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Assuring All Substantial Rights In Exclusive Patent Licenses

Jeffrey L. Newton

Avago Technologies, Intellectual Property Attorney, Fort Collins, CO, USA


Despite their best of intentions, parties draft license agreements which purport to have the patentee grant sufficient rights for a licensee to assert a patent against third parties, but fail to grant all substantial rights to sue. The surprising number of cases decided against the intended transfer of all substantial rights to empower a licensee to sue on a patentee is a testimony to the complexity of the jurisprudence in this area. This article attempts to cut the “Gordian knot” regarding all substantial rights in patent licenses. First, the United States law defining the four key categories regarding the parties in a licensing transaction is reviewed. Next, thirteen key cases from the United States Court of Appeals for the Federal Circuit (“CAFC”) are summarized as to which cases directly address the question of all substantial rights in patent licenses. Last, the article suggests fifteen practice pointers from the various decisions to assist practitioners in drafting exclusive licenses with all substantial rights which licenses will be upheld as originally intended.

Four Categories Among a Continuum of Rights

Between the polar extremes of patentee and a bare licensee, there are theoretically an infinite number of permutations of rights, duties and limitations that can be constructed into patent assignment and license agreements. Indeed, even “[b]etween the extremes of the fully exclusive and the bare non-exclusive license there is a continuum of practical commercial arrangements.” Four categories serve well to exhibit key distinctions across the continuum of countless possibilities of rights, duties and limitations. These categories are, in descending order of rights:
• Patentee;
• Exclusive licensee with all substantial rights (also known as the “effective patentee”);
• Exclusive licensee without all substantial rights; and
• Bare licensee.
Each category will be discussed and described in more detail below.

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