Unknown Speaker  0:00  
Thank you all. My name is Russell Levine. I'm a partner at Kirkland and Ellis and I will be the presenter today, for the top 10 court decisions of the year affecting licensing. Thank you all for having me back. I very much look forward to discussing these cases with you. And I should say that while the title says top 10, due to inflation, we've got 11 cases we're going to talk about today. A couple of other statistics about the cases, two of the cases are 2024 cases, hot off the presses, including the first one that we're going to talk about, which came out 10 days ago, so you guys could be some of the first to really hear the analysis and to understand some of the most recent of the court decisions that affect licensing. Most of the cases we're going to talk about over half, are within the last six months. So very, very recent cases that we're going to be talking about today. And again, the whole idea is to look at what happened not necessarily whether it was right or wrong, or things along those lines, but much more to be thought provoking. So when we go back and talk with our clients, and the startup companies or the professors within the universities, we've got an idea of things that we might consider doing in the next deal that we're drafting in in the next license agreement that we're negotiating. And, of course, I always do provide the disclaimer that I'm not talking about any views of my client or the firm. But today, I want to focus on the disclaimer a little bit more. Because the first two cases that we're going to be talking about involve universities, it very well could be that some of you here, were involved in one of these cases, whether it's the university case, or perhaps one of the others I'm going to talk about, again, I'm not commenting on whether the decision was right or wrong. There are many, many facts that go into cases that don't always come through in the reported decision. And certainly that I don't have time standing up here today to talk about in a very lengthy court decision that issued if you want to add something, feel free, put your hand up, let the rest of us know what you think may have led to the particular outcome that we're going to see. And certainly if you have any questions as we go along, please don't wait till the end. Put your hand up Stand up after the question, because if you have a question, odds are somebody else here does as well. I've got an extra microphone, we can pass it around to help with respect to any questions. So with that, let's talk about the very first case that I want to address today. And again, this is something that came out 10 days ago on February 9, and it was a case that the takeaway is that post work funding, we're talking about federal grants here. In this particular case, it was an NIH grant, the grant went to Mayo, Mayo subcontracted to South Florida, South Florida thought that the government was infringing, filed the suit seeking to get royalties from the government, the government defended and said, Hey, wait a minute, we've got a license pursuant to by dole, and therefore you can't collect any further damages. Because we've got the license defense. The court agreed. The takeaway, as I said, here is that post work funding sits within the statutory confines of by dole. So let's look at what happened. As I mentioned, this is a case between South Florida and the government. The argument was that under by dole, the government had a license. There was no dispute that the Jackson lied laboratory on behalf of the government was practicing the patent. They were practicing the patented technology, nobody disputed that. The dispute was whether that practicing of the patented technology was quote unquote, the subject invention within 202 C four by dole, giving the government a license to the patented technology. The key provision by DOL was of course 202 C four C, talking about a funding agreement shall contain an appropriate provision, providing the government with the license. And I should say too, that these slides will be available on Autumn net afterwards, I was actually making revisions as late as this afternoon, but the final slide slide deck will be available on Autumn net. And if you want, just leave a business card, whether you put it up here, put it at the back of the room somewhere, and I'll send you a signed copy of the slide deck as well, but these will be made available for you. Alright, so at trial, the court determined that 202 C four applied and the government had a license. Why is that? Well, the court and notice that we're talking here about the Federal Circuit, so this is now up on appeal, one step below the Supreme Court. So this is not a trial court decision here. If the trial court said the government had a license, we're now looking at the analysis in the conclusion of the Court of Appeals. And the Court of Appeal said, Well, we've got to determine is whether the work that was done in April of 1997, which was when the first reduction occurred, whether that work was being funded by South Florida through mayo, pursuant to the NIH grant. The funding agreement, though, did not get signed, and executed until November of 97 months after the April 97 work that resulted in the first reduction to practice. So South Florida argued, while any funding agreement that's going to trigger this license to the government has got to be in place at the time that the work is done. So their argument was the work got done in April, the funding agreement didn't get put into place until November. So you can't have a license under that factual scenario. And again, there was no dispute with respect to these underlying facts. Florida accepted the NIH funds from Mayo, pursuant to that November 1997. funding agreement. And what the Federal Circuit concluded was that the APR 97 work when that first reduction to practice occurred was the performance of the work under the funding agreement, even though the funding agreement didn't exist for months later. And their logic was that when you look at it in that context, that under by doll, the language to embrace past work funding, what they said fits the statutory context. Why? They said, Look, we all know it's of great significance, to advance useful knowledge in this particular case medicine. And that for many grant projects, all the people involved, whether it's the people doing the work, the university, the government agency, that's funding it. Everyone expects that the grant work is going to proceed immediately upon the award of the grant, without waiting for the formal subcontract or funding agreement. According to the Federal Circuit, that's what by DOL would expect. That's what the people getting rights under by DOL expect that whether it's the people getting the funding, or the people doing the funding. And they also pointed out that that type of immediate performance of the work beyond just being necessary from a scientific matter is important for proper grant administration. Because the government is going to be constantly looking at whether or not they should renew the grant, where you got to have some work in progress was the logic in order to know whether the grant should be renewed. And if no work started, until that funding agreement in November and now you're looking at the beginning of the following year to decide whether to renew, you're not going to have enough to really base that renewal decision on. So it makes sense for the work to start immediately upon the grant, even if the funding agreement is not yet in place. So for all of those reasons, the Federal Circuit rejected South Florida's reliance on the date when the funding agreement was entered into

