- What is a license?
• De Forest Radio Telephone Co. v. United States, 273 U.S. 236, 242 (1927) (License is “a mere waiver of the right to sue” the licensee for infringement.)
• General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175, 181 (1938) (patent license “a mere waiver of the right to sue.”)
• Cohen v. Paramount Pictures Corp., 845 F2d 851 (9th Cir. 1988)
• Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1076 (5th Cir.1997) ("[A] license to use a mark ... is a transfer of limited rights, less than the whole interest which might have been transferred.")
• Spindelfabrik Suessen Schurr v. Schubert & Salzer, 829 F.2d 1075, 1081 (Fed.Cir.1987), cert. denied, 484 U.S. 1063 (1988) (“[A] patent license agreement is in essence nothing more than a promise by the licensor not to sue the licensee [even] if [the promise is] couched in terms of ‘[L]icensee is given the right to make, use, or sell X.””) - License compared to sale of copy.
• DSC Communications v. Pulse Communications, 170 F.3d 1354 (Fed. Cir. 1999) (licensee not owner if license substantially restricts use of program)
• ITOFCA, Inc. v. MagaTrans Logistics, Inc., 322 F.3d 928 (7th Cir. 2003) (The sale of a copy of a copyrighted work does not convey an exclusive right to the work; the owner of the copyright retains his or her right to make and sell additional copies to others; a copyright is not transferred automatically with the transfer of the copyrighted good.
• MAI Sys. Corp. v. Peak Computer, Inc., 991 F2d 511 (9th Cir. 1993) (licensees are not owners of copies; “Since MAI licensed its software, the Peak customers do not qualify as “owners” of the software and are not eligible for protection under § 117.”)
• Monsanto Co. v. McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (Where restriction on use of plants grown from seeds, contained in agreement between patentee and licensee were within the scope of the patent grant, which covered the seeds as well as the plants, the sale of the seeds did not confer on licensee a license to construct new seeds, and since such new seeds grown from the original batch were never sold by patentee, the patent law first sale doctrine of exhaustion of the patent right is not implicated.)
• Adobe Sys., Inc. v. Stargate Software, Inc., 216 F.Supp.2d 1051 (N.D. Cal. 2002) In determining whether a contractual agreement between copyright owner and distributors affects a sale or a license, the court looks to the language, content, and intent of the contractual agreement in question. Where contract between copyright owner and reseller contains numerous restrictions on title to the copyrighted material and distribution thereof, contract clearly confers a license, not a sale, because such terms substantially interfere with a reseller’s ability to distribute and convey title to the products in which the copyrighted work is embodied. Here, the transaction at issue should be characterized as a license, not a sale.
• Berthold Types Ltd. v. Adobe Sys., Inc., 101 F. Supp. 2d 697 (ND Ill. 2000) (While “a transaction involving a computer program can involve an Article 2 sale of goods . . . an agreement that does not involve a transfer of title cannot be an Article 2 sale in Illinois. . . . A pure license agreement, like the 1997 agreement, does not involve transfer of title, and so is not a sale for Article 2 purposes.”)
SECTION 2: What Law Applies?
- Common Law
• Lamle v. Mattel, Inc., 394 F3d 1355 (Fed. Cir. 2005) (“A license for intellectual property including a patent is not a sale of goods”; cannot modify without consideration, but can abrogate and replace; also e-mail satisfies writing)
- UCC Article 2
• Lamle v. Mattel, Inc., 394 F3d 1355 (Fed. Cir. 2005) (“A license for intellectual property including a patent is not a sale of goods”; cant modify the contract without consideration, but can abrogate and replace)(a). Software
• Advent Sys., Ltd. v. Unisys Corp., 925 F.2d 670 (3d Cir. 1991) (software treated as goods; Article 2 applies).
• Allstate Life Insurance Co. v. Peoplesoft, Inc., 2004 WL 1375383 (ND Ill. 2004) (Mixed software and services K is for goods)
• Architectronics, Inc. v. Control Sys., Inc., 935 F. Supp. 425 (S.D.N.Y. 1996) (not goods; Article 2 not apply)
• Berthold Types Ltd. v. Adobe Sys., Inc., 101 F. Supp. 2d 697 (ND Ill. 2000) (While “a transaction involving a computer program can involve an Article 2 sale of goods . . . an agreement that does not involve a transfer of title cannot be an Article 2 sale in Illinois. . . . A pure license agreement, like the 1997 agreement, does not involve transfer of title, and so is not a sale for Article 2 purposes.”)
• Dealer Management Systems, Inc. v Design Automotive Group, Inc., 355 Ill.App.3d 416, 822 N.E.2d 556, (Ill. App. 2nd Dist. 2005) (Software as goods for Article 2)
• Multi-Tech Systems, Inc. v. Floreat, 2002 WL 432016 (D. Minn. 2002) Article 2 not apply to joint software development agree
• Neilson Business Equip. Ctr., Inc. v. Italo V. Monteleone, M.D., P.A., 524 A.2d 1172 (Del. 1987) (turnkey hardware and software system was contract for goods).
• Olcott Int’l & Co., Inc. v. Micro Data Base Systems, Inc., 793 NE2d 1063 (Ind. App. 2003) (A2 applied to software; liquidated damages provision invalid (treble damages)
• Page v. Hotchkiss, 2003 WL 22962151 (Conn. Super. 2003) (This software was not goods; citing Article 9 definitions although this was a license case)
• Richard Rosenblatt & Co. v. Davidge Data Sys., Inc., (NYAD 2002) (Software is goods; service contract was incidental)
• RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543 (9th Cir. 1985) (goods) - UCC Article 2A
• Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002) (Though U.C.C. § 2A-304 states that a lessor with voidable title has power to transfer a good leasehold interest to a good faith lessee for value, and section 2A-305 states that a lessee with a voidable leasehold interest has the power to transfer a good leasehold interest to a good faith buyer or sublessee for value, when goods have been delivered under a transaction of lease, even though the delivery was procured by fraud, these sections cover only the leasing of goods and, since intellectual property is excluded from the definition of goods, such sections are not relevant to patent sublicensees.) - UCITA
• There are no reported cases applying UCITA, but there are many that refer to it by analogy or otherwise.
• Specht v. Netscape Communications Corp., 306 F.3d 17 (2nd Cir. 2002)
• Rhone Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002)
• M.A. Mortenson Co., Inc. v. Timberline Software Corp., 970 P.2d 803 (Wash. 2000)
• ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)
• AGT Intern., Inc. v. Level 3 Communications, LLC, 2002 WL 31409879 (S.D. Ohio 2002)
• I.Lan Systems, Inc. v. Netscout Service Level Corp., 183 F.Supp.2d 328 (D. Mass. 2002)
• Klocek v. Gateway, Inc., 104 F.Supp.2d 1332 (D. Kan. 2000)
• Applied Information Management, Inc. v. Icart, 976 F.Supp. 149 (E.D.N.Y. 1997) - Other State Statutes
• Twentieth Century Fox Film v. Marvel Enter., 220 F.Supp.2d 289 (S.D.N.Y. 2002) (Cal.Civ.Code § 988, which provides that any ambiguities in a contract be resolved in favor of the artist who grants intellectual property rights, applies only to ambiguities concerning physical ownership rights in the art work and not all conveyances of intellectual property beyond physical ownership such as provisions at hand relating to licensee’s ability to preclude licensor from making live motion pictures.)
(b). Other Licenses
• Lamle v. Mattel, Inc., 394 F3d 1355 (Fed. Cir. 2005) (“A license for intellectual property including a patent is not a sale of goods”; cant modify but can abrogate and replace; also e-mail satisfies writing)
• Dravo Corp. v. White Consol. Indus., Inc., 602 F. Supp. 1136 (W.D. Pa. 1985) (The fact that drawings or designs or professional work product are recorded and delivered on paper or on digital media does not mean that the primary focus of the transaction lies in the paper or media, rather than in the ideas, information or rights involved).
B. Intellectual Property Law (See also §§ 4A; 9D; 13)
• Bowers v Baystate Technologies, Inc., 302 F.3d 1334 (Fed. Cir. 2002) (enforceability of license determined by state law; no federal preemption of no-reverse-engineering clause)
• Davidson & Assoc. v. Jung, 2005 WL 2095970 (8th Cir. 2005) (shrinkwrap license enforceable; no preemption of no reverse engineering clause contained in the license - licensee waive fair use privilege)
• ProCD, Inc. v. Zeidenberg, 86 F3d 1447 (7th Cir. 1996) (Enforceability of shrinkwrap license determined under state law; no copyright preemption even though subject matter was rendered unprotected by copyright; property rights and contract rights are two different bodies of law)
• Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002) (Though the court generally turns to state law in interpreting patent license contracts, such as whether there is contractual authority to practice the invention of a patent, and the consequences of fraud in the negotiation of patent license contracts are also a matter generally governed by state law, the bona fide purchaser defense, which is explicitly governed by federal statutory law in some situations but not in others, presents a unique situation where, because of the importance of a uniform rule, the applicability of such a defense to patent infringement is a matter of federal law.)
• Scandinavian Satellite Sys. v. Prime TV Ltd., 291 F.3d 839 (D.C. Cir. 2002) (Where plaintiff sought remedies of injunctive relief for infringement and attorneys fees, based on its asserted exclusive copyright license, the federal court had jurisdiction because the complaint sought a remedy expressly granted under the Copyright Act and defendant’s purported contract defense did not serve to defeat the court’s jurisdiction to hear the case.)
• Scheiber v. Dolby Labs., Inc., 293 F.3d 1014 (7th Cir. 2002) (An action to enforce a patent licensing agreement does not arise under federal patent law so as to confer jurisdiction under the patent laws alone.)
• Higher Gear Group, Inc. v. Rockenbach Chevrolet Sales, Inc., 223 F.Supp.2d 953 (N.D.Ill. 2002) Where licensing agreement prohibited licensee from using licensed software for any purpose other than its internal business operations, and forbid licensee from selling licensed software, making copies or derivative works, or permitting third party use, licensor’s breach of contract claim is preempted to the extent that licensor intends to show that contract prohibited alleged copying or creation of derivative works, but is not preempted to the extent such claim is based on non-business use of software or use by third parties in violation of licensing agreement because such contractual restrictions on use are distinct from the exclusive copyrights under the Copyright Act.
• Micro Data Base Sys., Inc. v. State Bank of India, 177 F.Supp.2d 881 (N.D. Ind. 2001) (insofar as claim is for infringement of copyright, copyright law law controls and precludes recovery for acts occurring outside the U.S.).
• Pixton v. B&B Plastics, Inc., 291 F.3d 1324 (Fed. Cir. 2002) (In order to determine whether a federal district court has original jurisdiction under 28 U.S.C. § 1338, the court must decide whether the plaintiff has plead a complaint arising under the patent laws or whether the claim is one sounding solely of breach of contract. Where owner of Patent brought suit for patent infringement against former licensee after alleged termination of license, and licensee pled that license agreement was still in force because license had been orally modified, the court had jurisdiction because the issue at hand was not ownership, but rather a claim of patent infringement to which the defendant had asserted a defense of license; jurisdiction is not lacking simply because efficiency demanded that the license defense be addressed first.)
• MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (Distributor of software that enabled peer-to-peer transfer of files could be liable for contributory infringement based on inducing infringement; Sony case did not prevent liability).
• Davidson & Assocs. v. Jung 422 F.3d 630 (8th Cir. 2005) (Shrink wrap contract relinquishing right to reverse engineer a computer gaming product held enforceable and not preempted by Federal Copyright Act; violation of DMCA and no application of the interoperability exception.).
C. Which State Law: Contractual Choice of Law
• DeJohn v. The TV Corp. Int’l, 245 F.Supp.2d 913 (C.D. Ill. 2003) (Where parties’ contract contained choice of law clause specifying that New York law would control, but where choice of law clause contained in second agreement, which was incorporated into parties’ contact by reference, stated that California law would control, the resulting conflict between the two choice of law clauses was not sufficient to render the parties’ contract unenforceable since court could apply New York law to disputes regarding the parties’ primary contract and apply California law to disputes regarding the incorporated agreement.)
D. Contractual Choice of Judicial Forum
- Interpretation of Clause
• K & V Scientific Co. v. Bayerische Motoren Werke Aktiengesellschaft, 314 F.3d 494, (10th Cir. 2002) (Mandatory forum selection clauses are those that contain clear language showing that designated forum is the only appropriate place for jurisdiction. Permissive forum selection clauses authorize jurisdiction in a designated forum but do not prohibit litigation in others. Where forum clause specifies venue using mandatory and obligatory language the clause will be enforced. However, where only jurisdiction is specified in the forum clause, the clause will generally not be enforced absent additional language indicating the parties’ intent to make venue exclusive. Valid forum clause contained in the parties’ confidentiality agreement is permissive under majority rule because the clause refers only to jurisdiction and does not use exclusive terms such as “exclusive,” “sole,” or “only.” When the forum clause is ambiguous, in that it is capable of being construed as either permissive or mandatory, it is construed against the drafter.
• Scotland Memorial Hospital, Inc. v. Integrated Informatics, Inc., 2003 U.S. Dist. LEXIS 867 (MD NC, 2003) (Interprets forum clause as exclusive because of specific reference to one place) - Enforceability
• America Online, Inc. v. Booker, 2001 WL 98614 (Fla. App. 2001). (The unavailability of a class action procedure in the transferee forum is not sufficient to render an otherwise valid forum selection clause unenforceable. Florida plaintiffs cannot defeat otherwise valid provisions requiring suit in other states simply by asserting a cause of action in the name of a putative class. Accordingly, choice of forum clause valid and enforceable. Parties have the right to control their litigation destinies by bargaining for the ability to litigate in a specific forum.)
• AOL v. Pasieka, 2004 WL 221311 (Fla. App. 2004) (Not enforce forum clause where it would dilute enforcement of deceptive trade practices act since chosen state did not have class actions)
• Baan, USA v. USA Truck, Inc., 105 SW3d 784 (Ark. App. 2003) (Software contract forum selection enforced)
• Barnet v. Network Solutions, Inc., 38 S.W.3d 200 (Tex. App. 2001) (“Barnett also claims that he did not have adequate notice of the forum selection clause because it was hidden in the registration agreement. However, the record demonstrates that the forum selection clause was stated clearly in the registration agreement. By the very nature of the electronic format of the contract, Barnett had to scroll through that portion of the contract containing the forum selection clause before he accepted its terms. Therefore, he had an adequate opportunity to read and understand the forum selection clause.)
• Monsanto Co. v McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (No misuse; sale restrictions enforced; choice of forum enforced)
• AC Controls Co. v. Pomeroy Computer Resources, Inc., 284 F. Supp.2d 357 (WD NC, 2003) (Forum selection clause enforced)
• Alexander v. Superior Court, 8 Cal.Rptr.3d 111 (Cal. App. 2003) (Venue selection clause invalid as against pub policy)
• American Express Financial Advisors, Inc. v. Yantis, 2005 WL 469362, F.Supp2d – (ND Ia. 2005) (Franchise law bars enforcement of choice of law provision; conversion claim re files likely to succeed)
• DeJohn v. The .TV Corp. Int’l, 245 F.Supp.2d 913 (C.D. Ill. 2003) (term enforceable in online contract; A party seeking to avoid a mandatory choice of forum clause must show that: “(1) it is the result of fraud or overreaching; (2) the party will be deprived of his day in court as the result of the ‘grave inconvenience or unfairness of the selected forum’; (3) the party may be deprived of a remedy due to the ‘fundamental unfairness’ of the chosen law; or (4) the clause contravenes a strong public policy of the forum state.” Absent evidence of these factors, a forum selection clause is presumptively valid. These rules apply to not only paper contracts, but electronic contracts as well.)
• Digital Envoy, Inc. v. Google, Inc., 319 F.Supp2d 1377 (ND Ga. 2004) (Forum selection clause in sw agreement covers tort claims re misappropriation and the like)
• Dix v. ICT Group, Inc., 106 P3d 841 (Wash. App. 2005) (Forum selection clause in ISP contract invalid because of state consumer law)
• Foulkes v. Quest Software, Inc., 2004 WL 2106589 (Cal. App. 2004) (Forum selection enforced even though neither party was resident in the chosen country)
• Mortgage Plus, Inc. v. DocMagic, Inc., -- F.Supp.2d -- (D Kan. 2004) (Shrinkwrap enforceable; forum clause applies to fraud claim related to contract)
• SAI Insurance Agency, Inc. v. Applied Systems, Inc., 858 So2d 401 (Fla. App. 2003) (Court enforces forum selection clause in software license in reference to a claim under Florida Deceptive Trade Practices Act.)
• Koninklijke Philips Electronics v. Digital Works, Inc., 358 F.Supp.2d 328 (S.D.N.Y. 2005) (Forum selection clause in patent license enforceable.)
• 1Image Software, Inc. v. The Reynolds and Reynolds Co., 273 F.Supp2d 1168 (D Colo. 2003) (Software arbitration clause covers copyright claim; clause interpreted)
• Appforge, Inc. v. Extended Systems, Inc., 2005 WL 705341 (D. Del. 2005) (Copyright infringement claim was within scope of arbitration clause where it required solving issues about scope of license)
• Bellsouth Communications System, LLC v. West, 2004 WL 2757416, So2d – (Ala. 2004) (In ISP contract, even if amendment was proper, arbitration clause only applied to future disputes and not dispute about set up fees)
• Cavalier Mfg., Inc. v. Jackson, 2001 WL 1177028 (Ala. 2001) (Arbitration clause barring arbitrator from awarding punitive damages is contrary to public policy and void.)
• Comb v. Paypal, Inc., 2002 WL 2002171 (ND Cal. 2002) (Arbitration provision in online card processor agreement was unenforceable as unconscionable. Clause was in an adhesion contract, was one-sided and imposed costs on the customer that far exceeded the amount in controversy.)
