Patrick m. Arenz Christopher K. Larus John D. Flynn April 4, 2017 With Millions of Dollars at Stake The Trial Lawyer’s Perspective on Litigating and Trying IP License Disputes Patrick m. Arenz Christopher K. Larus John D. Flynn April 4, 2017

Business LAW IP License Disputes Technical Interests Economic Interests Contract Law IP Law Business Interests Trial Law IP License Disputes

Most Favored Nations Clauses

Most favored nations clause: Defined Example: If Licensor grants to any other Person a license to any of the Licensed Patents, it will so notify Licensee, and Licensee will be entitled to the benefit of any and all more favorable terms with respect to such Licensed Patents. Purpose: The purpose of a ‘most favored nations’ clause is to guarantee that no other licensee will be given the opportunity to use the patent at a more favorable rate.

JPmorgan Chase v. Datatreasury Net Annual Income: $24.7 Billion License Date: 2005 License Amount: $70M Net Annual Income: $161 Million License Date: 2012 License Amount: $250k

Jpmorgan chase v. datatreasury “Therefore, where a licensee with a most favored licensee clause seeks to replace what has become a less-favored lump-sum license payment with a later-granted, more favorable lump-sum payment, the only way to give meaning to the MFL clause is by retroactive substitution of the payment term. That is the outcome of the parties’ contract here.”

Takeaways Review every term Limit Scope and Application of MFN Clauses. Similarly situated licensors Sunset provisions Comparable scope of license grant

No Challenge Clauses

No-Challenge ClauseS: Defined A no-challenge clause precludes a licensee from challenging the validity of a licensed patent in a suit to recover back-royalties. Basic No-Challenge Clause: “Licensee shall not challenge at any time the validity of the Licensed Patents in any administrative or judicial proceeding, either affirmatively or as a defense to any claim for royalties due.”

No-Challenge ClauseS: LICENSEE ESTOPPEL CASE LAW Medimmune, v. Genentech (S. Ct.): Licensee need not cease royalty payments before filing action seeking declaration that the patent is invalid: case or controversy exists. Baseload Energy v. Roberts (Fed. Cir.): General release of claims in a settlement agreement will not bar validity challenge: no-challenge clauses must be clear and unambiguous. Rates Tech v. Speakeasy (2d Cir.): No-challenge clauses entered into prior to litigation are void per se. 2007 2010 2012

Takeaways Was the contract pre-litigation? If yes, the no-challenge clause may be unenforceable. Was the contract entered into during or as a result of litigation? If yes, the no-challenge clause may be enforceable. However, it must be clear and unambiguous.

Litigating Undefined Terms

The inventor in the garage

The 2002 Agreement

Exhibit A Exhibit B

The 2002 Agreement

Takeaways Focus on definition of Licensed Products Define terms or live with plain meaning

Trailer Assignment Provisions

Trailer assignment provision Example I hereby assigns to the company my entire right, title and interest in and to all inventions, patents, copyrights, and/or designs I have made or may hereafter make, conceive, develop or perfect, either solely or jointly with others either (a) during the period of such employment, or (b) within one year after termination of such employment if conceived as a result of and is attributable to work done during such employment and relates to a method, substance, machine, article of manufacture or improvements therein within the scope of the business of the company or any of its affiliates.

Policy In support of trailer provisions Dorr-Oliver, Inc. v. United States, 432 F.2d 447, 452 (1970) “Their legitimate purpose is to prevent an employee from appropriating to his own use or to the use of a subsequent  employer inventions relating to and stemming from work done for a previous employer. Hold-over clauses are simply a recognition of the fact of business life that employees sometimes carry with them to new employers inventions or ideas so related to work done for a former employer that in equity and good conscience the fruits of that work should belong to the former employer.”

Case law limiting Trailer provisions Applied Materials, Inc. v. Advanced Micro-Fabrication Equip., 630 F. Supp. 2d 1084, 1090-91 (N.D. Cal. 2009): “Ultimately, the Court finds that the Assignment Clause is overly broad with respect to both subject matter and temporal scope. Since the Court finds that the Assignment Clause touches post- employment inventions, regardless of when they were conceived or whether they were based on Applied's confidential information, the Clause necessarily operates as a restriction on employee mobility. Accordingly, the Court finds that the Assignment Clause is a post-employment penalty that violates California public policy as codified in Business & Professions Code § 16600.”

Takeaways Tailor to Jurisdiction* Keep Reasonable Limits Time Scope

Contact us Christopher K. Larus Patrick M. Arenz Partner CLarus@RobinsKaplan.com 612-349-0116 Patrick M. Arenz Principal PArenz@RobinsKaplan.com 612-349-8591

Burden of Proof

Medtronic v. mirowski 2010 District Court Verdict 2014 Supreme Court Decision 2006 Modification 1991 Agreement 2007 Declaratory Judgment Suit 2012 Federal Circuit Decision

Medtronic v. mirowski District court: “The burden always is on the patentee to show infringement,” and thus held that “[a]s the parties asserting infringement, defendants bear the burden of proof by a preponderance of the evidence.” Federal Circuit: “It is Medtronic and not MFV that is asking the court to disturb the status quo ante and to relieve it from a royalty obligation it believes it does not bear. . . . Medtronic must present evidence showing that it is entitled to such relief. If neither party introduced any evidence regarding infringement or noninfringement there is no principled reason why Medtronic should receive the declaration of non- infringement it seeks.”

Medtronic v. Mirowski (Supreme Court) A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.

Takeaways Don’t want the burden? Negotiate away from default Make processes and obligations explicit Audit provisions Procedure for reviewing new products