1. Patrick m. Arenz Christopher K. Larus John D. Flynn April 4, 2017
With Millions of Dollars at Stake The Trial Lawyer’s Perspective on Litigating and Trying IP License Disputes
Patrick m. Arenz
Christopher K. Larus
John D. Flynn
April 4, 2017

2. Business LAW IP License Disputes
Technical Interests
Economic
Interests
Contract Law
IP Law
Business
Interests
Trial Law
IP License Disputes

3. Most Favored Nations Clauses

4. Most favored nations clause: Defined
Example: If Licensor grants to any other Person a license to any of the Licensed Patents, it will so notify Licensee, and Licensee will be entitled to the benefit of any and all more favorable terms with respect to such Licensed Patents. Purpose: The purpose of a ‘most favored nations’ clause is to guarantee that no other licensee will be given the opportunity to use the patent at a more favorable rate.

5. JPmorgan Chase v. Datatreasury
Net Annual Income: $24.7 Billion
License Date: 2005
License Amount: $70M
Net Annual Income: $161 Million
License Date: 2012
License Amount: $250k

6. Jpmorgan chase v. datatreasury
“Therefore, where a licensee with a most favored licensee clause seeks to replace what has become a less-favored lump-sum license payment with a later-granted, more favorable lump-sum payment, the only way to give meaning to the MFL clause is by retroactive substitution of the payment term. That is the outcome of the parties’ contract here.”

7. Takeaways Review every term
Limit Scope and Application of MFN Clauses.
Similarly situated licensors
Sunset provisions
Comparable scope of license grant

8. No Challenge Clauses

9. No-Challenge ClauseS: Defined
A no-challenge clause precludes a licensee from challenging the validity of a licensed patent in a suit to recover back-royalties.
Basic No-Challenge Clause:
“Licensee shall not challenge at any time the validity of the Licensed Patents in any administrative or judicial proceeding, either affirmatively or as a defense to any claim for royalties due.”

10. No-Challenge ClauseS: LICENSEE ESTOPPEL CASE LAW
Medimmune, v. Genentech (S. Ct.):
Licensee need not cease royalty payments before filing action seeking declaration that the patent is invalid: case or controversy exists.
Baseload Energy v. Roberts (Fed. Cir.):
General release of claims in a settlement agreement will not bar validity challenge: no-challenge clauses must be clear and unambiguous.
Rates Tech v. Speakeasy (2d Cir.):
No-challenge clauses entered into prior to litigation are void per se.
2007
2010
2012

11. Takeaways
Was the contract pre-litigation? If yes, the no-challenge clause may be unenforceable.
Was the contract entered into during or as a result of litigation? If yes, the no-challenge clause may be enforceable. However, it must be clear and unambiguous.

12. Litigating Undefined Terms

13. The inventor in the garage

14. The 2002 Agreement

15. Exhibit A Exhibit B

16. The 2002 Agreement

18. Takeaways
Focus on definition of Licensed Products
Define terms or live with plain meaning

19. Trailer Assignment Provisions

20. Trailer assignment provision Example
I hereby assigns to the company my entire right, title and interest in and to all inventions, patents, copyrights, and/or designs I have made or may hereafter make, conceive, develop or perfect, either solely or jointly with others either (a) during the period of such employment, or (b) within one year after termination of such employment if conceived as a result of and is attributable to work done during such employment and relates to a method, substance, machine, article of manufacture or improvements therein within the scope of the business of the company or any of its affiliates.

21. Policy In support of trailer provisions
Dorr-Oliver, Inc. v. United States, 432 F.2d 447, 452 (1970)
“Their legitimate purpose is to prevent an employee from appropriating to his own use or to the use of a subsequent  employer inventions relating to and stemming from work done for a previous employer. Hold-over clauses are simply a recognition of the fact of business life that employees sometimes carry with them to new employers inventions or ideas so related to work done for a former employer that in equity and good conscience the fruits of that work should belong to the former employer.”

22. Case law limiting Trailer provisions
Applied Materials, Inc. v. Advanced Micro-Fabrication Equip., 630 F. Supp. 2d 1084, (N.D. Cal. 2009): “Ultimately, the Court finds that the Assignment Clause is overly broad with respect to both subject matter and temporal scope. Since the Court finds that the Assignment Clause touches post- employment inventions, regardless of when they were conceived or whether they were based on Applied's confidential information, the Clause necessarily operates as a restriction on employee mobility. Accordingly, the Court finds that the Assignment Clause is a post-employment penalty that violates California public policy as codified in Business & Professions Code § ”

23. Takeaways
Tailor to Jurisdiction*
Keep Reasonable Limits
Time
Scope

24. Contact us Christopher K. Larus Patrick M. Arenz Partner
Patrick M. Arenz
Principal

26. Burden of Proof

27. Medtronic v. mirowski 2010 District Court Verdict 2014
Supreme Court Decision
2006
Modification
1991
Agreement
2007
Declaratory Judgment Suit
2012
Federal Circuit Decision

28. Medtronic v. mirowski
District court: “The burden always is on the patentee to show infringement,” and thus held that “[a]s the parties asserting infringement, defendants bear the burden of proof by a preponderance of the evidence.”
Federal Circuit: “It is Medtronic and not MFV that is asking the court to disturb the status quo ante and to relieve it from a royalty obligation it believes it does not bear Medtronic must present evidence showing that it is entitled to such relief. If neither party introduced any evidence regarding infringement or noninfringement there is no principled reason why Medtronic should receive the declaration of non- infringement it seeks.”

29. Medtronic v. Mirowski (Supreme Court)
A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.

30. Takeaways Don’t want the burden? Negotiate away from default
Make processes and obligations explicit
Audit provisions
Procedure for reviewing new products