• Discover Bank v. Superior Court, 113 P3d 1100 (Cal. 2005) (class action waivers unconscionable in a consumer contract of adhesion involving small damages when alleged that party with superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums; California law not preempted by FAA)
• Investment Partners, LP v. Glamour Shots Licensing, Inc., 298 F3d 314 (5th Cir. 2002) (Arbitration clause did not bar treble damages and was enforceable)
SECTION 3:
Contract Formation Part I. Generally
A. Objective Manifestations of Assent
• 12 Americans, Inc. v. MSNBC Interactive News LLC, 91 Fed. Appx. 23, 2004 WL 324732 (9th Cir. 2004) (Letter to Internet provider was, by its terms, mere invitation to participate in negotiations)
• Arbitron, Inc. v. Traylyn Broadcasting, Inc., 400 F3d 130 (2nd Cir. 2005) (Royalty escalation at option of licensor was enforceable; not agreement to agree, but a contract right)
• Baer v. Chase, 392 F3d 609 (3d Cir. 2004) (Idea submission; no contract because compensation too indefinite; quantum meruit possible)
• Chodos v. West Publishing Co., Inc., 292 F3d 992 (9th Cir. 2002) (Bad faith rejection of book manuscript; contract not illusory since publisher had duty of good faith and discretion was limited)
• Computer Associates Int’l, Inc. v. U.S. Balloon Mfg Co., Inc., 782 NYS2d 117 (NY AD 2004) (Software contract not formed where parties had different interpretations of what was in the service pack)
• Evolution, inc. v. Insurance Finance Corp., 2003 WL 22227461 (Kan. App. 2003) (No contract when parties implicit disagree about whether SW to be converted)
• Monsanto Co. v. McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (Failure to read terms made available for review does not invalidate the terms)
• Weldon v. Innovative Management Concepts, Inc., 113 Fed. Appx. 517, 2004 WL 2423693 (4th Cir. 2004) (Agreement to cooperate in promoting software was mere agreement to agree and not enforceable)
• Salomon v. Angsten, 797 N.Y.S.2d 14 (N.Y. App. Div. 2005) (Letter agreement at most provided exclusive agency, not exclusive right, to enter into licensing agreements.)
• John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 186 F.Supp.2d. 1 (D. Mass. 2002) (An owner of a copyright may grant a nonexclusive license that permits another party to use and copy an otherwise protected work. Unlike an exclusive license, a nonexclusive license does not amount to a transfer of copyright ownership and, as such, is not governed by the statute of frauds. A nonexclusive license may be granted by the owner of a copyright where the totality of the parties’ conduct indicates an intent to grant permission to use and copy the work, as well as where the copyright owner has granted consent to such use in the form of mere permission or lack of objection to a would be infringer.)
• Watec Co., Ltd. v. Liu, 403 F.3d 645 (9th Cir. 2005)(Substantial evidence existed to support the jury's findings that an oral agreement existed between the parties and Manager entered into the agreement in his personal capacity and had senior rights in trademark registered by exclusion distributor.)
- Open or Incomplete Terms
• Arbitron, Inc. v. Traylyn Broadcasting, Inc., 400 F3d 130 (2nd Cir. 2005) (Royalty escalation at option of licensor was enforceable; not agreement to agree, but a contract right)
• Baer v. Chase, 392 F3d 609 (3d Cir. 2004) (Idea submission; no contract because compensation too indefinite; quantum meruit possible)
• Chodos v. West Publishing Co., Inc., 292 F3d 992 (9th Cir. 2002) (Bad faith rejection of book manuscript; contract not illusory since publisher had duty of good faith and discretion was limited)
- Different or Conflicting Terms
• Evolution, inc. v. Insurance Finance Corp., 2003 WL 22227461 (Kan. App. 2003) (No contract when parties implicitly disagree about whether SW to be converted)
- Quasi Contract
• Baer v. Chase, 392 F3d 609 (3d Cir. 2004) (Idea submission; no contract because compensation too indefinite; quantum meruit possible)
C. Formalities: Statute of Frauds
• A&A Plush, Inc. v. SKM (USA) Enterprises, Inc., 47 U.S.P.Q. 1438, 1440-42 (C.D. Cal. 1998) (writing must “not only memorialize … prior oral agreements, but provide … a reference point for the parties. Although the writing need not be contemporaneous with the oral agreement, the party alleging that prior oral negotiations took place must present evidence showing” that the negotiations took place and the terms of the oral agreement must not have expired; also a third party alleged infringer cannot raise defect in writing requirement if copyright owner and transferee/licensee both join suit or agree)
• Dean v. Burrows, 732 F. Supp. 816 (E.D. Tenn. 1989) (check cashed with a notation at the bottom that it was payment for “mold designs and molds” was sufficient to reflect a transfer).
• Grappo v. Alitalia Linee Aeree Italiane, S.p.A., 56 F.3d 427 (2nd Cir. 1995) (UCC Article 1 statute of frauds applies to license)
• I.A.E., Inc. v. Shaver, 37 U.S.P.Q. 2d 1436, 1442 (7th Cir. 1996). (“A nonexclusive license is ... an exception to the writing requirement of Section 204”).
• ITOFCA, Inc. v. MagaTrans Logistics, Inc., 322 F.3d 928 (7th Cir. 2003) While the Copyright Act explicitly requires a memorandum in writing for the sale of a copyright to be enforceable, the writing does not have to use the word “copyright,” but can use terminology such as “all assets,” which clearly includes copyrights.
• John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 186 F.Supp.2d. 1 (D. Mass. 2002) Unlike an exclusive license, a nonexclusive license does not amount to a transfer of copyright ownership and, as such, is not governed by the statute of frauds. Because it is not governed by the statute of frauds, a nonexclusive license can be granted orally or by implication arising from conduct.
• Landham v. Lewis Galoob Toys, Inc., 227 F.3d 619 (6th Cir. 2002) (unsigned assignment of publicity right would not be enforced against actor; mere presence on the set was not assent to the agreement)
• Liu v. Price Waterhouse LLP, 302 F.3d 749 (7th Cir. 2002), cert. denied, 123 S.Ct. 2640 (2003) (17 U.S.C. § 204(a), which provides that “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of transfer, is in writing and signed by the owner of such rights conveyed or such owner’s duly authorized agent,” is not applicable where, pursuant to terms of contract authorizing creation of derivative work, creators of a derivative work never had any ownership interest in copyrights in derivative work.)
• Papa’s-June Music, Inc. v. McLean, 39 U.S.P.Q. 2d 1124 (S.D.N.Y. 1996) (Court found that the songs were works of joint authorship, and that an agreement altering a 50/50 share presumed for joint owners by the Copyright Act was “a ‘transfer of copyright ownership’ requiring a writing ... signed by the owner of the rights conveyed” in order to be effective” (while the form of the writing was not important, its existence was and “the terms of any writing ..., even a one-line proforma statement, must be clear,” and cashing of two royalty checks, with a check stub stating “@ 30%” was not)
• Valente Kritzer Video v. Pinckney, 881 F2d 772 (9th Cir. 1989) (absolute requirement)
• University Patents, Inc. v. Kligman, 672 F. Supp. 1212 (ED Pa. 1991) (contract to assign in the future; use not barred by statute of frauds)
• Magnuson v. Video Yesteryear, 39 U.S.P.Q. 2d 1018 (9th Cir. 1996) (interpreting 1909 Copyright Act, court gave effect to oral transfer that was ratified in writing subsequently).
• Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 752-53 (8th Cir. 1997) (oral exclusive copyright license was unenforceable so “a court has no choice but to touch at alternatives beyond the parties’ intended arrangement,” which it did by finding an implied nonexclusive license).
• Wang Laboratories, Inc. v. Applied Sciences, Inc., 741 F. Supp. 992 (D. Mass. 1990) (Massachusetts statute of frauds did not apply to patent license).
• Marilyn Miglin, Inc. v. Gottex Indus., Inc., 790 F. Supp. 1245 (SDNY 1992) (promissory estoppel re recovery of expended investment)
• Walthal v. Rusk, 172 F.3d 481, 483 (7th Cir. 1999) (Nonexclusive licenses were excluded from the definition “transfer of copyright ownership” and so could be granted orally.”).
• DSMC, Inc. v. Convera Corp., 2002 WL 32128704 (D.D.C. 2002) Though a later-approved copyright application relates back to the date that the application, deposit, and fee were received, a claim under the Copyright Act or the Digital Millennium Copyright Act cannot be brought prior to actually applying to register a copyright.
• Hustlers, Inc. v. Thomasson, 253 F.Supp.2d 1285 (N.D. Ga. 2002) The transfer of ownership in a registered copyright does not trigger the need to re-register the copyright for purposes of bringing suit.
Part II. Selected Applications
• 12 Americans, Inc. v. MSNBC Interactive News LLC, 91 Fed. Appx. 23, 2004 WL 324732 (9th Cir. 2004) (Letter to Internet provider was, by its terms, mere invitation to participate in negotiations)
• Johnson v. Benjamin Moore & Co., 788 A.2d 906 (N.J. App. Div. 2002) (Under New Jersey law, where a buyer and seller enter into a confidentiality agreement and a post-disclosure contract, a post-disclosure contract for sale of an idea may be supported by adequate consideration even though the idea is not novel. However, where the parties do not execute a separate post-disclosure contract for use of an idea, but only a contract for disclosure of an idea with payment based on use, New Jersey and New York law, unlike California law, require a showing of novelty in order for the pre-disclosure agreement to be enforceable. Under New Jersey law, a written pre-disclosure “contract for sale” of a non-novel idea was not enforceable between inventor and company without a post-disclosure agreement.)
• Weldon v. Innovative Management Concepts, Inc., 113 Fed. Appx. 517, 2004 WL 2423693 (4th Cir. 2004) (Agreement to cooperate in promoting software was mere agreement to agree and not enforceable)
• Baer v. Chase, 392 F3d 609 (3d Cir. 2004) (Idea submission; no contract because compensation too indefinite; quantum meruit possible)
• Gunther-Wahl Prod., Inc. v. Mattel, Inc., 128 Cal. Rptr.2d 50 (Cal Ct. App. 2002) (Agreement to disclose an abstract idea may be compensable, even though it lacks novelty for a cause of action for an implied in fact contract to pay for an idea. When a producer accepts an idea or material under circumstances that are such that it is reasonably understood that a professional author expects payment of the reasonable value or the idea or material, if used, the conduct of the producer in accepting it implies a promise to fulfill those reasonable expectations.
• Johnson v. Benjamin Moore & Co., 788 A.2d 906 (N.J. App. Div. 2002) (Under New Jersey law, where a buyer and seller enter into a confidentiality agreement and a post-disclosure contract, a post-disclosure contract for sale of an idea may be supported by adequate consideration even though the idea is not novel. However, where the parties do not execute a separate post-disclosure contract for use of an idea, but only a contract for disclosure of an idea with payment based on use, New Jersey and New York law, unlike California law, require a showing of novelty in order for the pre-disclosure agreement to be enforceable. Under New Jersey law, a written pre-disclosure “contract for sale” of a non-novel idea was not enforceable between inventor and company without a post-disclosure agreement.)
• Cairo, Inc. v. v. Crossmedia Servs., Inc., 2005 WL 756610 (ND Cal. 2005) (Access by automated spider bound party to terms as a result of repeated access; imputed knowledge of terms presented in clear way)
• DeJohn v. The TV Corporation Int’l, 245 F.Supp.2d 913 (CD Cal. 2003) (Online contract enforceable; choice of law eliminates DTPA coverage) (However, where agreement between plaintiff and defendant/administrator of domain name registry expressly provided that the contract was not effective until accepted by defendant, that “acceptance” meant registration of plaintiff’s domain name in defendant’s registry or email confirmation from defendant, and that defendant could accept or reject the agreement at its sole discretion within thirty days from receipt of payment, plaintiff could not claim breach of contract based on defendant’s failure to register domain name because, since defendant exercised its option to reject registration, an agreement to register never came into existence.).
• Dyer v. Northwest Airlines Corp., 2004 WL 2009397, F.Supp2d (D ND 2004) (Privacy policy not part of contract; disclosures not breach)
• EF Cultural Travel v. Explorica, Inc., 274 F3d 577 (1st Cir. 2001) (Unauthorized access by use of scraper program violates CFAA)
• Home Basket Co. v. Pampered Chef, Ltd., 55 UCC Rep. Serv.2d 792, 2005 WL 82136 (D Kan. 2005) (Purchaser of goods bound by terms of internet based purchase order management system, including choice of forum, where emails setting up the purchase indicated that, on receipt of purchase order, the seller was to confirm and acknowledge via the website system that system contained an “I agree” button.)
• Koch v. America Online, Inc., 139 F.Supp.2d 690 (D Md. 2001) (Arbitration clause enforced in AOL online contract; contract; customer would not suffer sufficient inconvenience to preclude enforcement of clause and forum selection clause did not violate Maryland's public policy in favor of allowing residents access to judicial system. Importantly, the court concluded that this was true even if Virginia law did not permit a class action.)
• Novak v. Overture Services Inc., 309 F.Supp.2d 446 (ED NY 2004) (“Plaintiff had a full and fair opportunity to read the entire document, which is only seven and a half pages long and is written in an easy to read font. … no time limitation limited Plaintiff’s opportunity to scroll through the terms and conditions.”)
• Pollstar v. Gigmania, Ltd., 170 F.Supp.2d 974 (ED Cal. 2001) Fact issues remained as to whether a concert information provider's browser wrap license on its Internet website was sufficiently conspicuous to alert users of its presence. The provider brought an action alleging that a competitor breached the license agreement by downloading information from the site for use on its own proprietary site. The license agreement was not set forth on the homepage but was on a different web page that was linked to the homepage.
• Register.com v. Verio, Inc., 356 F.3d 393 (2nd Cir. 2004) (contract formed despite lack of click assent; notice of intent to impose terms was adequate and court affirms injunction on contract and trespass issues)
• Siedle v. National Ass’n of Securities Dealers, Inc., 248 F.Supp.2d 1140 (MD Fla. 2003) (Online agree enforceable; prevents commercial use of data; contract interpretation issue)
• Specht v. Netscape Communications Corp., 306 F.3d 17 (2nd Cir. 2002) Online agree not enforceable in this case because terms and act held to be assent on this free site not presented in way to give reasonable person notice that they existed)
• Ticketmaster v. Tickets.com, 2003 WL 21406289, Lexsee 2003 US Dist Lexis 6483 (2003) (Online contract enforceable even though no requirement for clicking assent; but no liability for trespass)
• Waters v. Earthlink, Inc., 2003 WL 22461542 (1st Cir. 2003) (not published) Online contract not enforceable absent proof of how it was presented and whether it gave notice
• Bowers v. Baystate Technologies, Inc., 320 F3d 1317 (Fed. Cir. 2003) (Shrinkwrap license enforced; no reverse engineering clause valid and not preempted)
• Davidson & Assoc. v. Jung, 2005 WL 2095970 (8th Cir. 2005) (shrinkwrap license enforceable; no preemption of no reverse engineering clause contained in the license - licensee waive fair use privilege)
• M.A. Mortenson Co., Inc. v. Timberline Software Corp., 970 P.2d 803 (Wash. 2000) (license enforced; “Reasonable minds could not differ concerning a corporation’s understanding that use of software is governed by licenses containing multiple terms.”)
• ProCD, Inc. v. Zeidenberg, 86 F3d 1447 (7th Cir. 1996) (later presented terms enforceable; no preemption of contract)
• Puget Sound Financial. L.L.C. v. Unisearch, Inc., 47 P3d 940 (Wash. 2002) (Damages limitation clause enforced; layered contract formed and enforceable regarding later terms in invoice)
• Step-Saver Data Systems, Inc., v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991) (UCC 2-207 applies; where defendant explicitly objected to the terms warranty terms of the box-top license during negotiation, there was no assent to the additional or different terms in the box top license purporting to impose those terms; there were proposed different terms that were not assented to by purchaser)
• 1-A Equipment Co. v. Icode, Inc., 2003 WL 549913 (Mass. App. 2003) (Shrinkwrap enforced; forum clause enforced)
• Against Gravity Apparel, Inc. v. Quarterdeck Corp., 699 NYS2d 368 (NYAD 1999) (no substantial discussion of enforceability, terms enforced)
• Arizona Cartridge Remanufacturers Assoc. v. Lexmark International Inc., 2005 WL 2077641 (9th Cir 2005) (terms seen when cartridge package is opened, or known by distributors to which objection is not made, became part of contract forming legitimate restriction on use of cartridge)
• CECG, (or CECG) Inc. v. Magic software Enterprises, Inc., 51 Fed.Appx. 359, 2002 WL 31248483 (3rd Cir. 2002) (Licensee’s inclusion in purchase order for software of provision allowing it to receive unlimited runtime license did not become part of parties’ agreement)
• Chandler v. AT&T Wireless Services, Inc., 2005 WL 486747, F.Supp2d – (SD Ill. 2005) (Terms in cell phone contract enforceable under shrink wrap analysis where could have declined to use the service; “By using her phone rather than canceling immediately, or no later than thirty days after her activation date, Chandler accepted the offered services and the terms and conditions under which they were offered. She had a clear mechanism and reasonable opportunity to reject them.”)
• Falbe v. Dell Computer Inc., 2004 WL 1588243 (ND Ill. 2004) (Consumer bound by contract contained in box, including arbitration clause; return right was valid even though consumer would pay shipping)
• Greenfield v. Twin Vision Graphics, Inc., 268 F.Supp.2d 358 (D NJ 2003) (Invoice license enforced; rejects Step Saver)
• I.Lan Systems, Inc. v. Netscout Service Level Corp., 183 F.Supp.2d 328 (D. Mass. 2002) (Shrink wrap license for software was enforceable under Article 2 of the UCC. Clicking I agree was a clear manifestation of assent that was binding on the transferee. The court followed ProCD, rejecting Wyse, and holding that the assent here was explicit and enforceable.)
• Kilgallen v. Network Solutions, Inc., 2000 WL 722558 (D. Mass. 2000) (bound by e-mail form contract even though terms were not read)
• Management Computer Controls, Inc. v. Charles Perry Const., Inc., 743 So.2d 627 (Fla. App. 1999) (forum selection clause in shrink wrap license enforced)
• Moore v. Microsoft Corp., 2002 WL 575758 (NY AD 2002) Contract enforceable; “The terms of the EULA were prominently displayed on the program user's computer screen before the software could be installed. Moreover, the program's user was required to indicate assent to the EULA by clicking on the "I agree" icon before proceeding with the download of the software. Thus, the defendant offered a contract that the plaintiff accepted by using the software after having an opportunity to read the license at leisure. As a result, the plaintiff's claims are barred by the clear disclaimers, waivers of liability, and limitations of remedies contained in the EULA”)
• Mortgage Plus, Inc. v. DocMagic, Inc., -- F.Supp.2d -- (D Kan. 2004) (Shrinkwrap enforceable)
• O’Quinn v. Verizon Wireless, 256 F.Supp.2d 512 (MD La. 2003) (Shrinkwrap enforceable; arbitration clause not unconscionable)
• Peerless Wall and Window Coverings, Inc. v. Synchronics, Inc., 85 F.Supp2d 519 (W.D. Pa. 2000) (license enforced)
• Rational Software Corp. v. Sterling Corp., 2005 WL 18246 (1st Cir. 2005) (Prior course of dealing brought damage limitation clause in even though clause was in invoice)
• Stenzel v. Dell, Inc., 2005 WL 674857, 870 A.2d 133 (Me. 2005) Shrink wrap; bound by contract and clauses in package; not illusory despite reservation of right to change terms)
• Boomer v. AT&T Corporation, --F3d--, 2002 WL 31202126 (7th Cir. 2002) (Later terms enforceable in ongoing contract)
• Lamle v. Mattel, Inc., 394 F3d 1355 (Fed. Cir. 2005) (“A license for intellectual property including a patent is not a sale of goods”; cant modify but can abrogate and replace)
• Morgan Laboratories, Inc. v. Micro Data Base Systems, Inc., 41 U.S.P.Q.2d 1850 (N.D. Cal. 1997) (contract not modified by subsequent shrinkwrap where contract required modification to be in signed writing)
• Uncle Henry’s, Inc. v. Plaut Consulting Co., Inc., 399 F3d 33 (1st Cir. 2005) (contract modification was enforceable)
SECTION 4: Interpreting Licenses
• Apple Computer, Inc. v. Microsoft Corp., 709 F. Supp. 925 (ND Cal. 1989) (terms of ambiguous grant in license to be interpreted against Microsoft, which drafted the license).
