New Developments in Licensing Law

This week’s court decisions include two cases in which courts highlighted the importance of specific phrases or terms that the parties used in IP license agreements.  One decision (Sunstar Inc. v. Alberto-Culver Company) highlights the importance of understanding non-English terms, or phrases that may have different meanings in different countries.  The other (Imation Corp. v. Kononklijke Philips Electronics N.V.), focuses on what business entities are actually entitled to the benefits of a license. 

Sunstaruse of Japanese legal term in U.S.-based agreement

In Sunstar Inc. v. Alberto-Culver Company, the U.S. Court of Appeals considered a trademark license agreement that granted Sunstar a “senyoshiyoken” in certain trademarks that included the term “VO5” as it has been used in connection with hair and skin care products.  “Senyoshiyoken” is a Japanese term that, in English, means “exclusive-use right.” 

The parties disagreed over the scope of the license, and in particular the meaning of the term “senyoshiyoken.”   Sunstar wanted to use and license new variations on the mark, with modern fonts and sleeker looks.  Albert-Culver refused, saying that the agreement did not grant Sunstar such rights.  The issue revolved on whether the term “senyoshiyoken” was to be defined under Illinois law based on what the licensor thought it was granting, or whether the term should be given its broader meaning under Japanese law

Although the agreement was governed by Illinois law, the court noted:

the parties can’t have meant that the meaning of senyoshiyoken would be decided under Illinois law because it has no meaning in that law. 

Thus, the court noted that under Japanese law, senyoshiyoken is an exclusive right that bars the licensor from using the mark, and which even gives the exclusive right to sue for infringement.  Based on this broad right, the 99-year term of the license agreement, and the section of Japan’s trademark law which states that a registered trademark “includes a trademark consisting of the same trademark having modified typefaces,” the court found that Sunstar may have a right to use the modified fonts under the agreement and remanded the case for further proceedings.

Imation:  license to subsidiaries includes all in existence at any time during term of license

In Imation Corp. v. Kononklijke Philips Electronics N.V., the Federal Circuit analyzed a patent cross-license between Imation and Philips.  The license grant covered the parties to the agreement, as well as their subsidiaries.  The agreement defined “subsidiaries” as including any organization in which a party “now or hereafter” holds an interest of 50% or more.  The agreement expired in 2000, but the patent license survived expiration so long as the licensed patents remained in effect.

Imation argued that companies which became Imation subsidiaries after 2000 were entitled to the benefits of the patent license.  Philips argued that the license only covered organziations that were Imation subsidiaries before the year 2000 expiration date.  The Federal Circuit agreed with Imation, stating that although the agreement expired in 2000, the license grant survived expiration for the life of the Philips patents.

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