Unknown Speaker  9:46  
and said rather because the work was done in April pursuant to the grant, the government had a license even though the funding agreement did not get put into play scintillator Yes. Yes, they were able to trace the money back and to show that the money that came in through that funding agreement paid for the work that was done back in April. Yes.

Unknown Speaker  10:28  
What is the date that would start the obligation? I think that the date that would be operative would be when the work began. So in this case, they know the work was done in April. So that's probably the date that triggered it. It may be that there was some other work that occurred, let's say back in March before the actual reduction to practice, and one might have been able to argue that under this logic, that whenever the work starts is when you know, that license would kick in. But I don't recall that those facts were in the in the record, everybody agreed, reduction to practice occurred in April. So that was, and that the funding that came in and November paid for the work that was done in April? Yep. In the back?

Unknown Speaker  11:31  
Later.

Unknown Speaker  11:49  
On government

Unknown Speaker  11:59  
to funding. Yeah, yeah. It's very complicated. This is a very lengthy decision. The point the Federal Circuit was making that I think it's helpful for all of us, when we're looking at trying to collect royalties for patented invention, or one off

Unknown Speaker  12:25  
the micro microphone work and again, okay, there we go. So, yeah, if you're looking to get royalties from the government, in a situation like this, the point you need to understand is that the post work, or post work funding agreement doesn't impact the date of the actual when the government has the license. So certainly something to worth worth taking a look at, and being aware of given this particular decision. Alright, the next case, and also involving a university, or at least, the licensing arm of the university, tells us that when we're drafting agreements, the whereas clause that we put at the beginning of the agreement, can actually be an excellent source of insight into the party's intent in entering into the agreement, and many, many times, I'm sure we've all done this, I've done this, we all of us have done this, we put forth three or four, maybe five, whereas clauses about the parties want to do this. Sometimes it's they want to settle a dispute. But you always figure well, that's not going to be used to interpret the agreement. The real operative provisions are going to be those that come after the whereas clauses. And this case, lets us know that if there's a dispute with respect to the interpretation of the agreement, the court may go can look at the whereas clauses to try and get an idea is what the intent of the parties was at the time that they entered into the agreement. So in this particular case, an entity called Texas LD P. C, had sued Broadcom, obviously alleging patent infringement and trying to get royalties from Broadcom, Texas LDPC, was the entity that was enforcing some intellectual property from Texas a&m University. And as the Court said rather eloquently at the beginning, that Texas LP DC Broadcom, Broadcom and friends to court, but along the way, they lost a little interest in the case. So the dispute no longer belongs in court, and the court dismissed the case. What the court went through and analyzed and pointed out was that the Texas LDP C's interest was base is entirely on its contract with the university. But that contract said that it would automatically terminate when LDPC ceased business operations. And there was a point in time at the very beginning, where that entity was going to do more than just enforce intellectual property, it was really going to try and commercialize intellectual property. But if it ceased operations, the agreement would automatically terminate. And what the Court needed to do was to understand well, what rights did they have? And could they continue to sue Broadcom once that agreement terminated? So the court said to figure that out, I'm going to widen my scope. Just look at the automatic termination provision. This judge in Delaware said, A whereas clause can be an excellent source of insight into the parties intent and entering into a contract. And here there were several whereas clauses, and they referred to a&m is desire to commercialize IP for both public benefit and welfare to expand upon LDP sees expertise in commercialization and development. But as the Court pointed out, nowhere in those whereas clauses didn't mention anything about the enforcement of that IP against third party infringers. It focused on commercialization of IP, development of IP, but did not mention enforcement. Plus, later on in the contract, it listed various business operations that LDPC had to stop when the contract terminated. And that list also referenced commercial activities, but didn't say anything about litigation or enforcement. So the court said that because the contract automatically terminated when LDPC ceased its business operations. The licensing contract also terminated when LDPC changed its business from no more doing commercialization, but now just doing enforcement. And that interpretation was supported by all of the evidence at the time, as well as some of the depositions that came out. So as a result, LDPC law lost its interest in the enforcement action could no longer maintain the suit, and it had to be dismissed. Obviously, one lesson or takeaway is that if you're giving an entity rights to enforce, be explicit about it. And maybe you even have in your survival clause, what terms survive the termination of the agreement, this case would certainly Council towards including the right to enforce is one that survives. There's probably other provisions as well in terms of how royalties from enforcement actions would be shared, those two should survive. But here, the contract talked almost exclusively about commercialization. And therefore, when the commercialization activity stopped, there was nothing further for LDPC to do and they could no longer maintain the enforcement action.