• Bloom v. Hearst Entertainment, Inc., 33 F.3d 518 (5th Cir. 1994) (book publishing contract granted the publisher exclusive worldwide motion picture and television rights included home video rights. The court applied New York common law rules of contract interpretation, noting that the burden was on the authors to reserve video rights to their book, if that was their intent).
• Graham v. James, 46 U.S.P.Q. 2d 1760, 1766 (2d Cir. 1998) (construction of license terms was matter of state law);
• Data Gen. Corp. v. Grumman Sys. Corp., 36 F3d 1147 (1st Cir. 1994)
• Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 752-53 (11th Cir. 1997);
• Diggan v. Cycle Sat, Inc., 46 U.S.P.Q. 2d 1372, 1373-74 (Iowa 1998) (state law controls whether compensation is owed for uses under implied license);
• Devlin v. Ingrum, 928 F2d 1084 (11th Cir. 1991)
• McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920 (Fed.Cir.1995) (“Whether express or implied, a license is a contract ‘governed by ordinary principles of state contract law.”)
• Power Lift, Inc. v. Weatherford Nipple Up Systems, Inc., 871 F.2d 1082, 1085 86 (Fed.Cir.1989) (“license agreement is a contract governed by ordinary principles of state contract law” and examining whether state relief from forfeiture provision was preempted).
• Gruen Marketing Corporation v. Benrus Watch Company, 955 F. Supp. 979, 984 (N.D. Ill. 1997) (breach of trademark license claims by an exclusive licensee against licensor are governed by state contract law, not Lanham Act)
• Intergraph Corp. v. Intel Corp., 241 F3d 1353 (Fed. Cir. 2001) (Scope of cross-licensing agreement determined under ordinary contract interpretation principles)
• Johnston v. Katz, 1996 WL 1074202 & 3 (E.D. Pa. 1996) (“in cases involving intellectual property, state law governs contractual relationships as long as it is not explicitly preempted by federal copyright law or inconsistent with the Copyright Act’s policies,” “enforceability of a licensing agreement will not affect the copyright’s validity or the rights secured by it, but merely who has authority to assert these rights”)
• Mid-West Conveyer Co., Inc. v. Jervis B. Webb Co., 877 F. Supp. 552, 557 (D. Kan. 1995) (patent licenses “are to be construed according to general principles of contract interpretation and construction”)
B. Intellectual Property Rules
• Beckman Instruments, Inc. v. Cincom Systems, Inc., 232 F.3d 893 (9th Cir. 2000) (Non-assignment clause enforced; “We have rejected the argument that license agreements permit that which they do not prohibit. Moreover, although Beckman was entitled to "use" the software, that did not give it the right to authorize others to copy the software, even on its behalf. The License Agreement not only regulated how the software could be used, it also specified who could use it.”
• In re Catapult Entertainment, Inc., 165 F.3d 747 (9th Cir. 1999) Debtor in possession may not assume executory contract over nondebtor’s objection if applicable law would bar assignment to hypothetical third party, even where DIP has no intention of assigning contract in question to any such third party. In this case, federal patent law made the nonexclusive patent licenses personal and nondelegable, thus barring debtor from assuming patent licenses without licensor’s consent.)
• Everex Sys., Inc. v. Cadtrak Corp. (In re CFLC, Inc.), 89 F.3d 673, 679 80 (9th Cir.1996) (federal patent law of nonassignability preempts state law relating to patent license assignability; prevents assumption or assignment of the license in bankruptcy; a license is an executory contract)
• SOS, Inc. v. Payday, Inc., 886 F2d 1081 (9th Cir. 1988) (state law could not imply a grant of the right to make derivative works from software licensed for remote use only; federal policy of protecting rights holder trumps state rule of interpretation against drafter)
• Golden Voice Tech. Training, L.L.C. v. Rockwell Elec. Commerce Corp., 267 F.Supp.2d 1178 (M.D. Fla. 2003) (Where language of patent license is neither vague nor ambiguous, words therein are to be given their plain and ordinary meaning. Applying dictionary definitions of the terms, licensor granted licensee a non-exclusive license to make, use, or sell licensed products, or devices using licensed methods, incorporating a prerecorded response system for telephone operators, if and only if the number of prerecorded response messages accessible [defined as capable (having traits conducive to or features permitting) of being entered, recorded, listened to and/or played back by an operator at any operation position did not exceed six.)
- Purpose and Commercial Context
• Bourne v. Walt Disney Company, 68 F.3d 621 (2d Cir. 1995) (uses course of dealing to find grant reserved, even though ordinary rule was to exclude agreements that “‘would ordinarily be expected to embody in the writing.’”)
• Dunn & Bradstreet Software Serv., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3rd Cir. 2002) Where defendant consultant, who provided services and maintenance to plaintiff’s licensees, substantially incorporated plaintiff’s copyrighted material into an infringing derivative work, industry custom and practice cannot be invoked to escape the unambiguous terms in the license that did not allow such use of copyrighted work. - Interpret Ambiguities Against the Drafter
• Apple Computer, Inc. v. Microsoft Corp., 709 F. Supp. 925 (ND Cal. 1989) (terms of ambiguous grant in license to be interpreted against Microsoft, which drafted the license).
• Bloom v. Hearst Entertainment, Inc., 33 F.3d 518 (5th Cir. 1994) (book publishing contract that granted the publisher exclusive worldwide motion picture and television rights included home video rights. Court applied New York common law rules of contract interpretation, noting that the burden was on the authors to reserve video rights to their book, if that was their intent).
• Intel Corp. v. VIA Techs., Inc., 319 F.3d 1357 (Fed. Cir. 2003) (Where there is ambiguity as to the meaning of contract terms, the principal of contra proferentem, under Delaware law, requires that the agreement be construed against a party who drafted the contract and offered it on a “take it or leave it” basis without meaningful negotiations. Where patentee/licensor drafted license agreement, had complete control over the language, and offered the reciprocal license on a “take it or leave it” basis without the possibility of negotiations, ambiguity as to the scope of the license arising from the varied use of the words “required by” had to be resolved against patentee/licensor and interpreted to mean that otherwise infringing activity was protected by the license agreement.)
• K & V Scientific Co. v. Bayerische Motoren Werke Aktiengesellschaft, 314 F.3d 494, (10th Cir. 2002) When the forum clause is ambiguous, in that it is capable of being construed as either permissive or mandatory, it is construed against the drafter, and if the drafter is defendant it is deemed to be permissive.
• State Contracting & Eng’g Corp. v. Florida, 258 F.3d 1329 (Fed. Cir. 2001) (A license is a contract and is governed by ordinary principles of state contract law. Thus, where State drafted contract, which allegedly gave rise to a license of patent rights, Florida law required that such a contract be construed against the State as the drafter of such contract. Where contract between highway construction company and State provided that State would have the right to use construction companies’ data contained in its proposal for State’s future contracts, did not bar the contractor from securing a patent in the invention of walls described in the proposal, and did not explicitly convey any patent rights in construction companies’ design and manufacturing method for sound barrier walls.) - Interpret to Protect Rights Holder
• Beckman Instruments, Inc. v. Cincom Systems, Inc., 232 F.3d 893 (9th Cir. 2000) (Non-assignment clause enforced; “We have rejected the argument that license agreements permit that which they do not prohibit. Moreover, although Beckman was entitled to "use" the software, that did not give it the right to authorize others to copy the software, even on its behalf. The License Agreement not only regulated how the software could be used, it also specified who could use it.”
• SOS, Inc. v. Payday, Inc., 886 F2d 1081 (9th Cir. 1988) (state law could not imply a grant of the right to make derivative works from software licensed for remote use only; federal policy of protecting rights holder trumps state rule of interpretation against drafter) - Interpret to Avoid Absurd Results
• Beanstalk Group, Inc. v. AM Gen. Corp., 283 F.3d 856 (7th Cir. 2002) (Though written contracts are usually enforced based on the common meaning of the language used, without recourse to parole evidence regarding the parties’ intent, this presumption in favor of giving contractual terms their ordinary meaning is rebuttable by other principles of interpretation, such as the principle that contracts will not be interpreted literally if doing so would lead to absurd results, as well as the general rule that contracts should be interpreted as a whole. Where contract between marketer and trademark owner designated the marketer as the exclusive representative for purposes of licensing the mark, and entitled marketer to 35 percent of the gross receipts received under any license made during the period of such representation, marketer was not entitled to a percentage of the consideration furnished to trademark owner under a joint venture agreement transferring the mark along with most of owner’s business associated with the mark. Marketer’s position that such a joint venture agreement was covered by the marketing agreement would be an unreasonable construction of the contract, which the parties would not have likely agreed to, and conflicted with other terms which implied that marketer was to only receive a percentage on licensing agreements it negotiated, not contracts entered into without any contribution by marketer.)
• FutureSource LLC v. Reuters Ltd., 312 F.3d 281 (7th Cir. 2002), cert. denied, 123 S.Ct. 1769 (2003) (“Nonsensical interpretations of contracts, as of statutes, are disfavored. Not because of a judicial aversion to nonsense as such, but because people are unlikely to make contracts, or legislators statutes, that they believe will have absurd consequences.”) - Practical Context: Trade use, course of dealing etc.
• Bourne v. Walt Disney Company, 68 F.3d 621 (2d Cir. 1995) (uses course of dealing to find grant reserved, even though ordinary rule was to exclude agreements that “‘would ordinarily be expected to embody in the writing.’”)
• Dunn & Bradstreet Software Serv., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3rd Cir. 2002) Where defendant consultant, who provided services and maintenance to plaintiff’s licensees, substantially incorporated plaintiff’s copyrighted material into an infringing derivative work, industry custom and practice cannot be invoked to escape the unambiguous terms in the license that did not allow such use of copyrighted work.
• Greenfield v. Twin Vision Graphics, Inc., 268 F.Supp.2d 358 (D.N.J. 2003) (Though a course of performance accepted or acquiesced in without objection can be relevant in determining the meaning of an agreement, the party accepting or acquiescing in such a course of performance by failing to object must have had knowledge that the other party was engaging in such performance. Here, licensee could not show that licensor was aware of defendant’s use of plaintiff’s photographs in a manner outside the scope of the parties’ written agreement, and could not claim that the parties’ course of dealing demonstrated that defendant was permitted to use plaintiff’s photographs without any of the limitations imposed under parties’ written agreement.)
D. Parol Evidence Rule; Merger Clauses
• American Trim, LLC v. Oracle Corp., 383 F3d 462 (6th Cir. 2004) (Parol evidence did not bar fraud claim re SW contract)
• Cable & Associates Insurance Agency, Inc. v. AMS Services, Inc., 102 Fed.Appx. 234, 2004 WL 1203035 (3rd Cir. 2004) (Integration clause bars reliance element of fraud claim re SW license; limitations period starts on delivery)
• Coopervision, Inc. v. Intek Integration Techn ologies, Inc., 2005 WL 366888 (NY S.ct. 2005) (terms precluded fraud claim while general merger clause would not have done so)
• In4Network, Inc. v. University of Southern California, 2004 WL 957693 (Cal. App. 2004) (Fully integrated agreement bars proof of alleged representations regarding software)
• Intel Corp. v. VIA Techs., Inc., 319 F.3d 1357 (Fed. Cir. 2003) (Under Delaware law, the principal of contra proferentem is applied to resolve an ambiguity before resort to any extrinsic evidence)
• Shugrue v. Continental Airlines, Inc., 44 U.S.P.Q. 2d 1343, 1348 (S.D.N.Y. 1997) (Often courts will cite the existence of a merger clause as justification for excluding extrinsic evidence, but then go on to explain that the extrinsic evidence would not have helped the desperate party attempting to bring the evidence in anyway.)
• Westco Group, Inc. v. KB & Associates, Inc., 128 F.Supp.2d 1082, 58 U.S.P.Q.2d 1068 (ND Ohio 2001) (Integration clause in trademark license, stating that new license superceded previous agreements "between the parties thereto," was effective to set aside prior license between licensee and licensor's predecessor in interest.)
• In re Cambridge Biotech Corp., 186 F.3d 1356 (Fed. Cir. 1999) Assignee of patents directed to structural components of and methods of detecting presence of two types of Human Immunodeficiency Virus (HIV), along with its United States licensee, brought infringement action in bankruptcy court against purported sublicensee, which claimed that it obtained sublicense from another licensee through cross license agreement. Held that: section of cross license agreement requiring licensee to use its best efforts to recover right to sublicense patents was unambiguous and that assignee breached “best efforts” clause of cross license agreement
• Dunn & Bradstreet Software Serv., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3rd Cir. 2002) Where defendant consultant, who provided services and maintenance to plaintiff’s licensees, substantially incorporated plaintiff’s copyrighted material into an infringing derivative work, industry custom and practice cannot be invoked to escape the unambiguous terms in the license that did not allow such use of copyrighted work.
F. Interpreting Particular Terms
• Associated/ACC International v. Dupont Flooring Systems Franchise Co., Inc., 2004 WL 75381 (3rd Cir. 2004) (Term “encourage” in franchise agreement was not ambiguous and, thus, no extrinsic evidence)
• Burke v. Union Pacific Resources Co., 2004 WL 813289, SW3d – (Tex. App. 2004) (“seismic testing” in standard practices clause of agreement with property owners created express warranty that would do it in prudent manner)
• Go2net, Inc. v. CI Host, Inc., 115 Wash.App. 73, 60 P3d 1245 (Wash. App. 2003) (“Impressions” meaning in advertising contract for online site)
• Graham v. James, 46 U.S.P.Q. 2d 1760 (2d Cir. 1998) (court recognizes distinction between covenant and condition; there was a dispute about the scope of the oral license and its duration; while putative licensee must prove the existence of a license, once she has done so the burden shifts to the copyright owner to prove that the license had been exceeded.). Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 752-53 (11th Cir. 1997);
• I.A.E., Inc. v. Shaver, 74 F.3d 768, 778 (7th Cir. 1996) (“nothing in the contract or in Mr. Shaver’s later letter indicates that full payment was a condition precedent to the use of his drawings” and so the payment obligation was treated as a covenant, not condition);
• Effects Associates, Inc. v. Cohen, 908 F.2d 555, 559 n.7 (9th Cir. 1990) (“Nor can we construe payment in full as a condition precedent to implying a license. Conditions precedent are disfavored and will not be read into a contract unless required by plain, unambiguous language.”).
• IXL, Inc. v. Adoutlet.com, Inc., 2001 WL 315219 (N.D. Ill. 2001). “However, iXL has not established a likelihood of success on the proposition that a breach of contract results in AdOutlet being deprived of ownership of the source code. The Statements of Work provide that the Services provided by iXL are "works made for hire" for AdOutlet…. The Agreement and the Statements of Work contain no express agreement that AdOutlet will be considered the author of the source code and the owner of its copyright only after full payment of the invoices. Nor do these agreements state that AdOutlet is barred from using the source code in its web site if AdOutlet has failed to pay the full invoice amount. Indeed, when iXL delivered the CD Roms containing the source code on or about October 1, 2000 by which time AdOutlet already was nearly $900,000 in arrears in payment for more than 60 days iXL nonetheless affixed to the code a legend identifying AdOutlet as the holder of the copyright.”
SECTION 5: Exclusive Licenses
• Camco International, Inc. v. Perry R. Bass, Inc., 926 SW2d 632 (Tex. App. 1996) (a transfer was an assignment, not a license where the contract transferred essentially all rights pertaining to the patent.
• Eichman v. Fotomat Corp., 880 F.2d 149, 164 (9th Cir.1989) (“Where there is no express grant of an exclusive territory in a contract or franchise agreement, none will be impliedly read into the contract.”)
• ICEE Distribs., Inc. v. J&J Snack Foods Corp., 325 F.3d 586 (5th Cir. 2003) A license to use a mark is a transfer of limited rights, and, as such, is less than the whole interest which might have been transferred. Deeming a licensee an assignee would allow the assignee to hold the registered trademark owner liable under trademark law, rather than simply under contract law for utilizing a similar trademark in the assignee's area. Here, while a truly exclusive licensee, who, as such, has the right to exclude even the licensor from using licensed mark, might be considered an assignee, the parties’ agreement sets forth many duties and rights between licensor and licensee that are inconsistent with an assignment, such as geographic limitations on the licensee’s territory, such an agreement does not amount to an assignment.
• State Contracting & Eng’g Corp. v. Condotte America, Inc., 346 F.3d 1057 (Fed. Cir. 2003). A conveyance of legal title by a patentee is an assignment, vesting both the title in the patent and the right to sue for infringement in the assignee. In order to determine whether agreement constitutes an assignment or a license, a court must ascertain the intent and examine the substance of what was granted. When a written agreement granted a transferee all substantial rights under a patent, such a transferee is considered the owner of the patent, regardless of how the parties characterize the transaction. Where language in the parties’ agreement specified that patentee sold, assigned, and transferred to transferee the entire right title and interest in patented inventions, including the subject matter of the patents, such terms constituted an assignment because it transferred the exclusive right to make, use, and vend the invention throughout the United States. The conclusion was also supported by the fact that the agreement, by transferring the right to sue third parties for infringement, also granted the transferee the right to exclude others from making, using, or selling the claimed invention.
• Westowne Shoes, Investment v. Brown Group, Inc., 104 F.3d 994 (7th Cir. 1997) (no implied duty to maintain intellectual property value imposed on licensor in trademark license)
• See also §§ 9(L)(M)
• Kardios Sys. Corp. v. Perkin Elmer Corp., (no best effort standard in exclusive license to market language translator program where such provision was in early draft of contract, but did not carry forward to final draft; New York law does not imply a best effort standard in this setting).
D. Exclusive License: Standing to Sue
• Black Clawson Co. v. Kroenert Corp., 2001 WL 303904 (8th Cir. 2001) License transferred exclusive right within the United States to use technology, licensor no longer possessed any substantial rights to technology in the United States and licensor therefore did not have claim for unauthorized use of it in United States. Whether a transfer of proprietary information is a bare license or a constructive assignment depends on the legal effect of the transfer rather than the form it takes; court must look at the language of the agreement and ascertain whether the parties intended a grant of all substantial rights. The court also stated that an exclusive licensee for all or any specified portion of the United States is an assignee as to the specified territory and may sue in its own name for infringement of its technology rights, even against the licensor.
