Authored by D. Brian Kacedon, Matthew J. Luneack, and John C. Paul
The Federal Circuit found a license agreement's "most-favored licensee" provision, that could be triggered by assertion of patents that were otherwise not addressed in the remainder of the license agreement, only applied to patents owned by the licensor at the time of the agreement and provided a future license only to such patents that triggered the provision.
Licensees sometimes attempt to obtain "most-favored-licensee" provisions to avoid the disadvantage of having a subsequent licensee get better terms or a greater scope of rights. Such a provision is intended to allow the original licensee access to those more favorable terms or that greater scope of rights if certain conditions are later met.
In Wi-LAN USA, Inc. v. Ericsson, Inc., the Federal Circuit considered whether the most-favored-licensee provision of a patent license agreement created a license under patents later acquired by the licensor that did not trigger the provision.
Background
Wi-LAN and Ericsson entered into an Agreement providing a license
to certain identified patents, and a most-favored licensee
provision (MFL) under which Wi-LAN granted Ericsson a non-exclusive
license to "patents not already addressed under this Agreement
and which are infringed or alleged to be infringed by"
products using one of two wireless industry standards.
Subsequently, Wi-LAN sued Ericsson in the Southern District of Florida for infringing wireless communication patents that Wi-LAN acquired after the execution of the Agreement.
Ericsson moved for summary judgment against Wi-LAN, arguing that the MFL provision entitled it to a license under the patents subsequently acquired by Wi-LAN. The district court agreed with Ericsson and granted summary judgment in its favor. On appeal, however, the Federal Circuit disagreed with Ericsson and held that the MFL provision only applied to patents owned or controlled by Wi-LAN as of the effective date of the Agreement.
On remand to the district court, Ericsson continued to argue that the MFL provision granted it a license under the patents Wi-LAN subsequently acquired and asserted. Specifically, Ericsson argued that the Agreement's MFL provision was triggered by Wi-LAN's assertion of an unrelated patent that it owned at the time it executed the agreement with Ericsson against certain third parties based on products using the industry standard technology referenced in the MFL provision. Once triggered, Ericsson argued that the MFL entitled it to the terms of any future license not only for this unrelated patent but also to any other patents covering that industry standard technology including the patents Wi-LAN subsequently acquired and was asserting against Ericsson.
Applying the Federal Circuit's finding that the MFL provision only applied to patents owned or controlled by Wi-LAN as of the effective date of the Agreement, the district court found that the MFL provision did not apply to the newly-acquired patents being asserted by Wi-LAN against Ericsson.
The Wi-LAN Decision by the Federal
Circuit
On appeal for the second time, the Federal Circuit interpreted the
MFL provision as limited to the patent that triggered the MFL
provision and that the MFL provision could only be triggered by
assertion of patents owned or controlled by Wi-LAN at the time the
Agreement was executed. The majority opinion found the MFL
provision related to the "licensing of patents not already
addressed" under the Agreement that are infringed or alleged
to be infringed. It also concluded that the MFL provision discussed
the rights extended to Ericsson in terms of those patents rather
than products including the industry standard technology.
Therefore, it rejected Ericsson's proposed interpretation that
the MFL provision was based on the scope of rights granted on such
products.
A concurring opinion offered a different interpretation, finding the MFL provision to be defined in terms of products that incorporate technology that meets one of the two recited industry standards, and not in terms of patents. Nonetheless, because the accused products do not use such technology, the concurring opinion agreed that the MFL provision did not apply to bar Wi-LAN's infringement suit.
Strategy and Conclusion
This case illustrates issues that may arise from most-favored
licensee provisions and how the scope of future licenses is defined
under those provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.