Unknown Speaker  18:46  
The third case to talk about is one that highlights what some of us may have heard of the implied covenant of good faith and fair dealing. Well, what is that? How can it be used? And in this particular case, we're going to see that it cannot be used to rewrite a contract or to change the bargain that the parties had entered into. A pharmaceutical research entity together with formed a large contract organization, many of you may be familiar with this Pharmaceutical Research Associates in pra, health sciences, they do a lot of clinical trials in the pharmaceutical and biotech industry. Well, value health was a software company, founded by an individual value health developed three software applications for use in clinical trials. They called them CLIN trial Max, cloud Max and infomax. And we can the court referred to these as the so called solutions. The solutions were coming Hannibal with a platform called Salesforce, which is widely used by organizations conducting clinical trials. And the solutions caught the interest of pra. And you can imagine what happened next, there was a corporate deal that was put together, and plaintiffs and defendants entered into an asset purchase agreement. And under that asset purchase agreement, that solutions were sold to pra, in exchange for pra stock, and two and a half million. And the asset purchase agreement further provided for contingent payment, if certain milestones were achieved, I'm sure that's all sounds very, very familiar. And most of us have done agreements that have got milestone payment. Disputes arose in the future rose with respect to these contingent payments, and ultimately value health and the individual filed suit alleging breach of contract. Under the contract, pra was to reasonably determine if first and second milestones had been completed. And it was in their sole determination and discretion as to whether those milestones had been completed. And what value health was arguing was that they breached the agreement, because they didn't exercise due care in determining whether or not those milestones had been met. And what the Court pointed out, and this was part of the argument that the plaintiff was making, is that when a contract confers on one party, the discretion, such as here to determine if the milestones had been met, the implied covenant of good faith and fair dealing requires that the discretion be used reasonably and in good faith. So basically, what the argument was here was that pra violated that and covenant of implied faith and good dealing in applying the discretion and concluding that the milestones had not been met. And the court agreed that that's a proper use of the implied covenant that it can be used to make sure that there's fair dealing between the parties may be used to imply terms for development. And here's the key that could not be anticipated. And the court said the covenant of good faith and fair dealing is not an equitable remedy to rebalance the economic interests with respect to things that could have been anticipated. You can't use the covenant to give the plaintiff contractual rights and remedies and protections that the plaintiff could have negotiated for themselves at the bargaining table. You don't get to use the implied covenant to rewrite the agreement. And the key here in this particular case, was what was reasonably anticipated or could have been anticipated. And the court said the problems that the plaintiff was arguing about are all things that could have been anticipated. Do during negotiations, pra divides the list of functional deficiencies that would have prevented a milestone from being triggered. And those all got incorporated into the milestones. The first milestone The court said was so loosely worded, it could be argued either way, and partial achievement of milestone two was gray. So following the execution of the asset purchase agreement, it quickly became apparent that there were going to be disputes over completing the milestones. And this is pretty pretty telling what the court said down here at the bottom of the slide, the plaintiff has a right to enter into good and bad contracts. The law enforces both. That's a takeaway we all ought to remember when we go back and start drafting again. And the implied covenant of good faith and fair dealing cannot be used to change a bad contract into a good contract. The court made that point crystal clear that it's not going to use the covenant of good faith to rewrite a contract that the plaintiff now believes was a bad deal. The court noted that the plaintiff was a sophisticated party. And you've probably heard me over the years and other top 10 presentations, comment that courts look at all of us as licensing professionals, and involved in the licensing of intellectual property is being sophisticated parties. If we're doing patent license agreement to know how license agreement, funding startups engaging in the commercialization of intellectual property, the courts look at us as sophisticated parties who know what we're doing when we draft contracts. And that's all the more reason why the court says, we're going to enforce good contracts and bad contracts. And you cannot use this covenant of good faith and fair deal to rewrite a contract that later turns out to have been a bad contract. Now, one of the issues that comes up fairly often over the years of talking about top 10 cases, is can we get royalties after the patent expires? And the short answer is no. Yes, there are a couple of different ways that maybe you can try. But the short answer from a pure patent law, if you're only licensing patent standpoint is no, you cannot get post exploration royalties. And that's what this particular case highlighted for us didn't agree agreement requiring post exploration royalties is unenforceable. But part of the reason I'm talking about it is not just to remind you of that basic principle, but because the court reminded us in this decision about some of the ways that perhaps we can get royalties, even after a particular patent has expired. So in this particular case, we've got another pharmaceutical company that defending or that has sued Research Development Foundation, saying, Hey, we don't owe royalties anymore. The provision that requires us to continue to pay royalties after patent expiration is unenforceable. So we want a declaration that we don't have to pay anymore. The response was well, applying the Supreme Court case, brew Lottie that they paid for the discretion to use the patents, rather than the use of the patents themselves trying to split hairs really as to what the payments were for. Court didn't buy it. The court said that any terms of the agreement requiring pulsera to pay royalties on sales of a product manufactured using the patented process after the expiration of the patent is unenforceable as a matter of public policy. And the attempts to distinguish this particular case from the Supreme Court case, were unavailing. The court did note that the Supreme Court decision involves a slightly different licensing situation. But given the more recent Supreme Court case, the Kimble case from a few years ago, it didn't matter. royalties or agreements that require royalties, extending the life of a patent are just not going to be enforceable. The patent policy of not paying royalties after the patent expires because the invention is now in the public domain remains.