• Cook Inc. v. Boston Scientific Corp., 333 F.3d 737 (7th Cir. 2003) Where license agreements between licensor and two co-exclusive licensees prohibited either licensee from assigning his license, or from granting a sublicense to anyone except an affiliate, unless all parties to the two licenses agreed, one licensee could enforce this anti-assignment clause against the other licensee as a third party beneficiary even though it was not a party the other licensee’s license agreement.
• Great S. Homes, Inc. v. Johnson & Thompson Realtors, 797 F. Supp. 609 (MD Tenn. 1992) (exclusive copyright licensee had standing to bring infringement action even though license agreement was oral when complaint was filed)
• ICEE Distributors, Inc. v. J&J Snack Foods Corp., 325 F.3d 586 (5th Cir. 2003) (Franchise/ license left ownership in licensor; licensee lacked standing to sue for dilution)
• Mentor H/S, Inc. v. Med. Device Alliance, Inc., 240 F.3d 1016 (Fed. Cir. 2001) (“Sonique has retained significant ownership rights in the ‘491 patent. Sonique can develop and manufacture products (for sale only to Mentor) and supervise and control Mentor’s product development. Sonique also is obliged to pay the maintenance fees for the patent. Finally, and most importantly, Sonique has the first obligation to sue parties for infringement; failure to take appropriate action against infringors would constitute a breach of the agreement. Mentor can only sue for infringement in the event Sonique fails to do so.”; “We conclude that Mentor is an exclusive licensee who does not have all substantial rights in the ‘491 patent and that, therefore, Mentor is not a “patentee” with standing to sue in its own name.”)
• In re Ortho Pharmaceutical Corp., _ F3d _, 34 USPQ2d 1444 (Fed. Cir. 1995) (Nonexclusive licensee lacked standing to sue an infringer even though the license contract purported to give the licensee the right to sue; the contract controlled the relationship of the parties and could not govern standing to sue a third person.).
• Prima Tek II, L.L.C. v. A-Roo Co., 222 F3d 1372 (Fed. Cir. 2000) (Licensee did not have standing where the license involved a pass-through right, under which the licensee licensed to sublicensee. The licensee rights “extend ‘only to the extent necessary for [Prima Tek I] to grant a license to Prima Tek II.”).
• Silvers v. Sony Pictures Entertainment, Inc., 2005 WL 678735 (9th Cir. 2005) (Assignee of copyright infringe claim lacked standing; statute refers only to exclusive rights holder as having standing)
• Sabroso Publishing, Inc. v. Caiman Records Am., Inc., 141 F.Supp.2d 224 (D. PR 2001) Assignee of music publisher’s copyrights and any accrued or unaccrued causes of action for copyright infringement had standing to assert infringement claims accruing both pre- and post- assignment.
• State Contracting & Eng’g Corp. v. Condotte America, Inc., 346 F.3d 1057 (Fed. Cir. 2003). A conveyance of legal title by a patentee is an assignment, vesting both the title in the patent and the right to sue for infringement in the assignee. In order to determine whether agreement constitutes an assignment or a license, a court must ascertain the intent and examine the substance of what was granted. When a written agreement granted a transferee all substantial rights under a patent, such a transferee is considered the owner of the patent, regardless of how the parties characterize the transaction. Where language in the parties’ agreement specified that patentee sold, assigned, and transferred to transferee the entire right title and interest in patented inventions, including the subject matter of the patents, such terms constituted an assignment because it transferred the exclusive right to make, use, and vend the invention throughout the United States. The conclusion was also supported by the fact that the agreement, by transferring the right to sue third parties for infringement, also granted the transferee the right to exclude others from making, using, or selling the claimed invention.
• Sicom Systems, Ltd. v. Agilent Techs, Inc.,427 F.3d 971 (Fed. Cir. 2005) (exclusive licensee lacked standing to sue for infringement.)
• Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881 (9th Cir. 2005) (Assignee of an accrued claim for copyright infringement lacked standing to sue on that claim; statute grants standing to owners of exclusive rights).
• National Licensing Ass'n, LLC. v. Inland Joseph Fruit Co., 361 F.Supp.2d 1244 (E.D. Wash. 2005) (Grantee of bare legal right to sue for patent and trademark infringement lacked standing.)
E. Validity of Licensor's Subsequent Licenses
• Schering Corp. v. Roussel-UCLAF SA, 104 F3d 341 (Fed Cir. 1996) (license made by one co-owner is valid despite agreement giving other co-owner the unilateral right to sue)
• Syndia Corp. v. Lemelson Medical Education and Research Foundation, 165 F.Supp2d 728 (ND Ill. 2001) (Patent holder did not have the right to grant licenses for patents that were subject to an exclusive license despite any "power" that they retained by retaining title and right to withhold consent for litigation by exclusive licensee.)
• Gardner v. Nike, Inc., 2002 WL 123296 (9th Cir. 2002) (Exclusive license was not transferable without consent)
• Gasser v. Infanti Int'l, Inc., 353 F.Supp.2d 342 (E.D.N.Y. 2005) (Transfer of ownership interest in patent from judgment debtor to daughter was fraudulent.)
SECTION 6: Scope of License
A. Meaning and import of scope
• Batesville Services, Inc. v. Funeral Depot, Inc., 2004 WL 2750253 (SD Ind. 2004) Linking here may be infringement; use of licensee of owner to show photos might be outside scope of implied license
• Beanstalk Group, Inc. v. AM General Corp., 2002 WL 406985 (7th Cir. 2002) (license and royalty term did not apply to particular transfer)
• Bowe Bell & Howell Co. v. Harris, 2005 WL 1655030 (4th Cir. 2005) (third party likely violated license by making copy onto its machine for purposes of ongoing maintenance of the computer)
• Digital Envoy Inc. v. Google, Inc., 370 F.Supp.2d 1025, 1032-33 (N.D. Cal. 2005) (scope provisions ambiguous as to whether licensor’s technology could be incorporated in a new system that was sent to third party sites)
• Dispatch Automation, Inc. v. Richards, 280 F.3d 1116 (7th Cir. 2002) (Scope of license; employee owned new development software)
• Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc., 307 F3d 197 (2d Cir. 2002) (License scope not affected by trade use; infringement by calling and copy command; software misuse not defense)
• Faulkner v. Mindscape, Inc., 2005 WL 503652, F3d (2nd Cir. 2005) (Revision privilege; contracts do not negate digital version, although include searchability features that did not appear in print version, essentially presented underlying works to users in same context as in original versions of magazine)
• Golden Voice Technology Training, LLC v Rockwell Electronic Commerce Corp., 267 F.Supp.2d 1178 (MD Fla. 2003) Breach license and infringe patent by having system available to too many; term clear.
• Intel corp. v. VIA Technologies, Inc., 319 F3d 1357 (Fed. Cir. 2003) (Interpretation of scope of patent license)
• Lowe v. Lord Records, 2005 WL 665111, 126 Fed. Appx 545 (3rd Cir. 2005) (“there may .. be a claim of copyright infringement if the … use goes beyond the scope of the license”; here, use was within scope of implied license)
• Micro Data Base Systems, Inc. v. State Bank of India, F.Supp.2d , 2001 WL 1587881 (ND Ind. 2001) (Damages for unlicensed use of copyrighted software equaled the number of modules of software used without paying for or affixing a required payment token, times the actual list price for each module.) • Krause v. Titleserv, Inc., 402 F.3d 119 (2nd Cir. 2005) (Client could modify, move and add to software created by independent contractor where client became owner of copy; ownership of copy determined under DSC standard regarding the rights given to the transferee; in this case, there were no restrictions on transferee.)
B. Interpretation of Scope Provisions
• SAPC, Inc. v. Lotus Development Corp., 921 F2d 360 (1st Cir. 1990) (“party seeking to deviate from the terms of a broad and general conveyance [such as this] has the burden of proving the asserted specific exception.” The grantor failed to show any basis to conclude that there was a reservation of a prior right of action against the grantee and that any previously existing claims were not transferred by the agreement.)
- Existing Property
• Apple Computer Inc. v. Microsoft Corp., 35 F3d 1435 (9th Cir. 1994) (license not limited to product license referring to Windows 1.0 as a whole, but to various display elements from that product in any form).
• CRC Press, LLC v. Wolfram Research, Inc., 57 U.S.P.Q.2d 1220 (CD Ill. 2001) (Transfer of copyright in the “work” defined as a manuscript for a print published encyclopedia also covered copyright in a pre-existing web site where the site’s text was virtually identical to the manuscript and, in context, no reasonable commercial effect could be shown without having the grant cover this; thus, author of book and web site was guilty of infringement by continuing to do the site).
• Intel Corp. v. VIA Techs., Inc., 319 F.3d 1357 (Fed. Cir. 2003) (Where there is ambiguity as to the meaning of contract terms, the principal of contra proferentem requires that the agreement be construed against a party who drafted the contract and offered it on a “take it or leave it” basis without meaningful negotiations. Where patentee/licensor drafted license agreement, had complete control over the language of its terms, and offered the reciprocal license on a “take it or leave it” basis without the possibility of negotiations, ambiguity as to the scope of the license arising from the varied use of the words “required by” had to be resolved against patentee/licensor and interpreted to mean that otherwise infringing activity was protected by the license agreement and that directions for increasing volume and speed of communications between computer components were included within reciprocal royalty free patent license despite claim by patentee and drafter of license that method was optional feature not covered by license, which was confined to "baseline" features.). - Future Property or Property in Transition
• FutureSource LLC v. Reuters Ltd., 312 F.3d 281 (7th Cir. 2002), cert. denied, 123 S.Ct. 1769 (2003) (Where licensor merely promised to license data specified in licensing agreement to licensee as and when those data were created, even if licensee’s interest or license in debtor’s intellectual property was not extinguished by the sale of debtor’s assets pursuant to bankruptcy court’s order, licensee had no license in data that debtor, or purchaser of debtor’s assets, had not yet created.)
• Intergraph Corp. v. Intel Corp., 241 F3d 1353 (Fed. Cir. 2001) (Scope of cross-licensing agreement determined under ordinary contract interpretation principles; grant to manufacturer of licenses for purchaser of computer firms patents, and for applications which when issued would become patents of the purchaser, did not apply to pending patent applications that had been submitted by division of computer firm, where purchaser had agreed that division, including applications, would be assigned to a separate company).
• State Contracting & Eng’g Corp. v. Florida, 258 F.3d 1329 (Fed. Cir. 2001) (A license is a contract and is governed by ordinary principles of state contract law. Thus, where State drafted contract, which allegedly gave rise to a license of patent rights, Florida law required that such a contract be construed against the State as the drafter of such contract. Where contract between highway construction company and State provided that State would have the right to use construction companies’ data contained in its proposal for State’s future contracts, did not bar the contractor from securing a patent in the invention of walls described in the proposal, and did not explicitly convey any patent rights in construction companies’ design and manufacturing method for sound barrier walls.) - Property with Multiple Manifestations
• AccuSoft Corp. v. Palo, F.3d , 2001 WL 38437 (1st Cir. 2001) (transfer of rights included code underlying a program but not right to sell the program under its original name.).
• Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1983) (Purchasers of master tapes containing musical recordings did not thereby obtain a license to mechanically reproduce the tapes.)
• Playboy Enterprises, Inc. v Dumas, 831 F. Supp. 295 (S.D.N.Y. 1993), aff’d in part and rev’d in part 53 F.3d 549 (2d Cir. 1995), which involved a painting, as standing for the proposition that the failure to use the word “copyright” or similar language referring to intellectual property rights created an issue as to what the intent of the parties was to transfer such rights in an otherwise unambiguous absolute transfer.
• Shugrue v. Continental Airlines, Inc., 44 U.S.P.Q. 2d 1343 (S.D.N.Y. 1997) (transfer of “all right, title and interest” in a specified item laden with intellectual property may or may not cover all of the copyrights, depending on whether the reference is to software or other “intangible” information assets or tangible items. However, according to the court, while using the language “all right, title, and interest” in a transaction relating to paintings and other tangible items protected by copyright that are sold in consumer settings that may not convey the underlying copyrights, but just rights in a copy, the use of such broad language in a non-consumer setting involving software conveyed copyrights and copy. (court noted that Friedman v. Stacey Data Processing Servs., Inc., 17 U.S.P.Q. 2d 1858 (N.D. Ill. 1990) was contrary.)
• Relational Design & Technology, Inc. v. Brock, 1993 WL 191323 (D. Kan. May 25, 1993) (not reported in the Federal Supplement). (Refund provision of a development contract “in the event that the programs are not completed or not completed on a timely basis” then 50 percent of all monies paid shall be refunded, and source code shall become the sole property of [RDT, the developer].” Court held that this language left the copyright in the software in the customer, giving the developer ownership only of the copy of the source code. reful in identifying whether a copy or copyright is being transferred and who the owner of the copyright is. - New Technology: Motion Pictures, Video and Television
• Bartsch v. Metro Goldwyn Mayer, Inc., 391 F2d 150 (2d Cir.)cert. denied, 393 US 826 (1968) (broad conveyance of motion picture rights encompassed all uses that might reasonably fall within the medium described by the license).
• Ventura v. Titan Sports, Inc., 65 F.3d 725, 731 (8th Cir. 1995) (videotape sales of wrestling performances held not to be covered by a license as to televised live performances; the court looked to industry practice at the time of the license and the absence of discussions concerning the contemplated use).
• Rey v. Lafferty, 990 F.2d 1379, 1390 (1st Cir.), cert. denied, 114 S. Ct. 94 (1993) (opportunity to negotiate fairly presented).
• Cohen v. Paramount Pictures Corp., 845 F.2d 851 (9th Cir. 1988).
• Tele-Pacific, Inc. v. Grainger, 168 A.D. 2d 11, 570 N.Y.S. 2d 521, 524 (N.Y. App. Div. 1991) (“Tele-Pac”) (Despite the broad reference to media that would become known, the clause still referred to “broadcasting by television or any other similar device.” This allowed the court to focus on the word “broadcasting,” and as with the Cohen court to conclude that broadcasting by television was completely different technically from display by videocassette.)
• Bourne v. Walt Disney Co., 68 F.3d 621, 630 (2d Cir. 1995).
• Boosey & Hawkes, Music Publishers, Inc. v. Walt Disney Co., 46 U.S.P.Q 2d 1577 (2d Cir. 1998).
• Bloom v. Hearst Entertainment, Inc., 33 F.3d 518 (5th Cir. 1994) (book publishing contract that granted the publisher exclusive worldwide motion picture and television rights included home video rights. The court applied New York common law rules of contract interpretation, noting that the burden was on the authors to reserve video rights to their book, if that was their intent). - Coverage of Digital Uses
• Bruce v. Weekly World News, Inc., 310 F3d 25 (1st Cir. 2002) (Internet was a separate medium, distinct from print media requiring a separate license for use on the Internet)
• Chambers v. Time Warner, Inc., 2000 WL 1793214, F.Supp.2d (SD NY 2000) (the court held that contracts made in the 1950’s and 1960’s between musicians and record companies assigned the musicians' copyrights in digital versions of recordings to record companies. The key language, in this court’s view was that the contracts referred to recordings “made by any method now known, or hereafter to become known.”)
• Faulkner v. Mindscape, Inc., 2005 WL 503652, F3d (2nd Cir. 2005) (Revision privilege; contracts do not negate digital version, although include searchability features that did not appear in print version, essentially presented underlying works to users in same context as in original versions of magazine)
• FurryRecords, Inc v. Realnetworks, Inc., 2002 WL 2005812 (S.D.N.Y. 2002). (Licensing agreement between musical artist and licensee promotional company provided that licensor granted licensee the nonexclusive right to sell, distribute, and otherwise exploit recordings; “open ended right” under the contract to “otherwise exploit” such material permitted the defendant to encode such works into MP3 format and, therefore, did not constitute infringement despite artists claim that the licensing agreement did not expressly provide for copying per se.)
• Random House, Inc. v. Rosetta Books, LLC, 283 F3d 490 (2d Cir. 2002) (Assignment or license of book rights did not cover e-books; “To be sure, there is some appeal to appellant's argument that an "ebook" a digital book that can be read on a computer screen or electronic device, is simply a "form" of a book, and therefore within the coverage of appellant's licenses. But the law of New York, which determines the scope of Random House's contracts, has arguably adopted a restrictive view of the kinds of "new uses" to which an exclusive license may apply when the contracting parties do not expressly provide for coverage of such future forms.”)
• Silvester v. Time Warner, Inc., 763 N.Y.S.2d 912 (NY Cnty. 2003) Scope of license covered digitalization of works
• SMC Promotions, Inc. v. SMC Promotions, 355 F.Supp2d 1127 (CD Cal. 2005) (Online infringement; party could not protect its infringing use by relying on licensee of copyright owner to post images; linking here could be infringement)
• The Rodgers and Hammerstein Organization v. UMG Recordings, Inc., 8 ILR (P&K) 3107 (SD NY 2001) (License for use of a song from the Harry Fox Agency in a designated format did not authorize use in a different format and, thus, did not authorize use of the work in a streaming distribution over the Internet. The court distinguished this from a compulsory license under 17 USC 115.)
• Threshold TV, Inc. v. Monowise, Ltd., 2004 WL 2348553 (Cal. App. 2004) (Interpretation issue re scope of grant for online activities in license as applied to offline; prevents dismissal on pleadings) - Upgrades
• Advisory Information & Management Sys., Inc. v. Prime Computer, Inc., 598 F. Supp. 76 (MD Tenn. 1984) (not breach dealer agreement by supplying obsolete product).
• Allen Myland, Inc. v. IBM, 693 F. Supp. 262 (ED Pa. 1988) (no antitrust tying where single price system for all upgrades)
• Bell Atlantic Meridian Sys. v. Octel Communications Corp., 1995 WL 707916, No. Civ. A. 14348 (Del. Ch. Nov. 28, 1995) (contract allowed distributor after termination to receive “new systems” if the distributor had binding obligations to provide such systems or the systems are reasonably necessary to maintain a relationship with particular existing customers; court held that the term “new systems” was ambiguous, but that on the preponderance of the evidence it did not cover successor systems.).
• Computer Place, Inc. v. Hewlett Packard Co.607 F. Supp. 822 (ND Cal. 1984) (not required in dealer agreement to provide new models)
• Microsoft Corp. v. Manning, 1995 WL 669604, No. 06 95 00058 CV (Tex. App. Nov. 13, 1995).
