Updating policies that had been on the books for more than two decades, the U.S. Department of Justice and the Federal Trade Commission recently issued new Antitrust Guidelines for the Licensing of Intellectual Property.
The new Guidelines include several updates that reflect changes in the law since the 1995 guidelines were issued. For example, the new Guidelines now permit intellectual property license agreements to explicitly include provisions on resale price without being per se illegal. (Instead, price restraints in licensing agreements will now be analyzed under the rule of reason). The new Guidelines also contain changes relating to situations where an intellectual property license or transfer will be treated as a merger.
For more details and analysis of the new Antitrust Guidelines, my partner Ted Jobes recently published a summary that is available via this link on the Fox Rothschild website.
A covered business method (CBM) review is a tool that the America Invents Act (AIA) created to allow entities charged with infringement of a CBM patent to challenge the patent’s validity. A recent decision from the Patent Trial and Appeal Board (PTAB) shows that the “charged with infringement” requirement must be satisfied, or the PTAB will deny the petition.
In Ocean Tomo LLC v Patent Ratings LLC, the PTAB considered a CBM petition against a patent that was part of a license agreement to Ocean Tomo. Ocean Tomo filed a declaratory judgment action against the patent holder (Patent Ratings) on several grounds, including a count seeking declaratory judgment of non-breach of the license agreement. Ocean Tomo then filed a petition for CBM review of the patent.
The PTAB denied the petition, noting that Ocean Tomo had not been charged with infringement of the patent, and its declaratory judgment action did not include a count seeking a declaration of non-infringement. Instead, the PTAB found that “[t]he parties’ contract, tort, and related causes of action concern and arise from the fractured employment and business relationship between Petitioner and … Patent Owner, not from charges of infringement of the ’849 patent.” On that basis, the PTAB denied the petition.
In 2014, a group of America’s top technology companies created a unique way to combat the problem of patent assertion entities: the License On Transfer (LOT) Network. Founding members of the LOT Network included Canon, Dropbox, Google, SAP and Ford Motor Company. In September 2015, Enplug Inc., Inductive Automation LLC, and SilverEdge Inc. joined the network.
Members of the LOT Network must sign an agreement to grant the other members a perpetual, royalty-free license to the member’s patents upon the occurrence of a “Triggering Event.” Triggering Events include a transfer of a patent (other than a defined “Non-Assertion Transfer”), or a change of control in which the surviving entity is a non-assertion entity.
As of the time of this post (September 2015), the LOT Network included over 50,000 granted patents and nearly 300,000 patent assets (including patents and pending applications). It serves as a unique, market-based solution that allows members to put their patents on the line when facing the challenge of patent assertion entities.
In a much-anticipated decision, the U.S. Supreme Court has retained the long-standing rule that patent holders cannot charge royalties for use of a patent after its term has expired.
In Kimble v. Marvel Enterprises, Inc., the Court considered an appeal of a case in which the inventors of a toy with Spider-Man-like web-shooting capabilities sold a patent covering the toy to Marvel Enterprises. The agreement imposed a 3% royalty and had no expiration date. After the patent expired , the inventors filed suit for breach of contract. Marvel argued that it was not obligated to pay royalties for sales made after the patent’s expiration. Both the district court and the U.S. Court of Appeals for the Ninth Circuit agreed with Marvel, but the inventors appealed to the Supreme Court.
In the appeal, the inventors argued that the the 50-year-old rule of Brulotte v. Thys Co., which states the “a royalty agreement that projects beyond the expiration date of the patent is unlawful per se,” was “[a] product of a bygone era” and should be overruled.
The Court disagreed. While acknowledging that “[t]he Brulotte rule … prevents some parties from entering into deals they desire,” the Court favored retaining the status quo since overturning the prior decision would “upset expectations” and there was no “superspecial justification” warranting reversal.
In addition, the Court noted that there are many ways for parties to structure deals that provide longer royalty periods without violating Brulotte, including:
- payments for use of an invention during the patent’s term can be deferred into a post-expiration period;
- post-expiration royalties can be tied to a non-patent right (such as a license of trade secrets); and
- other business arrangements (such as joint ventures) can confer benefits long after a patent term has expired.
Patent licensors who want a longer royalty term should carefully draft license agreements to ensure that the royalties fall under these exceptions to the Brulotte rule and are not considered to be merely post-expiration patent royalties.
After a period in which the Court has seemed eager to change a number of fundamental principles of U.S. patent law, the Court’s citation of stare decisis in Kimble v. Marvel Enterprises, Inc. may strike some as surprising. At a minimum, it suggests that the Court isn’t ready to completely abandon predictability in U.S. patent law.
When drafting and negotiating a license agreement, it’s tempting for the parties to simply use definitions and so-called “standard” paragraphs that are taken from previous agreements. This can be risky. Even paragraphs that might be considered boilerplate need to be carefully reviewed to ensure that they are consistent with the parties’ intent
The Licensing Journal recently published my article “Defining ‘Affiliate’: Pay Attention to the Boilerplate“, in which I describe two examples in which boilerplate terms led to unintended consequences. For more details, click the hyperlink above for the full article.
UPDATE: On June 22, 2015, the Supreme Court upheld the Federal Circuit’s decision in this case. For more details, see this IP Spotlight post.
