Patent License Is Presumed to Cover Continuation Applications

The U.S. Court of Appeals for the Federal Circuit concluded that “where … continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well.” General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., Case No. 11-1115 (Fed. Cir., July 8, 2011) (Linn, J.).

In 2004 and 2005, Leviton Manufacturing sued General Protecht Group, Inc. (GPG) for infringement of two U.S. patents. In 2007 the parties settled their case. The settlement agreement included a covenant not to sue, stating that Leviton covenanted not to sue GPG for alleged infringement of the patents. The settlement agreement also included a dispute resolution forum selection clause specifying that any dispute arising out of or relating to the agreement should be decided in the U.S. District Court for the District of New Mexico.

Leviton continued prosecuting continuation applications of the patents from the prior suits after the settlement agreement, and new patents ultimately matured from these continuations. In 2010 Leviton sued GPG for infringement of the new patents in the U.S. District Court for the Northern District of California. GPG then filed its own suit in the district court of New Mexico, seeking an injunction against Leviton’s continued litigation in the Northern District of California. GPG contended that it had a license to practice the asserted patents under the settlement agreement. The district court found that GPG enjoyed a likelihood of success on this issue and granted the preliminary injunction enforcing the forum selection clause. Leviton appealed.

In the appeal, Leviton asserted that the settlement agreement does not as a matter of law give GPG an implied license in the continuation patents. The Federal Circuit disagreed and affirmed the grant of injunction, relying on its earlier decision in TransCore. The Federal Circuit noted that “a patent licensor [is prohibited] from derogating from rights granted under the license by ‘taking back in any extent that for which [it] has already received consideration.’” The Federal Circuit concluded that Leviton’s actions derogate from previously granted rights for which it received consideration under settlement agreement by accusing the same product that was subject to the previous settlement agreement and asserting infringement of the same inventive subject matter as disclosed in the licensed patents. The Federal Circuit stated that if Leviton did not intend its license to encompass continuation applications, it had an obligation to make this intention clear:

“where, as here, continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well. If the parties intend otherwise, it is their burden to make such intent clear in the license.”