• Apple Computer Inc. v. Microsoft Corp., 35 F3d 1435 (9th Cir. 1994) (license not limited to product license referring to Windows 1.0 as a whole, but to various display elements from that product in any form).
• Bartsch v. Metro Goldwyn Mayer, Inc., 391 F2d 150 (2d Cir.)cert. denied, 393 US 826 (1968) (broad conveyance of motion picture rights encompassed all uses that might reasonably fall within the medium described by the license).
• Broadcast Music, Inc. v. 84-88 Broadway, Inc., 942 F. Supp. 225, 230-231 (D.N.J. 1996) (sublicense to play background music did not allow licensee to have live or other performances of the same music).
• Fred Ahlert Music Corp. v. Warner/Chappel Music, Inc., 155 F3d 17 (2d Cir. 1998) (License granting right to make and distribute derivative work music as a record did not give a right to use the music in a motion picture.
• PlayMedia Systems, Inc. v. America Online, Inc., 171 F.Supp2d 1094 (CD Cal. 2001) (Licensee likely exceeded scope of software license where it used the audio decoding software in connection with a different type of audio system than that indicated in the license).
• The Rodgers and Hammerstein Organization v. UMG Recordings, Inc., 8 ILR (P&K) 3107 (SD NY 2001) (License for use of a song from the Harry Fox Agency in a designated format did not authorize use in a different format and, thus, did not authorize use of the work in a streaming distribution over the Internet. The court distinguished this from a compulsory license under 17 USC 115.)
• Shugrue v. Continental Airlines, Inc., 44 U.S.P.Q. 1343, 1349 (S.D.N.Y. 1997) (language providing for a “non-transferable license to use and to allow other parties to use for its benefit all such programs and software” would only allow the licensee to use for its own benefit, not to allow commercial exploitation in competition with the licensor).
E. Reservation of Rights by Licensor
• Accolade, Inc. v. Distinctive Software, Inc., 1990 Copyright L. Dec. ¶ 26,612 (ND Cal. 1990) (reservation of library rights)
• Bloom v. Hearst Entertainment, Inc., 33 F.3d 518 (5th Cir. 1994) (book publishing contract that granted the publisher exclusive worldwide motion picture and television rights included home video rights. The court applied New York common law rules of contract interpretation, noting that the burden was on the authors to reserve video rights to their book, if that was their intent).
• Golden Voice Tech. Training, L.L.C. v. Rockwell Elec. Commerce Corp., 267 F.Supp.2d 1178 (M.D. Fla. 2003) (patent license was limited to a non-exclusive license to make, use, or sell licensed products, or devices using licensed methods, incorporating a prerecorded response system for telephone operators, if and only if the number of prerecorded response messages accessible by an operator at any operation position did not exceed six. Licensee’s products were not within scope of license where such products were capable of recording and playing back more than six messages. More than six messages were capable of being recorded and played back, and therefore were “accessible” within the meaning of license agreement; the fact that customers did not choose to use more than six messages was irrelevant.)
• Random House, Inc. v. Rosetta Books, LLC, 283 F3d 490 (2d Cir. 2002) (Assignment or license of book rights did not cover e-books)
• SAPC, Inc. v. Lotus Development Corp., 921 F2d 360 (1st Cir. 1990) (“party seeking to deviate from the terms of a broad and general conveyance [such as this] has the burden of proving the asserted specific exception.” The grantor failed to show any basis to conclude that there was a reservation of a prior right of action against the grantee and that any previously existing claims were not transferred by the agreement.)
F. Digital Enforcement of Scope: DMCA 1201
• 321 Studios v. Metro Goldwyn Mayer Studios, Inc., 307 F.Supp2d 1085 (ND Cal. 2004) (Provider of DVD copying software violated DMCA)
• Agfa Monotype Corp. v. Adobe Sys. Inc., - F.Supp.2d - (ND Ill. 2005) (Embedded license terms are not a DMCA control device)
• Davidson & Assoc. v. Jung, 2005 WL 2095970 (8th Cir. 2005) (shrinkwrap license enforceable; no preemption of no reverse engineering clause contained in the license - licensee waive fair use privilege; requiring code to use online version of game was a DMCA device wrongly circumvented by reverse engineering to create duplicative online system)
• Edelman v. N2H2, 263 F. Supp.2d 137 (D 2003) (No right or privilege to reverse engineer Internet filtering software)
• Micro Data Base Sys., Inc. v. State Bank of India, 177 F.Supp.2d 881 (N.D. Ind. 2001) Where license required licensee, prior to distributing software, to purchase tokens for such software and attach the tokens to the software to be distributed, licensee breached license agreement by failure to comply with such provision.
• Pearl Investments, LLC v. Standard I/O, Inc., 257 F.Supp.2d 326 (D Me 2003) (DMCA violated re VPN and developer service K no warranty)
• Static Control v. Lexmark, 387 F.3d 522 (6th Cir. 2004) (No DMCA violation; plaintiff explicitly restricted the use of third-party toner cartridge refills for customers opting to buy toner cartridges at a discount under a shrinkwrap agreement but control system not qualify under DMCA because code could be access through memory dump without circumventing restrictions)
• Storage Technology Corp. v. Custom Hardware Engineering & Consulting, Inc., F.3d , 2005 WL 2030281 (Fed. Cir. 2005) (no DMCA violation for circumventing code that barred access to maintenance code since access did not facilitate or involve infringement; although use of code not licensed, code was not copies as a result of access (it was already in memory) and use was permitted via Section 117c)
• Geoscan, Inc. of Texas v. Geotrace Technologies, Inc., 226 F.3d 387 (5th Cir. 2000) (the court of appeals reversed a summary judgment when it was faced with a software license that provided for use of the software on designated units, but referred to an attachment that was never completed. This agreement was, according to the court, ambiguous as to the scope of the license.)
• Beckman Instruments, Inc. v. Cincom Systems, Inc., 232 F.3d 893 (9th Cir. 2000) (Non-assignment clause enforced; “We have rejected the argument that license agreements permit that which they do not prohibit. Moreover, although Beckman was entitled to "use" the software, that did not give it the right to authorize others to copy the software, even on its behalf. The License Agreement not only regulated how the software could be used, it also specified who could use it.”
• Intel Corp. v. Broadcom Corp., 173 F. Supp2d 201 (D. Del. 2001) (Court held that issues of fact precluded summary judgment on issue of whether an alleged patent infringer made the products pursuant to requests from a licensee of the patent owner in a manner that placed them within the "have made" rights granted under that license. The court noted that this type of license does not give the licensee a right to validate prior, infringing acts by purchasing already manufactured products.)
• Marvel Enterprises, Inc. v. World Wrestling Federation Entertainment, Inc., 610 S.E.2d 583 (Ga. App. 2005) (License did not apply to wrestlers that appeared on programs produced by assignee of agreement.)
• ITOFCA, Inc. v. MagaTrans Logistics, Inc., 322 F.3d 928 (7th Cir. 2003) Copyright license to prepare a derivative work does not authorize the preparer/licensee to sell copies of it; making and selling are distinct rights under § 106; “[a] mere copyright licensee is permitted only to make a single copy, and that for his own use only, not for sale to another.”
• Liu v. Price Waterhouse LLP, 302 F.3d 749 (7th Cir. 2002), cert. denied, 123 S.Ct. 2640 (2003) (Licensor owned derivative works created by licensee where license involved delivery of code to licensee to be translated and modified by it for licensor and provided that source code was owned by licensor; contract precluded ownership or registration of copyright by licensee)
J. Restrictions on Distribution and Resale
• Microsoft Corp. v. Harmony Computers & Electronics, Inc., 846 F. Supp. 208 (E.D.N.Y. 1994) (transfer of copy outside scope of license makes remote purchaser liable for infringement)
• Microsoft Corp. v. Maryland Micro.com, Inc., 2003 WL 21805213 (D. Md. 2003) (Redistributor liable for infringe re acquired from unauthorized parties)
• Novell, Inc. v. Unicom Sales, Inc., 2004 WL 1839117 (ND Cal. 2004) (Distribution licenses were licenses, rather than first sales; agreements in box enforceable; no bfp re copyright licenses)
• Symantec Corp. v. CD Micro, inc., 286 F.Supp.2d 1265, 1270-72 (D. Ore. 2003) (No first sale where distributor acquired from unauthorized replicator; first sale doctrine does not apply to copies illegally obtained)
• MAI Sys. Corp. v. Peak Computer, Inc., 991 F2d 511 (9th Cir. 1993) (software license restriction to personal internal use enforced; copying program within memory was infringement).
• Shugrue v. Continental Airlines, Inc., 44 U.S.P.Q. 1343, 1349 (S.D.N.Y. 1997) (language providing for a “non-transferable license to use and to allow other parties to use for its benefit all such programs and software” would only allow the licensee to use for its own benefit, not to allow commercial exploitation in competition with the licensor).
SECTION 7: Royalties and License Fees
• Auto-Chlor Sys. Of Minnesota, Inc. v Johnsondiversy, 328 F.Supp.2d 980 (D. Minn. 2004) (In Dealer agreement involving trademark, UCC rule applied to open price term)
• Beanstalk Group, Inc. v. AM Gen. Corp., 283 F.3d 856 (7th Cir. 2002) (Where contract designated the marketer as exclusive representative for licensing the mark, and entitled marketer to 35 percent of the gross receipts received under any license made during the period of such representation, marketer was not entitled to a percentage of the consideration furnished to trademark owner under a joint venture agreement transferring the mark along with most of owner’s business associated with the mark. Marketer’s position that such joint venture agreement was covered would be an unreasonable construction of the contract and conflicted with other terms which implied that marketer was to only receive a percentage on licensing agreements it negotiated, not contracts entered into without any contribution by marketer.)
• Board of Trustees of Leland Stanford Junior University v. CLSI Publications, 2003 WL 22671552 (SD NY 2003) (Conversion claim will not lie for failure to pay license royalties in book and software contract)
• Creative Transaction Corp. v. Monroe Allen Publishers, Inc., 2004 WL 60291 (S.D. N.Y. 2003) (Fact issue on meaning of contract regarding entitlement to royalties from Asian sales)
• Evans v. Famous Music Corp., 754 N.Y.S.2d 259 (N.Y. App. Div. 2003) Where express language delineated all royalties in which plaintiffs were entitled to share, defendant did not breach an obligation to reimburse them for a proportional share of monies recouped from credits defendant received against payment of foreign taxes because the contracts did not identify foreign tax credits as part of shared benefits.
• Grant v. Pharmacia & Upjohn Co., 314 F3d 488 (10th Cir. 2002) license was either unambiguous, or would be interpreted to have royalties end on expiration of rights
• Morrone Co. v. Barbour, 241 F.Supp2d 683 (SD Miss. 2002) (In a patent license, fraud conceal sales re royalties was not basis for conversion claim. Breach of contract only)
• Pragmatic C Software Corp. v. Antrim Design Systems, Inc., 2003 WL 244804 (D Minn. 2003) (No right to not pay royalties and continue to use or transfer the software)
• Scheiber v. Dolby Laboratories, Inc., 293 F3d 1014 (7th Cir. 2002) (Court protests, but enforces rule that royalties beyond term of patent are invalid)
• Springwall, inc. v. Timeless Bedding, Inc., 207 F.Supp.2d 410 (MD NC 2002) (Assignment of right to royalties did not relieve licensee of duty to perform)
• U.S. v. Broadcast Music, Inc., 426 F.3d 91 (2nd Cir. 2005) (Judicially established royalty rate for performing rights licensing organization vacated)
• Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969), on remand, 418 F.2d 21 (7th Cir. 1969), cert. granted, 397 U.S. 979 (1970), rev’d, 401 U.S. 321 (1971), reh’g denied, 401 U.S. 1015 (1971) (conditioning patent license on royalties based on other non-patented products constitutes misuse)
• Administrators of Tulane Educational Fund v. Debio Holding, S.A., 60 USPQ2d 1901 (ED La. 2001) (Agreement to pay royalties beyond expiration of patent term was unlawful per se.)
• Brulotte v. Thys Co., 379 U.S. 29, 33, 85 S.Ct. 176, 179, 13 L.Ed.2d 99 (1964) (exacting royalties that go beyond the length of a patent term is misuse).
• Grant v. Pharmacia & Upjohn Co., 314 F3d 488 (10th Cir. 2002) (license was either unambiguous, or would be interpreted to have royalties end on expiration of rights)
• Scheiber v. Dolby Laboratories, Inc., 293 F3d 1014 (7th Cir. 2002) (Court protests, but enforces rule that royalties beyond term of patent are invalid)
• Gil Enterprises, Inc. v. Delvy, 38 U.S.P.Q. 2d 1042 (2d Cir. 1996). Delvy was too mild in his letters seeking records, and thus his correspondence was insufficient to the task of being a “written demand” under the terms of a contract. The court acknowledged “a demand for accounting need not use the specific language ‘demand’ to trigger the contracting parties’ respective rights and obligations.” Nonetheless, a distinction had to be made between “a demand and a mere request.” The court reasoned that since a demand required by a contract “is intended to trigger certain rights and obligations[,] ... to prompt such rights and obligations, it is necessary that the party upon whom the demand is being made be put on notice that those legal obligations had been triggered” so that the allegedly breaching party would have its “opportunity to cure” provided by the contract )
• Iza Music Corp. v. W&K Music Corp., 46 U.S.P.Q. 2d 1731, 1732 (S.D.N.Y. 1998) (suit for accounting of copyright royalties is a state law action).
E. Most Favored Licensee Clauses
• Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F3d 9 (1996) (Clause in patent license not applicable to the facts)
• Arbitron, Inc. v. Traylyn Broadcasting, Inc., 400 F3d 130 (2nd Cir. 2005) (Royalty escalation at option of licensor was enforceable; not agreement to agree, but a contract right)
G. Breach of Royalty Obligation
• Igen Int’l, Inc. v. Roche Diagnostics GMBH, 335 F.3d 303 (4th Cir. 2003) Failure to pay royalties constituted a material breach of license agreement where royalty payments were the chief benefit for which licensor bargained.
• Broadcast Music, Inc. v. Hirsch, 104 F.3d 1163 (9th Cir. 1996) (Assignment of royalties under a copyright license was not a transfer of the copyright and, thus, was not required to be registered with the copyright office.)
• Springwall, inc. v. Timeless Bedding, Inc., 207 F.Supp.2d 410 (MD NC 2002) (Assignment of right to royalties did not relieve licensee of duty to perform)
SECTION 8: Warranties
Part I. Implied Warranties
A. General Rule: No Implied Warranties
B. Title-Related Implied Warranties
• Chemtron, Inc. v. Aqua Products, Inc., 830 F. Supp. 314 (E.D. Va. 1993), held that the implied warranty did not entitle an alleged infringer to impose liability on the original seller of non-infringing component parts, since those parts were not subject to infringement claims when delivered.
• M&A Assocs., Inc. v. VCX, Inc.657 F. Supp. 454 (ED Mich. 1987) (failed formalities leads to breach of title warranty).
C. Implied Warranties of Quality
- Informational Content
• Remsburg v. Docusearch, Inc., 816 A2d 1001 (NH 2003) (Liability for data revealed to customer under concept of negligence)
• Cubby, Inc. v. CompuServ, Inc., 3 CCH Computer Cases 46,547 (S.D.N.Y. 1991) (no warranty or obligation)
• Daniel v. Dow Jones & Co., Inc., 520 N.Y.S. 2d 334 (N.Y. City Ct. 1987) (no warranty in online information service) - Services
• Burke v. Union Pacific Resources Co., 2004 WL 813289, SW3d – (Tex. App. 2004) (“seismic testing” in standard practices clause of agreement with property owners created express warranty that would do it in prudent manner)
• Commonwealth Utilities Corp. v. Goltens Trading & Engineering PTE, Ltd., 313 F3d 541 (9th Cir. 2002) (Designer of generator was not negligent)
• K & D Distributors, Ltd v. Aston Group (Michigan), Inc., 354 F.Supp2d 761 (ND Ohio 2005) (issue of fact whether software provider breached express warranty to perform all work in a professional manner) - Goods: Merchantability Warranty
D. Disclaimers of Implied Warranty
• State v. DVM Enterprises, Inc., 275 Kan. 243, 62 P3d 653 (Kan. 2003) (Disclaimers online not unconscionable)
Part II. Express Warranties
E. Express Warranties in General
- Express Title-related Warranties
• International Minerals & Chem. Corp. v. Avon Prods., Inc., 889 SW2d 111 (Mo. App. 1995)( contractual indemnity relating to patent infringement claims did not apply to claims arising after the sale of a company that was actually engaged in the infringing conduct.)
• Schlaifer Nance & Company v. Estate of Andy Warhol, 1997 U.S. App. LEXIS 17901 (2d Cir. 1997) (express warranty re title; some of Warhol works were in public domain so Warhol Estate’s license was invalid).
• Sherman v. Bell Atlantic, 43 U.S.P.Q. 2d 1024 (S.D.N.Y. 1996) (a musician’s photograph was used in a commercial; advertising agency obtained photo from photographer who did not have a release granting right to use; court ignored express language in photographer’s “Terms of Delivery”; held: the presence of the warranty absolved defendant ad agency, Bell Atlantic and magazines from exemplary damages under a New York statute relating to unpermitted uses of likeness, at least as to uses prior to notice from plaintiff that use was not authorized).
• VRT, Inc. v. Dutton-Lainson Co., 530 N.W.2d 619 (Neb. 1995) (seller barred from enforcing a claim for unpaid royalties under a contract for the purchase and sale of health patient care equipment because he had promised, but falsely, to make a timely filing of a patent application relating to the property; the fact that the delayed filing resulted in denial of the patent and put the inventions in the public domain meant that the vendor did not substantially perform). - Express Quality Warranties
• Berlyn Inc. v. The Gazette Newspapers, Inc., 73 Fed.Appx. 576, 2003 WL 21958335 (4th Cir. 2003) (Lack of quality allowed termination of exclusive rights agreement)
• Burke v. Union Pacific Resources Co., 2004 WL 813289, SW3d – (Tex. App. 2004) (“seismic testing” in standard practices clause of agreement with property owners created express warranty that would do it in prudent manner)
• Chastant v. Oasys Imaging, inc., 2003 WL 751457 (La. App. 2003) (purchaser of imaging system entitled to rescission, not mere reduction in price, where vendor breached assurances that imaging equipment would be compatible with buyers system)
• K & D Distributors, Ltd v. Aston Group (Michigan), Inc., 354 F.Supp2d 761 (ND Ohio 2005) (issue of fact whether software provider breached express warranty to perform all work in a professional manner)
• Microsoft Corp. v. Manning, 1995 WL 669604, No. 06 95 00058 CV (Tex. App. Nov. 13, 1995) (interprets express warranty in software license)
• Valeo Intellectual Property, Inc. v. Data Depth Corp., 368 F.Supp.2d 1121 (WD Wash. 2005) (Breach of license re format of link)
SECTION 9: Other Selected Terms and Issues
• AGT International, Inc. v. Level 3 Commun., LLC., 2002 WL 31409879 (S.D. Ohio 2002) (Term of license conflicting and ambiguous; holds its perpetual based on trade use)
• Armstrong Business Services, Inc. v. H & R Block, 96 SW3d 867 (Mo. App. 2003) (Duration of franchise agreement; not perpetual but ongoing 5 year renewals)
• Astrolabe, Inc. v. Esoteric Technologies Opty, Inc., 2002 WL 511520 (D. Mass. 2002) (No prohibition on duration being set explicitly for the term of the copyright, including any renewals)
• Fluorine on Call, Ltd v. Fluorogas, Ltd., 2004 WL 1775988, F3d (5th Cir. 2004) (Exclusive license without duration term was terminable at will, but court implied reasonable term where licensee had investment)
• Haynes Trane Service Agency, inc. v. American Standard, Inc., 2002 WL 1972281 (10th Cir. 2002) (Contracts for indefinite term are terminable at will, even in franchise contract)
• Lulirama Ltd. v. Axcess Broadcast Services, Inc., 44 U.S.P.Q. 2d 1731 (5th Cir. 1998) (rejected the idea that an implied licensor “had a unilateral right of recession without notice; to hold otherwise thought the court, would be nothing more than given sanction to an illusory promise; which the courts do not presume parties intend.