Unknown Speaker  28:40  
But the court noted that in the agreement, there was no reduction in the royalty payment once the patents expired. So if the argument that was being made to try and support royalties was really correct, that they were paying for something other than just the patents, then why didn't the royalty go down when the patents expired? And they cited the recent Supreme Court case, the Kimble case, saying that post exploration royalties are allowable, so long as they're tied to a non patent, right. And they gave an example in which a license involve both patents and trade secrets, set a royalty at 5% During the patent period 4%, after the patents expired, certainly suggesting that that's enforceable. So if you do license both patents and know how, and you want to increase the chance of being able to collect those royalties after patent expiration, you should have some type of step down after patent expiration. And I think you'll increase the chances of being able to collect the know how royalties thereafter Sometimes the question is raised about, well, what if it's multiple patents? Should we do a step down when each particular patent expires? That may be the safest way. You may not need to if the patents that you're talking about are all related all in the same family, you may be able to say the royalty obligation continues until the last two expire of the patents. If they're terminal disclaimers on the patents, they may all expire on the same date. But if there are multiple patent families included within the license, and one patent family expires before the others having a step down, it's certainly a safer way to then be able to argue that that lower royalty is enforceable. But certainly if there's no how involved some type of step down, would be advisable. Another case highlighting the same issue that requiring post expiration royalties instead of just being unenforceable. Now it's being called by the court. It's patent misuse. And in this particular case, there was a settlement between Bart and atrium. And the license agreement that came out of the settlement gave atrium a non exclusive license to use a patent as well as other patents. All related claiming priority. There were two provisions relating to royalties, there was a 15% royalty on certain products. And then there was an annual minimum royalty in a different section sections 3.1 and 3.2 of the agreement. So after the patent expired, atrium stopped paying the annual minimum royalty. And they only paid the running royalty on net Canadian sales, which were very small. And the argument was that it was patent misuse, to require them to continue to pay the annual minimum once the patents expire. And Bard, of course, tried to get out from underneath that argument and argued there was no evidence to support the characterization of the minimum royalty is being tied to the sales of the US product. And they argued that that provision was not compensation for use of the patent after expiration, but rather was compensation for a whole bundle of things included in the license and settlement agreement, including the pre 2011 sales, and the release and again, a whole bundle of rights. But what the court said was that the purpose of the minimum royalty payment was to compensate for the sales and that remain the same throughout the life of those payments. And there was nothing in the agreement to suggest that that purpose changed when the patent family expired. So the court found that the purpose of the minimum royalty provision after the patent expired was the same as its purpose before the patent expired. And that was to compensate Bard for the product sales and charging a minimum royalty after the patent expired was patent issues. So again, if you're going to try and get royalties after patent expiration, having know how included or having some type of specific language in the agreement explaining what the post expiration royalties are for, is certainly something that may help your case.

Unknown Speaker  33:58  
I didn't quite hear you say

Unknown Speaker  34:05  
it, if there's regulatory exclusivity after the life of the patent, it shouldn't change the way the courts going to look at a patent royalty provision. And people have tried, they've said, well, giving them a license. Now it's going to take 15 years to develop the product. They're not going to commercialize until there's only another couple of years of patent life left. The courts are not accepting that argument. That argument was made in the Supreme Court gimbaled decision. It's just not an argument that here in the US is going to result in a different court decision. In the in the Supreme Court Kimball decision, one of the things they said as to why they weren't going to overturn the earlier Pilati decision, which was decades ago from the Supreme Court was that Congress has had many opportunities To legislatively overturn the port Lahti decision, and to say that post expiration royalties are permissible, if that's what the parties agreed to. But the Supreme Court noted that in all these decades, Congress has not passed a law to do that. So they said, We're not going to do it. Now. It's really for Congress. And your point about regulatory exclusivity, the point that many, many people have argued that it takes years to develop to commercialize a product, and the patent may expire before we get a return on the investment. The courts are telling us make those arguments to Congress, and it needs to be Congress who changes this law. I will also say that the US law is different than the law outside of the US. And if your agreement was governed by the laws of another country, Germany, the UK, you may be able to collect royalties beyond patent expiration. So depending upon who you're doing your deal with, if there is a legitimate basis for saying that foreign law applies, maybe that's where the manufacturing is being done, and it's a process patent. Or there may be other reasons why you can justify foreign law, that may be a way to increase the chance of getting post exploration royalties.

