Epistar v. ITC (and Philips Lumileds Lighting) (Fed. Cir. 2009) 07-1457.pdf
Merger: Lumileds owns a patent covering a light-emitting diode (LED) with an electrically conductive window layer that is both brighter and more efficient than other LEDs. The conductive layer helps spread the flow of electrical current avoid “current crowding.”
At issue in this case is the impact of a corporate merger/buyout on a settlement agreement that included a promise to not challenge a patent’s validity.
Lumileds and Epistar have signed at least two prior settlement agreements involving the patent at issue here. In those agreements, Epistar agreed to pay a licensing fee for certain products, but reserved its right to challenge the patent if Lumileds asserted the patent against other patents. A third company, UEC, agreed that neither it nor its successors would later challenge the validity of the Lumileds patents.
Subsequently, Epistar purchased UEC, and the patentee argued that UEC’s agreement should also bind Epistar. On appeal, the Federal Circuit partially rejected that argument – holding that the UEC settlement continues to bind the parties, but only “as understood and intended by them, according to its ordinary terms.” Thus, even though Epistar took on all the legal obligations of UEC, Epistar can still challenge the Lumileds patent if the case does not involve UEC related products.
UEC’s settlement agreement has preclusive effect upon Epistar only “to the same extent as upon [UEC it]self.” Restatement (Second) of Judgments § 43 (1982). The preclusive effect of that agreement, if any, is limited to UEC’s pre–Epistar product lines. To paraphrase this court in International Nutrition v. Horphag Research, Epistar’s acquisition of UEC does not have the effect of limiting Epistar’s rights that are unrelated to the product lines it acquired from UEC. Accordingly, this court overturns the Commission’s final determination that Epistar is estopped from challenging validity of the ’718 patent when asserted against its own products, separate from the UEC–Lumileds settlement agreement.
Here, the court could have done well to cite the Supreme Court’s decision of Lear v. Adkins and its statements favoring the ability to challenge patent validity based on on “the strong federal policy favoring the full and free use of ideas in the public domain.”
For many years licensing experts have said that agreements not to contest the validity of a patent [other than a litigation settlement admission of validity of a patent in dispute] are probably uninforceable as against public policy, and in some circumstances could even raise an antitrust issue as an agreement in restraint of trade.
Also, as 6 noted, as a practical matter, patent reexaminations [ex parte reexams] can be requested anonymously [as long as it provides the requisite material prior publications or patents and the fee]. Even from a foreign country in which U.S. litigation discovery is blocked.
[This is a general comment, not a comment on this specific case.]
“The reasoning that an agreement not to challenge validity can somehow be tied to specific products (whether or not those products infringe) … just doesn’t work for me as a non-result-directed basis for a judicial decision.”
The court didn’t tie the agreement to specific products, the parties did: “Epistar agreed to pay a licensing fee for certain products, but reserved its right to challenge the patent if Lumileds asserted the patent against other patents.”
I’m all for criticizing the court when it’s warranted, but the only issue here appears to be the preclusive effect given to the agreements. I haven’t read the case, but the outcome seems reasonable given Dennis’ summary.
Validity is an attribute of a patent, not of a product. The reasoning that an agreement not to challenge validity can somehow be tied to specific products (whether or not those products infringe) … just doesn’t work for me as a non-result-directed basis for a judicial decision.
“On April 28, 2006, Lumileds amended its complaint to accuse the Epistar OMA products of infringing the ’718 patent.”
And that was all she wrote for this patent. Livin’ dangerous ‘l send you off a cliff. You’ve witnessed here folks what must be the “beginning of the end”. I have to wonder though, why can Epistar not file for re-exam anonymously? I though that was possible. And no covenant would be capable of stopping it since it is anon.
“He explained that “references in the specification to ITO discuss drawbacks to the use of ITO as a front contact, not as a transparent window layer.””
Without having dug all the way into this case it seems to me like a front contact is a transparent window layer. Is it not? Are intended uses of structures in a claim now seen to distinguish a claimed structure from a structure in the prior art capable of being used in such a manner? Furthermore, could a wire running to the front of the LED not be construed as the front side contact? Mhmmm, yes it could. Thus it seems that Epistar should have prevailed on that sub argument. Although, Epistar still seems to lose on this argument as a whole since discussing ITO being bad doesn’t rise to the level of disclaimer.
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