• Made2Manage Systems, Inc. v. ADS Information Systems, Inc., 2003 WL 21508235 (SD Ind. 2003) (Reseller license not terminable at will; discusses standards)
• P.C. Films Corp. v. MGM/UA Home Video, Inc., 45 U.S.P.Q. 2d 1850 (2d Cir. 1998) (“perpetual” exclusive right to distribute a motion picture terminated included a conveyance of the renewal right with reference to the copyright; court declines to answer whether extension beyond the renewal term of the copyright raises federal copyright policy problems)
• Rano v. Sipa Press, Inc., 987 F.2d 580 (9th Cir. 1993) (under state law, license can be terminated at will, but this is preempted for a copyright license by language regarding licensor right to terminate license after a given number of years)
• Scholastic Entertainment v. Fox Entertainment, -- F3d – (9th Cir. 2003) (State law governed whether license for television series was terminated where license had a definite term)
• Sensormatic Security Corp. v. Sensormatic Electronic Corp., 249 F.Supp.2d 703 (D Md. 2003) (Franchise license not terminable at will)
• Ticketron Ltd. Partnership v. Flip Side, Inc., 1993 WL 214164 (N.D. Ill. June 17, 1993) (shutdown of access was permitted under Illinois law because the relationship between the parties was based on a license, which Illinois law treats as being subject to termination at will by the licensor—even in the face of a stated term.)
- Absence of Agreed Terms
• Fluorine on Call, Ltd v. Fluorogas, Ltd., 2004 WL 1775988, F3d (5th Cir. 2004) (Exclusive license without duration term was terminable at will, but court implied reasonable term where licensee had investment)
• Haynes Trane Service Agency, inc. v. American Standard, Inc., 2002 WL 1972281 (10th Cir. 2002) (Contracts for indefinite term are terminable at will, even in franchise contract) - Express Terms on Duration
• AGT International, Inc. v. Level 3 Commun., LLC., 2002 WL 31409879 (S.D. Ohio 2002) (Term of license conflicting and ambiguous; holds its perpetual based on trade use)
• Armstrong Business Services, Inc. v. H & R Block, 96 SW3d 867 (Mo. App. 2003) (Duration of franchise agreement; not perpetual but ongoing 5 year renewals)
• Astrolabe, Inc. v. Esoteric Technologies Opty, Inc., 2002 WL 511520 (D. Mass. 2002) (No prohibition on duration being set explicitly for the term of the copyright, including any renewals)
• FurryRecords, Inc v. Realnetworks, Inc., 2002 WL 2005812 (S.D.N.Y. 2002) Under New York law, contract is terminable at will only if (i) there is no fixed or determinable duration and (ii) there is no express agreement that the duration is perpetual. This agreement was not terminable at will because it expressly stated that licensee’s right to recordings would last ‘in perpetuity’ unless terminated by mutual consent.
• Ameritech Info. Sys., Inc. v. Bar Code Res., 331 F.3d 571 (7th Cir. 2003) Where provision in contract governing termination required written notice to defaulting party in order for non-breaching party to cancel the agreement, fax sent by non-breaching party substantially complied with such notice requirement.
• Blue Cross & Blue Shield Mutual of Ohio v. Blue Cross and Blue Shield Ass’n, 110 F.3d 318 (6th Cir. 1997) (good faith not applicable re enforcing automatic termination clause).
C. Assignability of Contract Rights
- Absent Contract Term
• In re Alltech Plastics, Inc., 5 U.S.P.Q.2d 1806 (Bankr. W.D. Tenn. 1987) (Section 365(c) precluded an entity, which had acquired the corporate debtor’s stock pursuant to a chapter 11 reorganization plan, from exercising the debtor’s rights under a prepetition patent license.)
• In re Catapult Entertainment, Inc., 165 F.3d 747 (9th Cir. 1999) Debtor in possession (DIP) may not assume executory contract over nondebtor's objection if applicable law would bar assignment to hypothetical third party, even where DIP has no intention of assigning contract in question to any such third party. In this case, federal patent law made the nonexclusive patent licenses personal and nondelegable, thus barring debtor from assuming patent licenses without licensor's consent.
• E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1114 (Del.1985) (rights conveyed by nonexclusive patent license are personal to licensee and not susceptible to sublicensing unless specific permission given).
• Eisner Computer Solutions, LLC v. Gluckstern, 2002 WL 501503 (NYAD 2002) (Default rule – covenant not to compete is assignable)
• Everex Sys., Inc. v. Cadtrak Corp. (In re CFLC, Inc.), 89 F.3d 673, 679 80 (9th Cir.1996) (federal patent law of nonassignability preempts state law relating to patent license assignability; prevents assumption or assignment of the license in bankruptcy; a license is an executory contract)
• Gardner v. Nike, Inc., 2002 WL 123296 (9th Cir. 2002) (Exclusive copyright license was not transferable without consent)
• Gilson v. Republic of Ireland, 787 F.2d 655, 658 (D.C.Cir.1986) ("It is well settled that a non exclusive licensee of a patent has only a personal and not a property interest in the patent and that this personal right cannot be assigned unless the patent owner authorizes the assignment or the license itself permits assignment.”)
• In re Golden Books Family Entertainment, 269 BR 311 (Bankr.D. Del. 2002) Rejects Nike analysis and holds that exclusive copyright license was transferable without consent.
• Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1983) (copyright license is not transferable and does not become part of bankruptcy estate) (Purchasers of master tapes containing musical recordings did not thereby obtain a license to mechanically reproduce the tapes.)
• Institut Pasteur v. Cambridge Buiotech Corp., 104 F.3d 489 (1st Cir. 1997) (Chapter 11 reorganized debtor was not different entity from that with which patent holder entered into licensing agreement, so that federal common law and contractual restrictions against assignment of patent licenses did not preclude assumption of license by Chapter 11 debtor in possession.)
• Motorola, Inc. v. Armkor Technology, Inc., 2004 WL 1195458 (Del. 2004) (court admits parol evidence to determine whether transaction treated as an assignment or a license for purposes of contract restrictions on transfer of rights under other contract)
• In re Nedwick Steel Co., Inc., 289 BR 95 (Bankr. ND Ill. 2003) (Cannot assign exclusive dealing agreement to a competitor)
• Stenograph Corp. v. Fulkerson, 972 F.2d 726, 729 n. 2 (7th Cir.1992) ("Patent licenses are not assignable in the absence of express language.")
• Unarco Industries, Inc. v. Kelley Co., 465 F.2d 1303, 1306 (7th Cir.1972) ("[T]he question of assignability of a patent license is a specific policy of federal patent law dealing with federal patent law. Therefore, we hold federal law applies to the question of the assignability of the patent license in question."), cert. denied, 410 U.S. 929, 93 S.Ct. 1365, 35 L.Ed.2d 590 (1973). - License Terms on Assignment
• Accusoft Corp. v. Mattel, Inc., 117 F.Supp.2d 99 (D. Mass. 2000) (Software license precluded assignment without the prior consent of the licensor. After the license was created, the licensee was taken over by first one company and then another. In neither case was there a request for or consent to the transfer. Court granted a preliminary injunction against Mattel, the ultimate parent of the original licensee, since the license gave no rights to Mattel and its use of the software constituted infringement.)
• Beckman Instruments, Inc. v. Cincom Systems, Inc., 232 F.3d 893 (9th Cir. 2000) (Non-assignment clause enforced; “We have rejected the argument that license agreements permit that which they do not prohibit. Moreover, although Beckman was entitled to "use" the software, that did not give it the right to authorize others to copy the software, even on its behalf. The License Agreement not only regulated how the software could be used, it also specified who could use it.”
• Bridgeport Music, Inc. v. Dimension Films, LLC, 230 F.Supp.2d 830, 65 USPQ2d 1119 (MD Tenn. 2002) (License gave right to relicense music and composer’s contribution)
• Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 149 F.Supp.2d 610 (S.D. Ind. 2001) Patent license precluded assignment by the licensee, but allowed transfer with the sale of all of the voting stock or with the sale of substantially all of the assets of the Telectronics Group or as part of any offering of the shares of the Telectronics Group. In 1996, a wholly owned subsidiary of defendant St. Jude Medical, Inc. purchased assets of Teletronics and then transferred those assets to defendant Pacesetter, Inc., which is also a subsidiary of St. Jude. Held: the undisputed facts show that defendants did not purchase ‘substantially all of the assets of Telectronics Group,’ as that term was defined in the license agreement.”
• Cook, Inc. v. Boston Scientific Corp., 333 F.3d 737 (7th Cir. 2003) Buy back arrangement violates license anti-assign clause
• Evolution, Inc. v. Prime Rate Premium Finance Corp., Inc., 2004 WL 1824389 (D. Kan. 2004) (No sum. Judg. on transfer of license during merger; merger law control whether transfer; agree not specify the treatment of merger transfers.)
• First Nationwide Bank v. Florida Software Servs., Inc., 770 F. Supp. 1537 (MD Fla. 1992) (Florida law precludes the licensor from refusing consent to an assignment of rights under a license solely because of its desire to extract a higher license fee where the license itself made provision for consent to the assignment).
• Folgers Architects Ltd. v. Kerns, 633 NW2d 114 (Neb. 2001) (Anti-assignment clause of a contract for architectural services, requiring the owner or architect to obtain written consent for the assignment, did not require the architects to obtain written consent before assigning breach of contract claim against owner because the timing of the transfer would not interfere with the right of a party to determine with whom it contracted.)
• In re Hernandez, 285 B.R. 435, 439-40 (Bkrtcy.D.Ariz. 2002) (“Patent holders have broad discretion in granting licenses and courts have recognized that the rights granted to an exclusive licensee may vest the licensee with an equitable proprietary interest in protecting a patent from infringement. … However, the recognition that an exclusive licensee has a sufficient property interest to give her standing to sue … does not mean she can freely assign her exclusive license. The reason that the holder of an exclusive license’s equitable property interest may not be freely assignable is based on the nature of rights granted under the Patent Act.”)
• Jacobs v. Nintendo of Am., Inc., 370 F3d 1097 (Fed. Cir. 2004) (can’t assign a right and then take steps that render it commercial worthless)
• Micro Data Base Systems, Inc. v. Dharma,, 46 U.S.P.Q. 2d 1922 (7th Cir. 1998) (licensee breached contractual provision precluding transfer without the consent of the licensor). - Bona Fide Purchaser of License
• American Int'l Pictures v. Foreman, 576 F.2d 661, 664 (5th Cir.1978) ("[E]ven an unwitting purchaser who buys a copy in the secondary market can be held liable for infringement if the copy was not the subject of a first sale by the copyright holder. Thus unless title to the copy passes through a first sale by the copyright holder, subsequent sales do not confer good title."; where title has passed, however, "first sale" buyer that becomes owner of copy disregard of restrictions on resale does not make buyer or subsequent buyer an infringer; copyright holder's remedy is suit for breach of contract containing the restrictions)
• Heidelberg Harris Inc. v. Loebach, 43 U.S.P.Q. 2d 1049 (D.N.H. 1997) (exclusive licensee was able to raise defense of “bona fide purchaser for value” against inventor who had assigned his rights to an invention covered by a patent application to the licensor)
• Microsoft Corp. v. Harmony Computers & Electronics, Inc., 846 F. Supp. 208 (E.D.N.Y. 1994) (transfer of copy outside scope of license makes remote purchaser liable for infringement)
• Microsoft Corp. v. Maryland Micro.com, Inc., 2003 WL 21805213 (D. Md. 2003) (Redistributor liable for infringe re acquired from unauthorized parties)
• Novell, Inc. v. Unicom Sales, Inc., 2004 WL 1839117 (ND Cal. 2004) (Distribution licenses were licenses, rather than first sales; agreements in box enforceable; no bfp re copyright licenses)
• Rhone Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002) (No BFP licensee)
• Symantec Corp. v. CD Micro, inc., 286 F.Supp.2d 1265, 1270-72 (D. Ore. 2003) (No first sale where distributor acquired from unauthorized replicator; first sale doctrine does not apply to copies illegally obtained) - Assignment by licensor
• ICEE Distribs., Inc. v. J&J Snack Foods Corp., 325 F.3d 586 (5th Cir. 2003) In a proper assignment of a trademark, the assignee steps into the shoes of the assignor. Where defendant acquired ownership of licensed trademarks from licensor, and continued to license use of the trademarks to distributors, defendant was bound by the same contractual terms relating to the trademarks as original licensor had been during its term of ownership, and, therefore, was deemed to be a party to licensing agreement entered into between predecessor licensor and plaintiff relating to the acquired trademarks.
• Inamed Corp. v. Kuzmak, 2003 WL 32140320 (C.D. Cal.) Patentee’s assignment of patents to another party did not constitute an anticipatory breach of licensing agreement because the assignment occurred after purported licensee filed suit claiming patent invalidity, patent misuse, and breach of the parties’ licensing agreement, indicating that licensee considered the contract terminated.
• Martha Graham School and Dance Found., Inc. v. Martha Graham Center of Contemporary Dance, Inc., 374 F.Supp.2d 355 (S.D.N.Y. 2005) (Choreographer assigned common law copyright in unpublished dances.)
- In a License
• DaimlerChrysler Services, N.A., LLC v. Summit National, Inc., 2005 WL 1994321 (6th Cir. 2005) (Whether there was a copyright violation was not material to contract breach claim; licensee was not owner of a copy)
• DSC Communications v. Pulse Communications, 170 F.3d 1354 (Fed. Cir. 1999) (licensee not owner if license substantially restricts use of program)
• MAI Sys. Corp. v. Peak Computer, Inc., 991 F2d 511 (9th Cir. 1993) (licensees are not owners of copies)
• Mallinckrodt, Inc. v. Medipart, Inc., 976 F2d 700 (Fed. Cir. 1992) (conditional terms of contract)
• Monsanto Co. v. Trantham, 156 F. Supp. 2d 855 (W.D. Tenn. 2001) (Suit over use of cotton and soybean seeds which were subject to a single-use license; “As the Court has already held this licensing agreement to be within the scope of the patent grant, the doctrine of exhaustion does not bar this suit for infringement since the sale of Plaintiff's patented gene technology is expressly conditioned on the signing of the restrictive licensing agreement that prohibits the saving of seed and restricts the use of the seed to a single growing season. Accordingly, Defendant's argument of patent exhaustion does not operate to bar Plaintiff's claims for patent infringement.”)
• Nintendo Co. v. Patten, 71 F3d 353 (10th Cir. 1995) (factual issue on question of copy ownership)
• SOS, Inc. v. Payday, Inc., 886 F2d 1081, 1087 (9th Cir. 1989) (“The literal language of the parties’ contract provides that S.O.S. retains “all rights of ownership.” This language plainly encompasses not only copyright ownership, but also ownership of any copies of the software. Payday has not demonstrated that it acquired any more than the right to possess a copy of the software for the purpose of producing “product” for its customers.”)
• Adobe Systems Inc. v. One Stop Micro, Inc., 84 F. Supp2d 1086 (ND Cal. 2000) (distribution agreement was a license, rather than a sale conveying ownership).
• Adobe Sys., Inc. v. Stargate Software, Inc., 216 F.Supp.2d 1051 (ND Cal. 2002) (Enforces distribution license, follows One-stop holding that distributor did not become owner pursuant to the license)
• Berthold Types Ltd. v. Adobe Sys., Inc., 101 F. Supp. 2d 697 (ND Ill. 2000) (While “a transaction involving a computer program can involve an Article 2 sale of goods . . . an agreement that does not involve a transfer of title cannot be an Article 2 sale in Illinois. . . . A pure license agreement, like the 1997 agreement, does not involve transfer of title, and so is not a sale for Article 2 purposes.”).
• Evolution, Inc. v. SunTrust Bank, -- F.Supp.2d -- (D Kan. 2004) (Fair use entitles licensee to copy portions of source code as needed to acquire own data; Section 117 applies)
• LG Electronics, Inc. v. Asustek Computer, Inc., 248 F.Supp.2d 912 (ND Cal. 2003) (Patent exhaust; first sale not barred by disclaim any authority re use of items sold; not a contract condition)
• Microsoft Corp. v. Maryland Micro.com, Inc., 2003 WL 21805213 (D. Md. 2003) (Redistributor liable for infringe re acquired from unauthorized parties)
• Monsanto Co. v McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (No misuse; sale restrictions enforced; choice of forum enforced)
• Novell, Inc. v. Unicom Sales, Inc., 2004 WL 1839117 (ND Cal. 2004) (Distribution licenses were licenses, rather than first sales; agreements in box enforceable; no bfp re copyright licenses)
• Practiceworks, Inc. v. Professional Software Solutions of Illinois, 2004 WL 1429955 (D. Md. 2004) (Dealer licenser terminated; dealers not owners of sw copies because subject to restrictions; copying in machine is copy; 117c not apply to this use of copies)
• Softman Products Co., LLC v. Adobe Systems, Inc., 171 F.Supp2d 1075 (CD Cal. 2001) (On request for preliminary injunction, court held that software transaction was a sale of a copy creating ownership, rather than a license, where price for software was a fixed amount for a perpetual license.).