Unknown Speaker  36:34  
Past expired steps could step up during that five year marketing exclusivity for another 1% of the contract?

Unknown Speaker  36:50  
So everyone heard the question, could the step down after patent expiration? Let's say it goes down from five to to 2%? Because of the No, how could you bump it back up, say to 3%, during the period of regulatory exclusivity, you could try, I think what the courts are going to look at is whether there was a step down after patent expiration, if it stayed at five, you're gonna have a very difficult chance, I think, of enforcing that contract. But there is value in regulatory exclusivity. So you may be able to get something for that, in addition to the no house payment. The next case that I want to talk about, it's somewhat similar what we saw in connection with the implied covenant. And that's that a court cannot rewrite an agreement or insert a term that the parties did not include. And again, courts look at us at sophisticated parties who know what we're doing, who know who know what to include or not to include. And if we chose not to include a term, the courts not going to put it in there for us. In this particular case, Vir to us and Vinci them entered into a patent license agreement, granted a license to certain computer security software, in exchange for royalty payments. The licensee was later acquired by Sophos, who began performing the licensees obligations under the agreement, all of that's kosher, everything's fine. But believing that the new owner or Sophos, we're skirting the royalty obligations, they sued for breach of contract. And the district court granted summary judgment agreeing that the contract had been breached and that more royalties were owed. This goes up on appeal. And because it's not coming out of a patent infringement case, it did not go to the Federal Circuit. Instead, it went to the Fourth Circuit Court of Appeals. And what the Fourth Circuit said, was that the district court was wrong. The District Court adopted a reading of the agreement that could not be squared with the plain text of the agreement. And therefore, they vacated the judgment and set it back down. And the whole dispute in this case, centered around the term container products. And whether or not container products meant certain anti virus software products, or whether it meant something else. And the definition of container products identified for container products by name and they're listed here in the slide. And the judge, the three judge panel said that the agreement provides is an exhaustive list of the accused container products. And the court was right there listed in the agreement in the definition of container products. What the dispute was that there were certain products that so called detect and prevent products that already existed at the time the agreement was signed. And the parties could have included those products in the list. But they didn't do so. And the Court said that carries force. But by including them, the district court rewrote the contract, and said that the definition of container products hinged on the type of source code that was in the product. And as the appellate court said, the agreement makes no mention of source code. It doesn't define container products based on what code is in a particular product. It defined container products by name. So by defining container products in a manner different than what was in the agreement, the district court committed an error, and the appellate court threw that decision out. So caution here, if you're defining licensed products, with specific reference to what the licensee is then selling, be careful. Did you include everything that they're selling? Or at least everything that falls within the scope of the patent? What about future products? You want to make sure those get covered? Here was based just on the exact product names, not the type of source code that was contained within the products? Yes. Yeah,

Unknown Speaker  41:53  
like in patents, we can't put trademarks in claims, because the person can change what is correct. What is covered, and then the company can change.

Unknown Speaker  42:12  
It, there certainly is risk. If you're defining the licensed products, we're using trade names, because as you point out, they can change or new ones can come along. The better way to do it is to define the licensed products based on the patented technology. So maybe what you would do is to say the licensed products, or those products that would infringe, but for the license is granted here and including brand name a brand name B brand named C, yes, something along those lines. But if all you do is to say brand name A, B and C, you run the risk that happened here, that there are other products that maybe would have been royalty bearing. But since they weren't listed in the agreement, the court was not going to make the licensee pay. What is the

Unknown Speaker  43:04  
person selling them just changed the name, then? That was a breach of the goods. Maybe

