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Intellectual Property Law Section Website › Newsletters › IP Links, November 2011 › Patent Licenses Presumed to Extend to Continuation Applications

Patent Licenses Presumed to Extend to Continuation Applications

General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., Case No. 11-1115 (Fed. Cir., July 8, 2011) (Linn, J.)

Article Date: Thursday, November 03, 2011

Written By: Jocelyn Fina

The United States Court of Appeals for the Federal Circuit held in General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., Case No. 11-1115 (Fed. Cir., July 8, 2011) (Linn, J.) that where "continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well."

Leviton Manufacturing Co., Inc. ("Leviton") and General Protecht Group, Inc. ("GPG") both manufacture ground fault circuit interrupters. In 2004 and 2005, Leviton sued GPG in the District of New Mexico for patent infringement of two of Leviton's U.S. patents. In 2007, the parties entered into a settlement agreement regarding such claims of patent infringement.

This settlement agreement contained a covenant not to sue, which stated that Leviton would not sue GPG for alleged infringement of the two patents at issue for GPG's current products and for anticipated future product that GPG had indicated an intent to market in the United States.  This settlement agreement also contained a forum selection clause specifying that any dispute related to the settlement agreement would be prosecuted in the U.S. District Court for the District of New Mexico.

In September 2010, Leviton filed a complaint with the International Trade Commission and a separate complaint in the Northern District of California alleging infringement by GPG and its distributors of two patents that were continuations of the patents at issue in the 2007 settlement agreement.  These continuation patents were issued after the 2007 settlement agreement was executed and the prior litigation had been resolved.

GPG then filed its own suit in the District of New Mexico, seeking an injunction of Leviton's continued litigation outside of New Mexico.  GPG contended that it had an implied license to practice the continuation patents under the 2007 settlement agreement.  The New Mexico district court found that there was a "likelihood of success on the merits" of GPG's argument and so granted the preliminary injunction enforcing the forum selection clause in the 2007 settlement agreement. Leviton appealed.

In its analysis of whether the 2007 settlement agreement contained an implied license to the continuation patents, the Federal Circuit relied heavily on its previous decision in TransCore v. Electronic Translation Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). In TransCore, the Federal Circuit found that TransCore had licensed its patents in a settlement agreement by covenanting not to sue on the patents and the language in the settlement agreement was also broad enough to grant an implied license to continuation patents.

The Federal Circuit in this case reiterated that "TransCore prohibits a patent licensor from derogating from rights granted under the license by 'taking back in any extent that for which [it] has already received consideration.'"

Leviton argued that TransCore was not applicable because some of the claims of its continuation patents were narrower than its previously asserted claims and, therefore, did not derogate from GPG's right to practice the licensed claims.

However, the Federal Circuit found that Leviton's actions "unquestionably derogated" from GPG's previously granted rights under the 2007 settlement agreement for which Leviton had received consideration because (a) the same products were accused of infringement in the new suit as in the previous suit and (b) the same inventive subject matter was disclosed in the licensed patents as in the continuations. The Federal Circuit made clear that if Leviton had not wanted its license in the 2007 settlement agreement to GPG to include continuation applications, it had an obligation to clearly state that intent:

"[W]here continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well. If the parties intend otherwise, it is their burden to make such intent clear in the license."

From an intellectual property licensing perspective, the key take-away from this case is to remember that intellectual property licenses can take many forms, including a covenant not to sue in a settlement agreement. The Federal Circuit made clear that parties are free to contract around interpretive presumptions that do not reflect their intentions, but it is the parties' burden to make such intentions clear. Agreements in any form, whether a traditional license agreement or a litigious settlement agreement, that involve intellectual property, should be drafted very carefully, so that no implied licenses can be inferred from the drafted, mutually agreed upon language of such documents. •


Jocelyn Fina is an associate in the IP Group of Womble Carlyle's Research Triangle Park office.
Views and opinions expressed in articles published herein are the authors' only and are not to be attributed to this newsletter, the section, or the NCBA unless expressly stated. Authors are responsible for the accuracy of all citations and quotations.