• Symantec Corp. v. CD Micro, inc., 286 F.Supp.2d 1265, 1270-72 (D. Ore. 2003) (No first sale where distributor acquired from unauthorized replicator; first sale doctrine does not apply to copies illegally obtained)
• Synergistic Technologies, Inc. v. IDB Mobile Communications, Inc., 871 F. Supp. 24 (D.D.C. 1994). also found that the customer of a systems developer owned the copy of the software developed and delivered to it, even though the contract was silent on the issue of ownership. Here the court found, based on Article 2, that an ownership transfer was presumed unless the parties expressly agreed to the contrary. Title to both the hardware and the copy of the software passed to IDB at the time of the delivery of the goods. - In a Flawed Development Contract
• Aymes v. Bonelli, 47 F.3d 23 (2d Cir. 1995) (Court held that developer owned the copyright, but the court noted that, “Aymes was paid by Island to design a program specifically for Island’s use, and for those efforts he earned in excess of $70,000. Island, therefore, had a right to use the program for its own business purposes.”
• Graham v. James, 46 U.S.P.Q. 2d 1760, 1766 (2d Cir. 1998)
• Krause v. Titleserv, Inc., 402 F.3d 119 (2nd Cir. 2005) (Client was owner of software copy applying the DSC approach since there were no relevant restrictions on use; 117 does not depend on formal title, but on rights given or reserved)
• SmithKline Beecham Consumer Healthcare, L.P. v. Watson Pharms., Inc., 211 F.3d 21, 25 (2d Cir.2000) (implied license will be found "only in narrow circumstances where one party created a work at the [other's] request and handed it over, intending that [the other] copy and distribute it.”)
• Celeritas Techs., Ltd v. Rockwell Int’l Corp., 150 F3d 1354 (Fed. Cir. 1998) (contract claim and damages relating to nondisclosure agreement are distinct from trade secrecy breach claims)
• Dearborn Industrial Manufacturing Company Ltd. v. Soudronia Finanz A.G., 1997 U.S. Dist. LEXIS 4009 (N.D. Ill. 1997) (nondisclosure agreement prohibited disclosure of information, but did not explicitly prohibit misappropriation through use by the recipient; the court noted that it “would imply a prohibition on misappropriation. Whether one were to conclude that stealing confidential information is equivalent to disclosing it, or whether one were simply to hold that such misappropriation would violate the implied covenant of good faith and fair dealing, ... this court believes that the Know How agreement at least implicitly prohibited [the recipient’s] theft of [the discloser’s] confidential and proprietary information”).
• Eden Hannon & Co. v. Sumitomo Trust & Banking Co., 914 F2d 556 (4th Cir. 1990) (enforced)
• IDX Systems Corp. Epic Systems Corp., 285 F3d 581 (7th Cir. 2002) (concepts that restrict no compete clauses are not relevant to terms that restrict disclosure)
• Johnson v. Benjamin Moore & Co., 347 N.J.Super. 71, 2002 WL 99535 (NJ Super. AD 2002) (Predisclosure agreement not enforced when not carried into later full agreement)
• Operating System Support, Inc. v. Wang Laboratories, Inc., 2002 Copr. L Dec. ¶ 28,474 (3d Cir. 2002) (license gave licensee right to sublicense in object code form; but not to disclose source code)
• Shalor Designs, Inc. v. NBA Properties, Inc., 264 A.D.2d 686, 1999 WL 778582 (NY AD 1999) (disclosure came within the exception to the confidentiality clause contained in the termination agreement between the parties; under which the agreement was to be kept confidential except as necessary to effectuate its terms.)
• SL Montevideo Technology, Inc. v. Eaton Aerospace, LLC, 292 F.Supp.2d 1173 (D Minn. 2003) (Breach of express contract as part of trade secret claim was sufficient alleged)
• SNA, Inc. v. Array, 51 F.Supp2d 554 (ED Pa. 1999) (The contract provided that Horizon had “a fiduciary responsibility not to duplicate or copy, or permit others to duplicate or copy any or all of the Seawind aircraft, part of the aircraft, accessories, options, drawings, instructions, printed matter or the like which shall all be designated as proper proprietary information.” The court held that this contract was breached when Horizon made molds to copy various parts of the SNA planes. It summarily rejected arguments that the contracts were invalid as contracts of adhesion. “Plaintiffs are entitled to have the molds returned to them, and the court will order defendants to do so. Plaintiffs have not demonstrated any damages caused by the breach of contract, so there is no basis for a monetary damage award.”).
• Strategic Directions Group, Inc. v. Bristol-Myers Squibb Co., 293 F3d 1062 (8th Cir. 2002) (In addition to finding survey questions provided to licensee were not trade secrets, court holds that their use was within the terms of the license.)
• Sunds Defibrator AB v. Beloit Corp., 930 F2d 564 (7th Cir. 1991) ([A]lthough the contract permits disclosure of any technical information that is lawfully in the public domain, it forbids the use of such information whether or not the information is in the public domain, provided only that the information was received directly or indirectly under the contract. The idea, surely, was to simplify litigation—and protect the parties' trade secrets—by excluding the question of trade secrecy as a litigable issue, though if the information in question was not a trade secret the other party might well have received it otherwise than pursuant to this Agreement.)
• Trandes Corp. v. Washington Metropolitan Area Transit Authority, 996 F.2d 655 (4th Cir. 1993). (Trade secret was the entire program; trade secret violation occurred in licensee allowing others to copy and use program. No preemption. Court used extra element standard and also concluded that it is not correct to focus on the action alleged and whether the same acts would support both copyright and trade secret actions. Instead, "to determine whether a particular cause of action involves rights equivalent to those set forth in § 106, the elements of the causes of action should be compared, not the facts pled to prove them. On this basis, the extra element present in a trade secret claim consists of the abuse of confidence or other improper conduct involved in procuring a copy of the work.")
• Twentieth Century Fox Film v. Marvel Enter., 220 F.Supp.2d 289 (S.D.N.Y. 2002) (No breach of confidentiality terms where agreement terms disclosed by party, but other party had previously made a public filing that disclosed those terms; no possible damage from second disclosure)
• United Technologies Corp. v. Turbine Kinetics, Inc., 1996 WL 157311, No. CV 950548324S (Conn. Super. March 18, 1996) (no federal preemption of proprietary rights legend affixed to parts drawings; patent law does not occupy the entire field of rights "available to a business to deny access to the outside competitive world of certain devices or designs.”).
• WLIW Technology, LLC v. Hewlett-Packard Co., 2003 WL 22992196, A2d – (Del. 2003) (Five year confidentiality provision ambiguous, but use limits in software license were not)
F. No Reverse Engineering Clauses
• Altera Corp. v. Clear Logic, Inc., 2005 WL 2233252 (9th Cir. 2005) (SPCA violation; use bitstream data not protected reverse engineer; copyright does not preempt contract; no misuse)
• Bowers v. Baystate Technologies, Inc., 320 F3d 1317 (Fed. Cir. 2003) (Shrinkwrap license enforced; no reverse engineering clause valid and not preempted)
• Davidson & Assoc. v. Jung, 2005 WL 2095970 (8th Cir. 2005) (shrinkwrap license enforceable; no preemption of no reverse engineering clause contained in the license - licensee waive fair use privilege; requiring code to use online version of game was a DMCA device wrongly circumvented by reverse engineering to create duplicative online system)
• Edelman v. N2H2, 263 F. Supp.2d 137 (D 2003) (No right or privilege to reverse engineer Internet filtering software)
• SAS Inst., Inc. v. S&H Computer Sys., Inc., 605 F. Supp. 816 (MD Tenn. 1985) (software license; good faith breached where licensee reverse engineered software and created competitive product)
• Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 342 F3d 191 (3d Cir. 2003) (Not copyright misuse to limit use of clips to non-critical sites; no fair use in use of clip previews.)
• Behr systems, Inc. v. Envirometric Process Controls, Inc., 2003 WL 722176 (6th 2003) Site agreement precluding subcontractor from independent bidding was too broad
• Comprehensive Accounting Corp. v. Talmage, 758 F.2d 162 (6th Cir. 1985) (restrictive covenant providing for a one year period during which licensees could not compete with licensor was reasonable under Illinois law, and licensor had a valid and enforceable security interest in accounts receivable, contract rights and work papers of licensees.) (Bankruptcy court, misapplying an employer employee relationship to licensor licensee arrangement between independent business entities, was in error in reaching legal conclusion that no legitimate interests of licensor existed to support restrictive covenant imposed and, likewise, district court erred in finding covenant not to compete as greater than necessary to protect the legitimate interests of licensor.)
• Com Tech Assocs. v. Computer Assocs. Int'l, Inc., 753 F. Supp. 1078 (EDNY 1990) (noncompetition provision ambiguous).
• DeCapua v. Dine-A-Mate, Inc., 292 AD2d 489, 744 NYS2d 417 (NY AD 2002) (IK cannot enforce no compete clause where it was in breach for fail to pay royalties on sale)
• Eden Hannon & Co. v. Sumitomo Trust & Banking Co., 914 F2d 556 (4th Cir. 1990) (enforced)
• Kassbaum v. Steppenwolf Productions, Inc., 236 F.3d 487 (9th Cir. 2000) (Applying California law, court held that contract by which former member of a rock band waived any right in the band's name for any purpose did not preclude him from referring to himself in a new band's promotional literature as a former member of the other band. The court concluded that the contract only precluded use of the original band’s name as a trade name.)
• Lasercomb America, Inc. v. Reynolds, 911 F2d 970 (4th Cir. 1990) (copyright misuse where license precluded licensees from competing in particular field for 99 year term of license)
• O'Sullivan v. Conrad, 44 Ill.App.3d at 756, 3 Ill.Dec. at 386, 358 N.E.2d at 929. (The type of covenant involved in this case, one ancilliary to a sale or license agreement, however, is scrutinized to determine whether the restriction is reasonable, or "necessary in its full extent for the protection" of the one party "and at the same time not ... oppressive" to the other party "or injurious to the interests of the general public.")
• Vais Arms, inc. v. Vais, 2004 WL 1903255 (5th Cir. 2004) (TM national non-compete was reasonable)
I. No Contest Clauses and Estoppel
• Creative Gifts, Inc. v. UFO, F3d , 2000 WL 1843238 (10th Cir. 2000) (Trademark licensee estopped from asserting that license was a naked assignment) (alleged acquiescence did not convert trademark at will license into non-revocable license)
• Diamond Scientific v. Ambico, Inc., 848 F.2d 1220, 1224, 6 USPQ2d 2028, 2030 (Fed. Cir. 1988) (estoppel doctrine applicable to assignment not foreclosed by Supreme Court ruling in Lear. Different configuration of policy and practical interests involved.)
• Four Seasons Hotels & Resorts B.V. v. Consorcio Barr, S.A., 267 F.Supp.2d 1268 (S.D. Fla. 2003) Licensee acknowledged the validity of licensed marks under license agreements and, therefore, was estopped from challenging the validity of such marks in trademark infringement suit brought by licensor.
• Idaho Potato Comm’n v. M & M Produce Farm & Sales, 335 F.3d 130 (2d Cir. 2003) A balancing test applies as to whether a no-contest clause can be enforced in patent cases and have only enforced no-challenge contract provisions when the interests in doing so outweigh the public interest in discovering invalid patents. The same approach applies in license of a certification mark. Here, the public interest outweighed the interest in enforcing the contract term.
• Lear, Inc. v. Adkins, 395 U.S. 653 (1969) (Federal patent policy preempts application of state doctrine of licensee estoppel; federal interest in allowing challenges to patent validity)
• Mentor Grapbhics Corp. v. Quickturn Design Systems, Inc., 150 F.3d 1374 (Fed. Cir. 1998) (“ Due to the intrinsic unfairness in allowing an assignor to challenge the validity of the patent it assigned, the implicit representation of validity contained in an assignment of a patent for value raises the presumption that an estoppel will apply. Without exceptional circumstances (such as an express reservation by the assignor of the right to challenge the validity of the patent or an express waiver by the assignee of the right to assert assignor estoppel), one who assigns a patent surrenders with that assignment the right to later challenge the validity of the assigned patent.”)
• Twentieth Century Fox Film Corp. v. Marvel Enterprises, Inc., 2002 WL 46950, 61 USPQ2d 1583 (2d Cir. 2002) (Licensee could not maintain false designation of origin claim against licensor since source of goodwill that was licensed came from licensor.)
• Saint Gobain Performance Plastics Corp., HCM Div. v. Truseal USA, Inc., 351 F.Supp.2d 290 (D.N.J. 2005) (Assignor of patent estopped from challenging patent's validity.)
J. Quality Control in Trademark License
• Barcamerica Int’l USA Trust v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002) Here, there was a failure of quality controls; formal quality control may be not required where the particular circumstances of the licensing arrangement, such as where the licensor is sufficiently familiar with and relies on the licensee’s own efforts to control quality, indicate that the public will not be deceived. However, the trademark owner, who licensed the use of its mark to licensee for use in connection with wine sold by licensee, only randomly tasted the wine sold by licensee under licensed trademark, and failed to produce any evidence of his knowledge concerning the quality of the winemakers in charge of licensee’s product.
• Ford Motor Co. v. Lloyd Design Corp., 184 F. Supp2d 665 (ED Mich. 2002) (TM naked licensing)
• Four Seasons Hotels & Resorts B.V. v. Consorcio Barr, S.A., 267 F.Supp.2d 1268 (S.D. Fla. 2003) While the Lanham Act permits the controlled licensing of trademarks, a licensor owes an affirmative duty to the public to assure that, in the hands of his licensee, the trademark continues to represent that which it purports to represent; a licensor may engage in misuse of licensed mark if licensor, though the relaxation of quality controls, permits inferior products to be presented to the public under his licensed mark.
• Hallo Management, LLC v. Interland, Inc., 2004 WL 1781013 (ND Cal. 2004) (TM license was naked license, abandoning mark; license merely said observe commercially reasonable standards, and lor did not extensive monitor quality)
• Ritchie v. Williams, 395 F3d 283 (6th Cir. 2005) (naked license invalidated trademark)
• Vais Arms, inc. v. Vais, 2004 WL 1903255 (5th Cir. 2004) (TM abandoned)
• Interstate Net Bank v. Netwb@nk, Inc., 348 F.Supp2d 340 (D NJ 2004) (Transfer was a naked license)
• Tulip Computer Int’l B.V. v. Dell Computer Corp., 262 F.Supp.2d 358 (D. Del. 2003) Section 287(a) of the Patent Act provides that failure to mark patented goods as required, and therefore put the public on notice of the patent, results in patentee’s inability to recover damages for infringement, absent proof that the infringer was notified of the infringement and continued thereafter, in which event damages can be recovered only for infringement occurring after such notice. Though a licensee’s failure to mark patented goods prior to sale will be imputed to licensor where the licensee was acting within the authority granted by patent owner/licensor, a patent owner/licensor does not bear the consequences of a licensee’s failure to mark patented goods where licensee was not acting within the scope of its licensing obligations when executing sales at issue and whose acts, therefore, were unauthorized. Here, license agreement provided that the grant to licensee of the right to have products embodying patented invention made by third parties applied only when such products were created by licensor, or, if created by another manufacturer, only after licensor received and approved specifications for the manufacture of such products. Where licensee sold products without complying with requirement under license that licensor approve such products, licensee was not acting pursuant to license agreement when it sold allegedly infringing products to its customers, and, therefore, licensee’s acts could not be imputed to licensor for purposes of 287(a).
• 7-Eleven, Inc. v. McEvoy, 300 F.Supp.2d 352 (D Md. 2004) (No breach of good faith in franchise agreement; use of TM after license terminated is infringement unless consent found)
• Accusoft Corp. v. Palo, 237 F.3d 31 (1st Cir. 2001) (neither actions before the agreement was signed nor silence about them while negotiating the settlement agreement could form the basis for a violation of the duty of good faith and fair dealing).
• Advent Sys., Ltd, v. Unisys Corp., 925 F2d 670 (3d Cir. 1991) (applying UCC concept of good faith, not a breach to discontinue any marketing)
• Arthur v. Microsoft Corp., 267 Neb. 586, 601, 676 N.W.2d 29 (2004) (“[Good faith] provision of the Uniform Commercial Code was not intended to create a cause of action and cannot be used as a basis for damages”)
• Blue Cross & Blue Shield Mutual of Ohio v. Blue Cross and Blue Shield Association, 110 F.3d 318 (6th Cir. 1997) (good faith not applicable re enforcing automatic termination clause).
• Bisys, Inc. v. Worth Bank & Trust Co., No. 93 C 4212, 1994 WESTLAW 162818 (ND Ill. April 26, 1994) (contract to provide data processing to commence on date of conversion to new system by client; fact issue of bad faith raised when client elected to not convert system and alleged potentially spurious contract breach claims against service provider)
• Chodos v. West Publishing Co., Inc., 292 F3d 992 (9th Cir. 2002) (Bad faith rejection of book manuscript; contract not illusory since publisher had duty of good faith and discretion was limited)
• Columbia Cascade Co. v. Interplay Design, Ltd., 1991 WESTLAW 34473 (D. Or. 1991) (implied obligation of good faith in a patent license).
• Dearborn Industrial Manufacturing Company Ltd. v. Soudronia Finanz A.G., 1997 U.S. Dist. LEXIS 4009 (N.D. Ill. 1997) (nondisclosure agreement prohibited disclosure of information, but did not explicitly prohibit misappropriation through use by the recipient; the court noted that it “would imply a prohibition on misappropriation. Whether one were to conclude that stealing confidential information is equivalent to disclosing it, or whether one were simply to hold that such misappropriation would violate the implied covenant of good faith and fair dealing, ... this court believes that the Know How agreement at least implicitly prohibited [the recipient’s] theft of [the discloser’s] confidential and proprietary information”).
• DeJohn v. The .TV Corp. Int’l, 245 F.Supp.2d 913 (C.D. Ill. 2003) (Where plaintiff had agreed to be bound by the express terms contained in click-wrap agreement, which governed transaction at issue, plaintiff could not recover on claim that defendant violated implied duty of good faith and fair dealing because any such implied contract between plaintiff and defendant was negated by the existence of an express contract.)
• Digital Equip. Corp. v. Uniq Digital Technologies, Inc., 1995 WESTLAW 12297, No. 88 0644 (ND Ill. Jan. 11, 1995) (OEM relationship involving series of one-year contracts, but primary manufacturer elects to discontinue treating OEM system as required “added value; “There was no breach of good faith, because Digital had no obligation to negotiate renewal at all, let alone the definition of added value.”).
• Ennes v. H & R Block Eastern Tax Services, Inc., 2002 WL 226345 (WD Ky. 2002) (Franchisee has no tort claim based on good faith breach)
• First Nationwide Bank v. Florida Software Servs., Inc., 770 F. Supp. 1537 (MD Fla. 1992) (Florida law precludes the licensor from refusing consent to an assignment of rights under a license solely because of its desire to extract a higher license fee where the license itself made provision for consent to the assignment).
