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2019 Court Decisions: Implications for University Licensing

Louis Berneman
October 12, 2020
  • Licenses may include an implied license to continuation applications.
  • Arbitrators yield immense power.
  • Beware the scope of integration clauses.

1) The more things change, the more they stay the same. This year’s “Top 10 Court Decisions of the Year That Affect Licensing” addresses issues that have faced universities[1] for decades.[2]

2) What we do and how we do it matters. University licensors have “the power of the pen.” In adjudicating disputes, judges and arbitrators will presume people structuring, valuing, negotiating, and drafting license agreements are qualified professionals with relevant expertise. Meaning, what the agreement says is what the agreement means and the people crafting licenses know (or should know) what they’re doing.

1) STANDING — ALL SUBSTANTIAL RIGHTS

Universities typically seek to retain rights to use the licensed patents for internal, non-commercial teaching and research purposes. Universities may also seek to approve licensees’ grant of sublicenses, restrict rights to enforce, limit licensees’ scope of rights to licensed patents, and more. Courts have held that standing to sue requires licenses to convey all substantial rights (including the right to enforce, sublicense, practice, etc.) patents being licensed. Courts have expressed different views on standing and all substantial rights: Can the licensee sue in its own name? Can the licensee sue only with the involvement of the patent owner? Can the licensee not sue? Standing and all substantial rights must be considered by university licensors to avoid becoming involved in licensees’ litigation of the licensed patents.

2) LICENSED PATENT RIGHTS ARE PRESUMED TO INCLUDE AN IMPLIED LICENSE TO CONTINUATION APPLICATIONS

Beware of this one! Courts have held that unless specified, licensees may have implied rights to continuation applications, including, perhaps, continuations describing improvements not claimed in licensed patent rights and those not discovered and reduced to practice with support from licensees. Specificity in the delineation of the scope of rights granted and not granted is required.

3.) ARBITRATION (ALTERNATIVE DISPUTE RESOLUTION (ADR)

University licensors should carefully consider whether or not to use arbitration (and/or other alternative dispute resolution mechanisms). There can be advantages to ADR. Arbitrations can be faster than court disputes and timelines for resolution can be specified. Arbitrations can be less expensive. Discovery and depositions in arbitrations can be limited. The characteristics (expertise and experience) of arbitrators can be specified. That said, each license situation poses fact-specific issues to address in deciding whether or not to use ADR.

4) INTEGRATION/ENTIRE AGREEMENT CLAUSES

Universities often enter into multiple agreements with the same licensee. Integration and entire agreement clauses should specify if other agreements between the parties are to be included or not in the license being negotiated. That is, institutions having multiple agreements with the same counter-party should specify if and which other agreements (e.g. sponsored research, settlements, other licenses) are to be included in the integration/entire agreement provision.

Footnotes

[1] Universities include other not-for-profit research institutions and organizations, including degree and non-degree granting institutions, medical schools and teaching hospitals, government laboratories, and the like.

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