provisions to accurately reflect the intent of the parties. However, sometimes an opposing party may try to use those clarifications to provide a conflicting interpretation of the agreement.

Further Information

The Apple–Wi-LAN order can be found here.