In a case that could have a significant impact on the interpretation and drafting of patent licensing agreements, a patent licensee filed an appeal for an en banc proceeding at the Federal Circuit to challenge the court’s finding that a forum selection clause governing disputes that “arise out of and under [the Master License Agreement]” and does not explicitly allow proceedings at the Patent Trial and Appeal Board (PTAB) prevents proceedings from being initiated at the PTAB. If this holding remains intact, many licenses having forum selection clauses that are silent about PTAB proceedings may be able to be successfully relied upon to prevent PTAB proceedings.
Key Takeaway: Key business considerations relevant for choosing between patents and trade secrets include: (1) Need for transfer of IP rights; (2) Life cycle of the product or service; (3) Cost of IP protection; and (4) Other business considerations.
Foreign filing licenses do not typically require much attention in daily practice since the license is routinely applied for and granted as a matter of course in new application filings. However, in certain situations ignoring the license may cause severe damage. 35 U.S.C. § 184 states that a person shall not file or cause or authorize to be filed a patent application (among other things) in any foreign country unless six months have passed since the United States application was filed unless otherwise authorized by a license obtained from the Commissioner of Patents, i.e., unless a foreign filing license is received from the United States Patent and Trademark Office (USPTO). A purpose for this rule is that it allows the U.S. government to protect national security by approving or disapproving the export of sensitive technologies, such as technology associated with warfare, nuclear, or security-related measures.
Last week, the United States Court of Appeals for the Sixth Circuit issued a decision in the case of Cyber Solutions International LLC v. Pro Marketing Sales, Inc. Although the decision blazes no new legal territory, the facts of the case and rulings offer important lessons for both lenders and licensees.
The decision recounts the start up efforts of an emerging company focused on cybersecurity technology. As the company grew, it obtained a secured loan from a lender. In return for the loan, the company granted the lender a first position lien on all company assets including intellectual property. As is typical in any secured financing, the lien extended not just to property then owned by the company but also to property subsequently acquired by the company. Pursuant to the loan arrangement, the company agreed to standard provisions such as a restriction on its ability to sell its assets outside of the ordinary course of business without the permission of the lender.
The blog post discusses how legal provisions, such as a simple confidentiality agreement, a consulting agreement or a multi-billion dollar license, are often a source of misunderstanding, confusion and frustration.
Google recently announced a “Patent Starter Program” that may prove a boon to emerging companies looking to kick-start development of patent portfolios. Patents awarded under the program will necessarily form part of a new patent pool known as the “License on Transfer Network” or LOTNET. While this may be a win-win situation for both Google and the start-up community, whether the new Google program will slow the pace of patent "troll" litigation, as some have surmised, seems questionable.
Summary: In Kimble v. Marvel Enterprises, Inc. 576 U.S. __ (2015), the Supreme Court relied on stare decisis, declining to overrule its 1964 Brulotte v. Thys Co. decision and holding that a patent owner cannot charge royalties for the use of an invention after the patent expires. Justice Kagan’s June 22, 2015 opinion affirmed the appellate court’s decision and maintains the status quo for patent licensing practice. As before, licensors should steer clear of Brulotte’s ban on post expiration royalties. However, the parties can use other intellectual property that is likely to live well beyond an underlying patent (e.g., trademark, trade secret) and other financial tools (e.g., amortization, partnering) to reach a competitive, mutually beneficial, and enforceable license agreement that exists beyond the life of the underlying patent.
Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.