In Cheetah Omni v. AT&T Services, the U.S. Court of Appeals for the Federal Circuit recently issued a decision that stresses the importance of meticulously drafting license agreements.
In February, the court denied an attempt by Cheetah, an optical products developer, to revive its patent infringement suit against AT&T and Ciena Communications, ruling that the defendants were impliedly licensed under the patent-in-suit, U.S. Patent 7,522,836. In an earlier suit, Cheetah had asserted a separate patent, U.S. Patent 7,339,714, against Ciena. That suit was settled with Cheetah’s grant of an irrevocable license to Ciena and its affiliates to “Licensed Patents” which, as defined, included the ’714 patent and all parents and related patents. Notably, the ’714 patent is a continuation-in-part of U.S. Patent 6,943,925, which, as the grandparent of the ’714 patent, is an expressly licensed patent under the agreement; the at-issue ’836 patent is a continuation of a continuation of the ’925 patent.
The Federal Circuit was tasked with assessing whether Cheetah had impliedly licensed the ’836 patent because it had already licensed that patent’s “uncle” and “grandparent.” Citing its previous ruling in General Protecht Group v. Leviton Manufacturing Company, the court answered in the affirmative, ruling that an implied license arises “where a patentee has licensed or assigned a right, received consideration, and then sought to derogate the right granted.”
Citing another of its precedents, TransCore v. Electronic Transaction Consultants, the court reasoned that legal estoppel provides an implied license to a related, later-issued patent that was broader than and necessary to practice an expressly licensed patent. In addition, General Protecht held that an express license to a patent includes an implied license to its continuations, including where the continuation claims are narrower than the claims of the expressly licensed patent. Consequently, because Cheetah had expressly licensed the ’925 patent, the grandparent to the ’836 patent, Cheetah had impliedly licensed the ’836 patent to Ciena and its affiliate AT&T, the court said.
This decision also makes clear that “the timing of patent issuance is not material to the policy rationale underpinning [the] implied license presumption.” In short, an implied license may arise regardless of whether the patent in question was issued prior or subsequent to the execution of the agreement.
Because the analysis in General Protecht revolved around an agreement that had been executed before the issuance of the continuation patent the court found was impliedly licensed, Cheetah argued that that holding did not extend to patents existing at the time of the agreement. The Federal Circuit disagreed, concluding that it is easier for parties to identify an already-issued patent and expressly exclude it from a license if it so chooses. Likewise, the court rejected Cheetah’s argument that there was no implied license because the ’836 patent covers a different, narrower invention because “the same inventive subject matter was disclosed in the expressly licensed patents.”
The Cheetah decision reinforces the importance of precisely delineating which patents are and are not included in a license. The license agreement between Cheetah and Ciena did not explicitly identify the ’836 patent, a fact that Cheetah argued weighed against an implied license. Nonetheless the Federal Circuit concluded that the naming of certain patents “does not evince a clear mutual intent to exclude other patents falling within the general definitions in an agreement.” The fact that the license agreement listed broad categories of patents without specifically identifying their numbers further supported the court’s decision.
