Avoiding Implied Licenses Linked to Continuation Patents
General Protecht Group v. Leviton (decided 7/8/11)By: Allen S. Rugg
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What This Means to You
- In drafting a license agreement, consider the scope of potential implied licenses that may arise under the doctrine of patent exhaustion.
- If the intent is to avoid the creation of implied licenses tied to continuation patents, this must be clearly stated in the license agreement.
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Overview
After settling a patent infringement case against General Protecht Group (GPG), Leviton Manufacturing filed a second suit in a different court accusing the same products of infringing later-issued continuation patents. GPG argued that it was the implied licensee by application of the doctrine of patent exhaustion (limiting the patent rights that survive an initial authorized sale of a patented item.)
In General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., the US Court of Appeals for the Federal Circuit (Federal Circuit) affirmed the district court’s decision that the second suit was subject to the forum selection provision in the settlement agreement, as GPG asserted a defense of implied license arising out of the settlement.
Case Background
Prior to this case, Leviton and GPG settled a patent infringement case brought by Leviton by entering into a settlement agreement that licensed certain identified products and specified that future litigation arising out of the settlement agreement would be prosecuted in the original court. Leviton then filed a second case in a different court, accusing the same products of infringing later-issued continuation patents that depended from the same applications as the patents in the first case. GPG asserted a defense of implied license arising out of the settlement agreement and moved to enjoin the prosecution of the case in the second court.
In deciding GPG’s motion for a preliminary injunction, the district court held that the case presented a dispute as to the scope of the patent license and therefore “relates to or arises out of” the settlement agreement. Further, the district court held that, upon a final determination on the merits, an implied license would likely extend to the same accused products under later patents that depended from the same applications.
Decision Analysis
The Federal Circuit held that the second case arose out of the settlement of a prior patent case because the defendant asserted a non-frivolous patent law based defense – implied license arising as the result of patent exhaustion.
The implied license doctrine bars a licensor from taking back previously granted license rights for which it received consideration. The court held that Leviton’s claim that the same products were not licensed under later-issued continuations was a clear derogation of GPG’s license rights.
The court further held that, where continuations issue from parent patents previously licensed to certain products, absent a clear mutual intent to the contrary, those products are impliedly licensed under the continuations.
Takeaways
An intent to avoid the creation of implied licenses attached to continuation patents issued from patents licensed to certain products must be clearly stated in the license documents.