Unknown Speaker  43:14  
Maybe if they just changed the name of the product as a way to get out from underneath the royalty obligation those equities would not look good. But if you're going to define it with brand names, include some language about you know, in any future iterations or versions thereof so that if it's your product 1234 A, the next year 1234 B is still going to be a licensed product. Drafting should be able to take care of that. Well, here's another drafting problem. Future and later formed affiliates may be bound by the agreement. What happened here was VLSI hit was in litigation with Intel. Intel had entered into an agreement with another entity thin John, where Intel received a perpetual irrevocable license to thin John's patent. The licensee or the other party to that agreement then John was defined to include its affiliate. The term affiliate was then defined is any person that now or hereafter directly or indirectly through one or more entities controls or is controlled by fairly standard. The thin jamb License Agreement also defined control, controls controlling etc. In a fairly typical standard manner. So what happened next? Was the court had to determine whether a party to a contract can bind a future later formed non signatory affiliate under Delaware law. Alright, so that initial agreement between Intel and Finn, John gets entered into affiliates are covered. And as you can deduce from here, the issue is whether a future affiliate is now covered under that agreement. And what the court had to address was whether the plain language of the agreement could bind VLSI, even though it wasn't a signatory party to the agreement didn't even exist at the time that the agreement was entered into. But as of today, or at the time of this agreement, it was an affiliate of Finn, John. And the court agreed with Intel that under Delaware law, and certain circumstances, a non signatory created after the contract can still be bound by the contract. And what the court relied upon, was that now or hereafter language, in the definition of affiliates go back to it. Any person that now or here after, directly or indirectly, is controlled, etc. And the court relying on this now or here after language, said that it unambiguously contemplates that the agreement would later would apply to later acquired or formed entities, just as what happened in this particular case. And the court said again, that that now and hereafter language, unambiguously contemplates, later acquired and later formed entities so they can be bound by the agreement. And the court also noted, and I highlight this for us as well, as the Court said, It's noteworthy that this conclusion is not novel. And the language of the thin John License Agreement appears to be relatively common, and even referred back to a New York Law Journal article for more than 10 years ago, that warned of exactly this potential peril. If there's a failure of due diligence by the acquiring company, not realizing that, once that acquisition occurs, they may now be bound by the agreement that the target company has that has now or hereafter type language Genet. So it certainly gives us some food for thought, perhaps some pause when we're defining affiliate, and whether or not future affiliates may be bound by the agreements we're entering into, yes. Acquire

Unknown Speaker  48:06  
the license with Intel bound by previously existing coverage with the new entity be subject to the affiliate?

Unknown Speaker  48:19  
Well, what I can say is that if patents had been licensed to a third party, and ownership of those patents changes hands, the law says that the license continues. You can't eviscerate the license by selling the patents to somebody else.

Unknown Speaker  48:55  
Why very well could be, I think the situation you're addressing oftentimes is more in the context of the license grant, and how the definition of licensed patents is defined as opposed to an affiliate.

Unknown Speaker  49:32  
Yes, yeah, I think that's the risk that this case is pointing out that yes, if you're an affiliate, you become an affiliate, you run the risk. Yes. Yeah, I think so. I think that it would run both ways. The next case is to highlight that not all form selection And clauses preclude IP ORs. And while that's the outcome of this particular case, I think the real takeaway is to remind us all that a forum selection clause has got a lot of teeth to it, and can depending upon the way you draft it, preclude someone from challenging the validity of your patent in a patent office proceeding and an IPR. In this particular case between decks common Abbott, after decks com had sued Abbott for infringing its patent, Abbott filed petitions at the patent office, the IPR petitions. Dexcom, then moved for a preliminary injunction to prevent Abbott from proceeding with the inter parties reviews at the patent office. And their argument was based on a forum selection clause between the parties. The district court said no. And Dexcom appealed that denial of a preliminary injunction. The Federal Circuit noted that the agreement contained a forum selection clause that identified the US District Court for the District of Delaware as the exclusive jurisdiction over any dispute arising from or under or relating to the agreement. So the question becomes is ducks com likely to succeed on the merits? That's the first factor in considering whether to grant a preliminary injunction. So what the court had to determine was whether the agreements forum selection clause bars, the filing of the IP Rs. Now, here's the key to this case. And again, cases are very complicated, and there are a lot of facts. The court here said after the covenant period, so there were two periods of time that you need to understand in the context of this case, the so called covenant period, and then the period after the covenant. So the parties were disputing whether the filings of the IPR is were permissible after the covenant. But as the court noted, Section F three and f4 of the agreement, specifically allowed IPR petitions to be filed during the covenant period. Yes, certain conditions had to be made, but it allowed the filing of IPRS during the covenant period. So the court said, well, it necessarily follows that because that forum selection clause governs both during and after the covenant period, that the clause can't operate to prohibit filing of IPRS. After if it allowed the filing of the IPR is during. So given the specific language in this particular case, the Federal Circuit distinguished some of its other cases, like this Texas Instruments case, that set a forum selection clause that said, all disputes in Delaware precluded the filing of an IPR. And again, that's what I really want to emphasize here is that if you have a forum selection clause that said exclusively in a jurisdiction, it can be used to prevent the filing of an IPR. What happened here was that IPRS were permitted at one point in time. And they were arguing not permitted another but the court said, Wait a minute, it's the same forum selection clause. So if it permitted here, it must prevent permitted in a different period as well. So the court went on to really highlight this for us, although we held that the specific forum selection clauses at issue in those cases, prohibited a filing at the patent office. Those cases lacked a circumstance present here that allowed the filing of the IPR under certain circumstances, not withstanding that forum selection clause. So that was what drove the outcome here. Again, think about it. If you don't want the licensee to challenge the validity. You want to have a very specific forum selection clause or at least not to challenge it in the patent office. Well, let's keep talking about forum selection clauses. They could be mandatory or permissive. Having big impacts on where your litigation or dispute is going to be resolved. This was a case between everlight and IKEA. The parties had entered into an agreement for business to discussions. That's key just business discussions. The agreement was only two pages, set out what they were going to talk about. And it provided for context that whereas everlight requested that IKEA had business discussions regarding IKEA, potentially using everlight as a supplier, whereas IKEA has a history of meritless patent infringement suits relating to these LEDs being brought against IKEA. So what did the agreement say? The key provision said that they agree that the business discussions are solely for the purpose of proposing a potential business relationship will not use the business discussion for any other purpose. And that they agree that the agreement is governed by the laws of Delaware, and any disputes will be resolved in the state or federal courts of Delaware. And then everlight. And I agree, IKEA agreed a personal jurisdiction and venue in Delaware. So the court said that you've got a forum selection clause. There was a motion to transfer the case from Western Texas to Delaware. And IKEA said the forum selection clause is mandatory. You've got to ship this case to Delaware. And in response, everlight said wait a minute. This agreement, the nondisclosure agreement, basically, it's an agreement to have business discussions. It's not a patent license agreement. We're suing them for patent infringement. This agreement doesn't have anything to do with patent infringement. And in response, IKEA said that while there's no exclusion in the forum selection clause for patent infringement dispute, it says disputes are going to be brought in Delaware. Under the applicable law, in this case, Fifth Circuit law, there's a distinction between a mandatory and a permissive forum selection clause, and only mandatory forum selection clauses justify trick transfer. The clauses mandatory if it affirmatively requires litigation arising from the contract be carried out in a particular form. Whereas it's permissive. If the contract says you're going to waive jurisdiction and venue in a particular form. So here the forum selection clause was mandatory. And it's reproduced here at the bottom of the slide. Any disputes between IKEA and everlight will be resolved in the state or federal courts of Delaware period. And the courts have said that a clause that says we'll resolve any disputes, that's mandatory. So but for the fact that disagreement really didn't have anything to do with that, and in front, the court said, I would have shipped it to Delaware, because it's a mandatory forum selection clause. So when you're drafting it, if you want to make the litigation, whether it's breach of contract or otherwise gets resolved, where you wanted it to, will resolve and any disputes is the broad type of language that will result in a mandatory forum selection clause. But here, the court ultimately concluded that this agreement was one about business discussions. And it's not one that deals with the patent infringement dispute. So the court did not transfer this particular case to Delaware.