2015 could prove to be a time of change for patent licensing law, as the Supreme Court recently agreed to review the long-standing rule that a patent holder may only receive royalties during the term of a patent, and not after it expires.
In the case that is the subject of the appeal, Kimble v. Marvel Enterprises, Inc., the inventors of a toy with Spider-Man-like web-shooting capabilities sold a patent covering the toy to Marvel Enterprises. The agreement imposed Continue reading →
When licensing a patent, software, copyrightable work or other intellectual property, it’s common for the agreement to license the property to a particular entity and its “affiliates.” The agreement may define the term “affiliates.” But are the parties always sure that the definition includes all parties that they actually intend to include?
Following on the heels of a recent, similar decision from United States District Court for the Central District of California, the Court of Appeals of the State of New York held that a license granted to an entity and its “affiliates” is limited to affiliates that were in existence on the effective date of the license agreement, unless the agreement expressly states otherwise.
Although the licensee typically benefits when the agreement contains a broad definition of affiliates, the new case is unique because it shows that a licensor can also benefit from a broader definition in certain situations.
The New York case, Ellington v. EMI Music, Inc., involved the terms of a royalty provision found in a 1961 copyright renewal agreement between the legendary musician Duke Ellington and a group of music publishers, Continue reading →
Intellectual Asset Management (IAM) magazine has released the IAM Patent 1000: The World’s Leading Patent Practitioners 2014. Each year, IAM surveys its readers and asks them to recommend patent licensing and prosecution attorneys for inclusion in the guide. According to IAM:
[The IAM Patent 1000 is] a unique guide that identifies the top patent practitioners in key jurisdictions around the globe. . . .
The IAM Patent 1000 has fast become the definitive directory exclusively dedicated to identifying the world’s leading patent services providers. The extensive research process for this guide was conducted over several months by a team of full-time analysts, and involved in excess of 1,500 interviews with patent specialists across the globe.
The IAM Patent 1000 is available on the IAM website to registered users via this link. I am honored that IAM named me to its lists for both patent licensing and patent prosecution for the fourth consecutive year. In addition, I am pleased to note that my law firm, Fox Rothschild, is named to the guide’s honor roll for patent prosecution.
When two or more research institutions, corporations or other entities collaborate on an invention, it is common for them to agree that any patents resulting from the collaboration will be jointly owned. However, a jointly owned patent can be nothing more than a piece of paper if no party has a right to use the patent to stop infringement. The collaboration agreement, patent assignment documents or both must be carefully drafted to ensure that enforcement rights are protected.
This risk was recently highlighted in STC.UNM v. Intel Corp., Fed. Cir., No. 2013-1241, 6/6/14. In the case, STC.UNM attempted to sue Intel for infringement of a patent. The patent was a continuation-in-part of an earlier patent application that was jointly owned by the University of New Mexico (UNM) and Sandia Corp. Because of procedural matters involving a terminal disclaimer, UNM and Sandia also were co-owners of the patent in suit. However, Sandia refused to join the lawsuit, and there was no agreement in place between UNM and Sandia that required Sandia to do so.
The district court dismissed the case for a lack of standing, and the Federal Circuit affirmed. As the Federal Circuit stated:
“as a matter of substantive patent law, all co-owners must ordinarily consent to join as plaintiffs in an infringement suit”
The reasoning for this ruling was that if only one co-owner sues, it effectively deprives the other co-owner of the right to sue and collect damages for infringement.
Both courts also refused to involuntarily join Sandia to the case as a necessary party.
The case highlights risks that can occur if joint owners of a patent don’t carefully specify enforcement rights — and obligations of both parties — in the relevant agreements. When collaboration will result in invention, it’s important that the collaboration agreement, assignment agreement, or both specify who has enforcement rights. Even more important, it’s critical that the agreement require the non-enforcing co-owners to participate in the enforcement action when and if needed.
Penn State University is primed to launch the country’s first online auction of patent rights resulting from university research. According to a Penn State news release:
About 70 engineering patents in areas as diverse as acoustics, fuel cells and sensors will be available for license in this first auction. Required bid minimums on many will be as low as $5,000.
Available patents are listed on the Penn State Intellectual Property Auction Website. Bidders must pre-register to participate in the action. In addition to single patents with minimum bids as low as $5,000, the auction will include several patent bundles with minimum bids ranging from $10,000 to $50,000. The auction will open March 31, 2104 and close on April 11, 2014.
Winning bidders will need to enter into a license agreement with the University’s Office of Technology Management. The agreement will require the winning bidder to also pay all patent maintenance fees. However, unlike typical university research licenses, no ongoing royalties will be due. Penn State also retains the right to pursue third-party infringers; the licensee can only participate in enforcement if Penn State’s enforcement efforts are not successful after a six month period.
Patent auctions have met with limited success over the years. However, Penn State is tempering expectations with low minimum bids and realistic public statements. Penn State’s news release notes that a key goal of the auction is to “raise awareness among interested parties in business and industry that the University does have licenses available whose commercial applications could prove extremely valuable.”
A small license fee is certainly better than no license fee, especially for patents that are just sitting on the shelf. In addition, by calling attention to its portfolio of IP in fields such as antenna systems, superconductors, and ground water remediation, the auction will certainly help draw attention to the university’s diverse research capabilities.