Go Medical v. Inmed (Fed. Cir. 2006).
Go Medical owns a patent on a urinary catheter with a specialized sheath designed to reduce the chance of bacterial contamination. The parties entered into a long-term licensing contract and the defendant began manufacturing and selling the device. In another lawsuit, Go’s patent was found invalid, but that finding was later reversed on appeal. Several months after the invalidity finding (but before its reversal), the defendant stopped paying royalties — placing them in escrow. Go eventually sued for infringement, but the patent was found invalid. (invalidity affirmed on appeal).
The defendant then asked for some of its money back — arguing that the it should not have to pay for the licensing of an invalid patent. Under Kohle, however, a licensee is liable for contract damages up to the date “the licensee first challenges the validity of the patent.”
In other words, a licensee “cannot invoke the protection of the Lear doctrine until it (i) actually ceases payment of royalties, and (ii) provides notice to the licensor that the reason for ceasing payment of royalties is because it has deemed the relevant claims to be invalid.”
Thus, according to the CAFC, the original invalidity finding did not relieve the defendant of its responsibilities to continue to pay its license fees. Further, the defendant’s movement of payments to escrow was not sufficient to avoid license fees because the defendant did not explicitly state that it was “ceasing payments [because it deemed the] patent to be invalid.” Merely placing royalty payments in escrow “until the validity of the patent was resolved on appeal” is insufficient to relieve a licensee from license payments.
Notes:
- Zura discusses the best mode issues here.