Unknown Speaker  59:09  
Talk about drafting with specificity. You got to do it if you want to get a fee shifting provision and want to get your recovery of attorneys fees if you prevail, because what the court is saying here is that fee shifting provisions must be clear and unequivocal in the agreement. There's a case between Honeywell and upto. Honeywell prevailed in both jury and bench trials, slam dunk victory, you could say for Honeywell, but under US law, the so called American rule, each party pays their own legal fees. We don't have a loser pay system, like exists in many countries over in Europe, for example. But Honeywell said, Well, wait a minute. There's a fee shifting provision in the agreement. So we'd want fees and costs under 4.7 of the agreement? Well, what the court said was that the provision was drafted by sophisticated counsel. Again, if you're dealing with patent license agreements, court say we're sophisticated, we're not going to be able to say we didn't know. All right. So, the court said that the provision doesn't mention attorneys fees, and also noted that every other case that it could find awarding fees under Delaware law mentioned, quote unquote, attorneys fees. So in addition to not mentioning attorneys fees, the court said that this particular agreement doesn't even have the prevailing party language that you typically would see in a fee shifting provision. And the evidence also showed that when Honeywell wanted to negotiate a contractual provision that shifted attorneys fees, it knew how to do so whether it was in this agreement, or in other agreements, to which it was a party, all factors that the court considered in denying the fee request here. Alright, so let's take a look at what the court said that, because there had to be this clear and unequivocal language to shift the fees. You can't expect the party the court to deviate from the American rule if it's not in the contract. So the court said that in addition to this 4.7, which was the only provision in the agreement that Honeywell was relying on, there were a number of other provisions in the agreement that the Court considered. It may be a little bit small here. But what the court did was it went through and said, for example, that in Section 3.2 dismissal, the parties use the language attorneys fees in connection with the agreement in 4.7, if a party had to initiate an action to enforce the agreement, it mentioned attorneys fees, the same with respect to dispute resolution, but it was not mentioned in 4.7.

