The Divide between a Covenant and a License

A few weeks ago, I wrote about the pending Supreme Court petition in Meso Scale v. Roche that asks the question of whether a covenant … not to sue for the infringement of a federal patent is a license of that patent as a matter of federal law.

Roche has waived its right to respond, but at least two friend-of-the-court briefs have been filed in the case.

Spectrum Five is a satellite broadcast company and is concerned that its covenants not-to-sue will not be treated as license rights: “Although [the Supreme] Court has held that licenses and covenants not to sue are the same, lawyers who draft intellectual-property licenses recognize that lower courts have reached conclusions inconsistent with this Court’s. The Delaware courts here have added to those inconsistent conclusions.”

Verato, Inc. indicates its concern that exhaustion principles are greatly muddied if a covenant-not-to-sue isn’t treated as a license because it leaves an open question as to whether a patent is considered exhausted as to third-party-manufactured goods if the manufacturer operates under a covenant-not-to-sue but is not otherwise licensed.

The case still has fairly low odds of being heard by the court, but the potential of having a huge impact – especially if the court distinguishes between a license and a covenant.

5 thoughts on “The Divide between a Covenant and a License

  1. 3

    OT but an interesting decision involving a certificate of correction was published today: Cubist Pharmaceuticals v. Hospira (Fed Cir 2015).

    In a nutshell, the PTO allowed (and the CAFC approved) the use of a certificate to correct a structure of a compound that was presented in the specification, where the original structure reflected the “universal belief” about the structure of the chemical at the time of filing (a belief that was mistaken) and the corrected structure reflected an “updated” (and correct) structure determined by an independent group of scientists.

    The written description requirement was deemed satisfied because the specification referenced the compound by name “and disclosed relevant identifying characteristics that distinguished daptomycin from other compounds and thus showed that the inventors had possession of daptomycin, even though they may not have had an accurate picture of the entire chemical structure of that compound”.

    1. 3.1

      LOL – and you (incorrectly) panned my comment about the Flash of Genius+ model wherein that model included the “oops, what have I stumbled into” path….

      But you are just too busy being reactive because you saw (OH NOES) “anon said”…..

  2. 2

    Good question. This is one of the issues raised in the petition. If a covenant-not-to-sue is exactly the same as a non-exclusive license, then they should be treated identically.

  3. 1

    Dennis, could you please explain whether a covenant not to sue is considered personal and not transferable, as a general rule, while a license might automatically pass with a transfer of the business? Also, whether goods made by a person having a covenant not to sue might be the cause of an infringement suit against a buyer of the goods? Thx.

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