Unknown Speaker  1:02:35  
The court also noted that there were no cases supporting honey walls position that attorneys fees could be awarded when the agreement doesn't mention attorneys fees. If you want it, you got to put it in the agreement. And again, notice the last bullet point that Honeywell and Opto were represented by sophisticated and experienced counsel who knew how to say attorneys fees when they wanted to do so. Three times in the agreement attorneys fees were mentioned, but not in the particular section that Honeywell was relying upon. The court also noted that Honeywell had an agreement with Datalogic. That mentioned attorneys fees, they had an agreement with Zebra that mentioned attorneys fees. And these were all examples that the court used to show that when Honeywell wanted to negotiate a clear provision, it knew how to do so. So again, if you want attorneys fees in an agreement, and typically what you're looking for, is if you have to bring an action to enforce the agreement. Somebody's not paying you the royalties that you think you're entitled to. And you want to get reimbursed for your attorney attorneys fees if you win. You need to say the prevailing party in any such action shall be entitled to reimbursement of its reasonable attorneys fees. Courts are looking for the magic words. It wasn't contained in this agreement. So Honeywell was not able to get their attorneys fees. And the last case I want to talk about is one that said if you don't have a carve out in your arbitration clause, then it's going to be up to the arbitrators to decide whether to issue interim relief like a preliminary injunction. The other reason I wanted to mention this case is at least those of you from the Midwest may be very familiar with the grocery store chain involved here. Meyer so mad mobile specialized in developing point of sale software for checkout terminals. In April of 2019, Matt mobile and Meyer entered into an agreement and it provided that MADD mobile would deliver and support the software to Meyer in exchange for development and licensing fees. It also said that any disputes would be resolved by arbitration. Well, in the first statement of work, Matt mobile is going to develop point of sale software for the grocery stores self out self checkout lanes. Personally, I don't like those at all. But that's a whole separate story. Alright, so in November 21, mad mobile work expanded to developing software for the employee facing checkout terminals. They met regularly to discuss the progress of the work. And after one of the meetings, Meyer just ended the project that led to litigation. Soon as the litigation was filed, bad mobile demanded arbitration under Section 13.2 of the agreement. And mad mobile then filed the action that led to this decision and asked for a preliminary injunction to prevent Meyer from continuing to use or disclose Matt mobiles proprietary technology until the arbitration was concluded. So they've initiated an arbitration to decide whether or not there has been a breach. But now they want a court to issue a preliminary injunction to prevent any disclosure of trade secrets, so to speak. Well, 13.2 the arbitration clause says any claim or controversy arising relating to the agreement, or any statement of work will be determined only by arbitration. And it specifically mentioned the AAA rules. The next section 13.3 said no effect on injunctive relief. So a party must follow and participate in the processes outlined for the Cure period. And the dispute notice, before pursuing any litigation or other remedy, and not withstanding that they're not precluded from seeking injunctive relief in connection with the agreement. But it doesn't say where it just says they're not precluded from seeking injunctive relief, is that before the arbitrator or before court. And it's the court here said there's no carve out that explicitly permits them to go into the court to get the preliminary injunction. There is another section of the agreement dealing with confidential information. And that section does talk about, you know, the ability to go and get preliminary injunctive relief. But as the Court pointed out, that 14.3 says nothing about relief in court and doesn't otherwise alter the obligation and 13.2 to settle every dispute only by arbitration. And this is key that the AAA rules, specifically allow an arbitrator to take whatever interim measures he or she deems necessary, including injunctive relief. And this is no different than the jams rules, the ICC rules, the WIPO rules, or case I'm handling right now, the Chinese arbitration rules, they all allow the arbitrator to issue interim relief in the form of a preliminary injunction. So this is not a situation according to court where you got to run into the court to get a preliminary injunction to freeze the status quo. And the section that Meyer was trying to point to, or Madden mobile, I should say, was trying to point to for confidential information. The court said that doesn't do you any good. It's an entirely separate part of the agreement. But it too doesn't say you can run to the court. It just talks about the ability to get an arm relief. So in light of the entirety of the contract, the court said that the most plausible reading of this 14.3 is that it reiterates that an arbitrator can decide preliminary injunctive relief. So the court concluded that because the agreement incorporated specific arbitration rules here at the AAA, that includes the ability of an arbitrator to award interim relief, you gotta go to arbitration. So if you want the ability of a court to decide whether to issue a preliminary injunction, you need to have a carve out and I suspect that most of us don't I currently use a car belt. And this case really highlights that if there's an arbitration clause, it's probably going to get sent to arbitration.

Unknown Speaker  1:10:15  
Say it again?

Unknown Speaker  1:10:25  
I'm not sure there is a disadvantage of getting it from the arbitrator. It may be some might believe it's harder to enforce. Yeah, if if the party, for example, ignored the preliminary injunction issued by an arbitrator, you would have to then go into court to enforce that injunction. So that may be a disadvantage, but otherwise, the law should be the same. The speed with which you can get it should be the same. The evidence that you can bring to support or defend against should be the same. There just may be another step involved. If the party against whom it is awarded, does not abide by it. There may also be a difference if it's denied, whether you have a right of appeal, or if a pie is granted, you get an automatic right of appeal. You typically don't have that in an arbitration. Yep.

Unknown Speaker  1:11:35  
Yeah, that's true that arbitrations typically are confidential. So if you got a momentary injunction in arbitration, competitors or other licensees may not know about that, but if it's in court, it's certainly going to be widely publicized and public. At the end of the slides, I do include just the list for everyone. But as I said, if you want a copy, the copy will be on Autumn net or feel free to leave a business card and I'll be happy to send them to you but thank you again for attending.

Transcribed by https://otter.ai