• First Union National Bank v. Steel Software Systems Corp., 154 Md. App. 97, 838 A2d 404 (Md Sp. App. 2003) (Best efforts clause does not require party to relinquish all self interest)
• Holland v. Psychological Assessment Resources, Inc., 2004 WL 1368873 (D. Md. 2004) (No violation of good faith in refusing to approve Internet version of licensor’s work)
• Igen Int’l, Inc. v. Roche Diagnostics GMBH, 335 F.3d 303 (4th Cir. 2003) (Under Delaware law, while an implied duty of good faith and fair dealing exists in every contract, such a duty cannot override the literal terms of an agreement. Here, terms of patent license, under which licensor granted licensee a semi-exclusive license to develop products based on licensor’s patented technology, expressly provided that licensee’s rights would become non-exclusive in the event that licensee developed a product that competed materially with products based on licensed technology. Licensee’s decision to abandon development of a product based on licensed technology, and to continue to use its own competing product instead, clearly triggered this express remedy and, in turn, rendered licensee’s semi-exclusive license non-exclusive. In light of express terms of contract, such conduct by licensee did not result in breach of alleged implied duty to either pursue products based on licensed technology or, upon discontinuing the project, to return the semi-exclusive license.)
• JRT, Inc. v. TCBY System, Inc., 52 F.3d 734 (8th Cir. 1995) (in franchise context, breach of contract case based on an alleged violation of an obligation to deal in good faith requires showing that the franchisor “‘was not honest in fact and acted with bad motive’” based on an “objectively ascertainable showing of intentional bad faith,” such as ignoring franchisor’s own “well-documented guidelines”; good faith obligations do not expand specific terms of contract).
• In re MacMillan, Inc., 1996 WL 328743, No. 96 CIV 19 DLC (SDNY June 13, 1996) (publisher made no commitment as to the number of volumes of a book that would be sold and marketed book in good faith).
• Marsu, B.V. v. Walt Disney Company, -- F3d --, 1999 WL 543733 (9th Cir. 1999) (licensee breached its implied covenant of good faith and fair dealing with respect to its contractual obligations to merchandise a cartoon character, where it launched its merchandising campaign when no animation product featuring the character was being broadcast and used junior employees with minimal or no prior experience in merchandising to formulate the marketing, promotional, and merchandising plan. In effect, there seemed to be no true effort to effectively market and, indeed, there were indications that the licensee failed to exploit the character fully due to its focus on other properties.)
• McDonald’s Corp. v. Watson, 36 U.S.P.Q. 2d 1832, 1938 (5th Cir. 1995) (“a party cannot be guilty of bad faith and unfair dealing when acting in compliance with the terms of a contractual agreement”; compliance with notice of termination provisions in a form contract is sufficient without respect to whether “good faith” in abstract would require a different form of notice).
• Nance v. Random House, Inc., 212 F.Supp.2d 268 (SD NY 2002) (no triable issue of fact that publisher rejected his manuscript in bad faith)
• SAS Inst., Inc. v. S&H Computer Sys., Inc., 605 F. Supp. 816 (MD Tenn. 1985) (software license; good faith breached where licensee reverse engineered software and created competitive product)
• Spilman v. Mosby-Tearbook, Inc., 115 F.Supp.2d 148 (D. Mass. 2000) (Obligation of good faith arises under Missouri law, however, discretion retained by publisher applied only to its licensing of publication, and not to its express obligation to use "commercially reasonable efforts” to market the work. “While the contract clearly places the final decision as to promoting the publications in Mosby's hands, this does not absolve it of the duty to act in a commercially reasonable fashion. To the extent the contract is fairly open to more than one interpretation, the Court must construe the language against the party which prepared it, in this case Mosby.”)
• Vylene Enterprises, Inc. v. Naugles, Inc. (In re Vylene Enterprises, Inc.), 90 F.3d 1472 (9th Cir. 1996) (franchisor breached its contract with debtor by failing to negotiate in good faith for extension or renewal of franchise agreement and it’s building of competing restaurant near debtor’s restaurant was breach of covenant of good faith and fair dealing).
• Wootton Enterprises, Inc. v. Subaru of America, 2001 WL 256168 (D Md 2001) (duty of good faith and fair dealing does not require affirmative action not mandated by contract, and cannot override or modify specific contractual terms).
• Astrolabe, Inc. v. Esoteric Technologies Opty, Inc., 2002 WL 511520 (D. Mass. 2002) (In a dispute over an astrology software contract, Esoteric threatened termination of the contract after concluding that Astrolabe had breached its obligation to use its "best efforts" in the marketing the software. The court held that “[t]he jury could [have] reasonably infer[red] that Astrolabe, a small, niche [] company with limited finances and unimpressive marketing expertise in an obscure market, used its best efforts even if a tonier firm with more marketing know-how would have done better,” and denied the parties motions for judgment as a matter of law.
• Beraha v. Baxter Health Care Corp., 956 F2d 1436 (7th Cir. 1992) (best effort obligation inferred only if needed to ensure mutuality of obligation and not appropriate in this biotech license since contract allocated marketing risk).
• In re Cambridge Biotech Corp., 186 F.3d 1356 (Fed. Cir. 1999) Assignee of patents directed to structural components of and methods of detecting presence of two types of Human Immunodeficiency Virus (HIV), along with its United States licensee, brought infringement action in bankruptcy court against purported sublicensee, which claimed that it obtained sublicense from another licensee through cross license agreement. Held that: section of cross license agreement requiring licensee to use its best efforts to recover right to sublicense patents was unambiguous and that assignee breached “best efforts” clause of cross license agreement
• Eastern Elec., Inc. v. Sieburg Corp., 427 F2d 33 (2d Cir. 1970) (reasonable effort to exploit)
• Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159 (3d Cir. 2001) (“[W]e cannot hold, as did the District Court, that the contract language that granted Orion the right "to utilize and exploit" Emerson's trademarks did not, as a matter of law, impose on it an express obligation to sell a certain amount of Emerson-brand products to Wal-Mart.” “Under the circumstances, we cannot hold that it is necessary to imply an obligation to use reasonable efforts in order to avoid the lack of mutuality that was Justice Cardozo's fundamental concern in Wood. Moreover, Emerson will have the opportunity at trial to press its contention that Orion expressly undertook the obligation to exploit and sell Emerson-brand video products to Wal-Mart by the language in the License Agreement. We will therefore affirm the District Court's grant of summary judgment in favor of Orion on the question of an implied obligation to use reasonable efforts.”)
• First Union National Bank v. Steel Software Systems Corp., 154 Md. App. 97, 838 A2d 404 (Md Sp. App. 2003) (Best efforts clause does not require party to relinquish all self interest)
• Gentieu v. Tony Stone Images/Chi., Inc., 255 F.Supp.2d 838 (N.D. Ill. 2003) Though best efforts clause obligating licensee/agency to use its best efforts to license photographer’s images and to maximize the overall earnings received under such licenses did not itself, or by reference to any other provision in license, provide any standards of performance by which agency’s efforts could be measured, clause was still enforceable as an express articulation of the otherwise implied obligation imposing on agency a duty to use good faith, reasonable efforts to promote licensor/photographer’s images.
• JKC Holding Co. LLC v. Washington Sports Ventures, Inc., 264 F3d 459 4th Cir. 2001) (Football team owner did not breach agreement requiring best efforts to secure league approval of sale.)
• Kardios Sys. Corp. v. Perkin Elmer Corp., (no best effort standard in exclusive license to market language translator program where such provision was in early draft of contract, but did not carry forward to final draft; New York law does not imply a best effort standard in this setting).
• Paradata Computer Networks, Inc. v. Telebit Corp., 830 F. Supp. 1001 (ED Mich. 1993)
• Permanence Corp. v. Kenmetal, Inc.980 F2d 98 (6th Cir. 1990) (in patent license where substantial fee and advance royalty were paid, there was no implied obligation to use best effort to market product)
• Perma Research & Dev. v. Singer Co., 542 F2d 111 (2d Cir. 1976)
• PRC Realty Sys., Inc. v. National Ass'n of Realtors, 766 F. Supp. 453 (ED Va. 1991) (express term)
• TDS Healthcare Sys. Corp. v. Humana Hospital Illinois, Inc., 880 F. Supp. 1572 (ND Ga 1995) (express term; held there was a breach of an obligation to use best efforts to protect the confidentiality of information relating to hospital software. In fact, party under the best efforts obligation actually released the information intentionally.)
• Willis, Inc. v. Ocean Scallops, Inc., 356 F. Supp. 1151 (EDNC 1972)
• Wirelessmd, Inc. v. Healthcare.com Corp., 2005 WL 196714, SE2d – (Ga. App 2005) (No best efforts obligation where transfer involved debt forgiveness and royalty)
• Wood v. Lucy, Lady Duff Gordon, 222 NY 88, 118 NE 214 (1917).
• Automated Solutions Enterprises, Inc. v. Clearview Software, Inc., 255 Ga. App. 884, 567 SE2d 335 (Ga. App. 2002) (Relationship of publisher and reseller was not fiduciary)
• Gentieu v. Tony Stone Images/Chi., Inc., 255 F.Supp.2d 838 (N.D. Ill. 2003) Though an agent has a fiduciary duty to treat its principal with utmost candor, rectitude, care, loyalty, and good faith, an agent can act on behalf of competing principles without violating its fiduciary duty where agent has disclosed its representation of competitors to the principles involved. Though photographer appointed agency as her agent with respect to images accepted under license agreement, agency did not violate its duty to photographer by participating in the creation of images in photographer’s style by other photographers to take the place of her images in collection because photographer was aware that agency would represent and accept images of similar subject matter from multiple photographers, and, therefore, agency’s representation of photographer’s competitors could not alone constitute a breach of its fiduciary duty.
• Hustlers, Inc. v. Thomasson, 253 F.Supp.2d 1285 (N.D. Ga. 2002) Under New York law, there is no fiduciary duty between two sophisticated parties who enter into an arms length negotiated contract. A fiduciary relationship was not created by agreement entered into between record company and assignee of copyrights, under which record company agreed to pay assignee a royalty for the right to distribute copyrighted compositions; the agreement imposed only a contractual duty on record company to account to assignee for amounts due under the terms of parties’ agreement.
• Jones v. Management & Computer Servs., Inc., 976 F2d 857 (3d Cir. 1992) (no fiduciary obligation owed in trademark license).
• Tel Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F2d 1134 (5th Cir. 1992) (contract to market computer and telephone answering software did not create fiduciary duty; mere arm's length commercial deal)
• Wolf v Superior Court, ---Cal. Rptr. 2d ---, 2003 WL 463424 (Cal. App. 2003) (no fiduciary duty arises out of mere royalty payment obligation, but person in control of records has burden of proof on what royalties are actually owed)
• Bowe Bell & Howell Co. v. Harris, 2005 WL 1655030 (4th Cir. 2005) (third party likely violated license by making copy onto its machine for purposes of ongoing maintenance of the computer)
• DaimlerChrysler Services, N.A., LLC v. Summit National, Inc., 2005 WL 1994321 (6th Cir. 2005) (Whether there was a copyright violation was not material to contract breach claim; licensee was not owner of a copy)
• Krause v. Titleserv, Inc., 2005 WL 639420, Krause v. Titleserv, Inc., 402 F.3d 119 (2nd Cir. 2005) (Client was owner of software copy applying the DSC approach since there were no relevant restrictions on use; 117 essential use broadly interpreted)
• Practiceworks, Inc. v. Professional Software Solutions of Illinois, 2004 WL 1429955 (D. Md. 2004) (dealers not owners of sw copies because subject to restrictions; copying in machine is copy; 117c not apply to this use of copies)
• Storage Tech. Corp. v. Custom Hardware Eng'g & Consulting, Inc., 421 F.3d 1307 (Fed. Cir. 2005) (Third party service company came within safe harbor provisions of 117 because software copying was done solely for purpose of maintenance or repair; company’s circumvention of manufacturer’s encryption system did not violate DMCA because no “nexus” between infringement and circumvention.)
P. Licensor Duty to Protect Value of Rights
• Scheck v. Burger King Corp., 756 F.Supp. 543 (S.D.Fla.1991) (franchisee, although not entitled to an exclusive territory, was still entitled to expect that the franchisor would "not act to destroy the right of the franchisee to enjoy the fruits of the contract.")
• Pappan Enterprises, Inc. v. Hardee’s Food Systems, Inc., 46 U.S.P.Q. 2d 1769 (3d Cir. 1998) (Cannot use trademark licensor’s lax protection of the mark to defeat preliminary injunction against continued use after license was terminated)
• VRT, Inc. v. Dutton-Lainson Co., 530 N.W.2d 619 (Neb. 1995) (seller barred from enforcing a claim for unpaid royalties under a contract for the purchase and sale of health patient care equipment because he had promised, but falsely, to make a timely filing of a patent application relating to the property; the fact that the delayed filing resulted in denial of the patent and put the inventions in the public domain meant that the vendor did not substantially perform).
• Westowne Shoes, Investment v. Brown Group, Inc., 104 F.3d 994 (7th Cir. 1997) (no implied duty to maintain intellectual property value imposed on licensor in trademark license)
SECTION 10 : Implied Licenses
A. Implied License Doctrine; General
• AT&T Corp. v. Microsoft Corp., 2004 WL 188078 (SD NY 2004) (No estoppel or implied patent license where user was not aware of patent at the time)
• Attig v. DRG, Inc., -- F.Supp.2d -- (ED Pa. 2005) (Implied license to use website content evidenced by informal dealings of parties.)
• Carson v. Dynegy, Inc., 344 F3d 446 (5th Cir. 2003) (Implied license to employer was revocable because no consideration re employee at will)
• Lighthouse Solutions, LLC v. Connected Energy Corp., 2004 WL 1811391 (WDNY 2004) (SW develop K; irrevocable implied license; irrevocable due to consideration)
• Scott v. Lane, 2003 WL 21531890 (Cal. App. 2003) (SW agree fails due to stat fraud; ct says cannot use implied non-exclusive license)
• Twentieth Century Fox Film v. Marvel Enter., 220 F.Supp.2d 289 (S.D.N.Y. 2002) (Implied terms cannot contradict express language)
B. Licenses Implied from Conduct
• SHL Imaging, Inc. v. Artisan House, Inc., 117 F.Supp.2d 301 (SD NY 2000) (A photographer took pictures of the manufacturer's products for color slides to be used by manufacturer's sales force. The court held that this did not impliedly license manufacturer's publication of photographs in catalog, reproduction in brochures, scanning into computer, or use as magazine comps or publicity releases. The mere fact that the photographer might have suspected that such use would occur did not establish a meeting of minds necessary to imply a license.)
C. Implied to Fill Gaps in Express Grants
• Eichman v. Fotomat Corp., 880 F.2d 149, 164 (9th Cir.1989) (“Where there is no express grant of an exclusive territory in a contract or franchise agreement, none will be impliedly read into the contract.”)
• John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 186 F.Supp.2d. 1 (D. Mass. 2002) A nonexclusive license may be implied where 1) a person (the implied licensee) requests that the work be created, 2) the creator (implied licensor) makes the particular work requested and delivers it to the person who had requested it, and 3) the creator intended that the requester copy and distribute his work. Here architectural firm prepared drawings for promoter pursuant to an agreement stating that such drawings remained the property of architectural firm and were not to be used by promoter; architectural firm did not manifest a willingness to allow use of such drawings without its consent and, therefore, did not act in such a way that would provide a basis for an implied nonexclusive license in favor of defendant.
• Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505 (4th Cir. 2002) An implied nonexclusive license for use of a copyrighted work is created where 1) a person (implied licensee) requests the creation of a work, 2) the creator (implied licensor) makes the particular work requested and delivers it to the person who requested it, and 3) the creator of the work intends that such a person copy and distribute his work. Where architectural drawings are at issue, the third element required for the creation of an implied nonexclusive license requires that the creator of the protected work intended that its copyrighted drawings be used on the project for which the were created, independent of the creator’s involvement in such a project.
• SmithKline Beecham Consumer Healthcare, L.P. v. Watson Pharms., Inc., 211 F.3d 21, 25 (2d Cir.2000) (implied license will be found "only in narrow circumstances where one party created a work at the [other's] request and handed it over, intending that [the other] copy and distribute it.”)
• Twentieth Century Fox Film v. Marvel Enter., 220 F.Supp.2d 289 (S.D.N.Y. 2002) (Implied terms cannot contradict express language)
D. Contributions to Collective Works
• Faulkner v. Mindscape, Inc., 2005 WL 503652, F3d (2nd Cir. 2005) (Revision privilege; contracts do not negate digital version, although include searchability features that did not appear in print version, essentially presented underlying works to users in same context as in original versions of magazine)
• Allison v. Vintage Sports Plaques, 46 U.S.P.Q. 2d 1138, 1139-42 (11th Cir. 1998) (common law publicity rights; held the first sale doctrine applies to cause of action for wrongful commercial use of a likeness or name of a celebrity; the court noted the first sale doctrine would not prevent the control over use, name or image because a celebrity would still be able to license in the first place; court also noted that use of trading cards in repackaged form could go too far: the first sale items cannot be included or combined in such a way with separate products indicating sponsorship of the product beyond that implicated in the first sale item.)
• Anton/Bauer, Inc. v. PAG, Ltd., 329 F.3d 1343 (Fed. Cir. 2003) An implied license, which is a defense to patent infringement, is granted to a purchaser when (1) the patentee sells an article that has no noninfringing uses, and (2) the circumstances of the sale plainly indicate that the grant of a license should be inferred. Here, claimed combination did not cover male and female plates separately, but, instead, the combination formed when a female and male plate were fitted together to form a mechanical and electrical connection, patentee granted implied license to customers to employ claimed combination when it sold female plates, which did not have any use other than to complete patented combination with second unpatented component, did not impose any restrictions on use of plates sold to customers, and did not require manufactures to whom it sold female plates to restrict the grant of a license upon sale of finished product incorporating plate. Patentee’s unrestricted sale of its female plates, useful only in performing the claimed combination, plainly indicated that the grant of a license to practice the invention should be inferred.
• Enesco Corp. v. Price/Costco, Inc., 47 U.S.P.Q. 2d 1144 (9th Cir. 1998) noted that a “trademark” owner’s right under the Lanham Act to control distribution of his products is limited by the ‘first sale’ doctrine.”
• Met-Coil Systems Corp. v. Korners Unlimited, Inc., 803 F.2d 684 (Fed. Cir. 1986) “the combination of an unrestricted sale of equipment useful only in practicing the patented invention could create an implied license to practice the patented invention; two tests had to be met: the unrestricted sale of the equipment used to practice the invention must have “no noninfringing uses” and the “circumstances of the sale must ‘plainly indicate the grant of the license should be inferred.’”
• Prestonettes, Inc. v. Coty, 264 U.S. 359 (1924) where the Supreme Court allowed the purchaser to repackage perfume sold under a trademark in smaller bottles under a label alerting purchasers that the original trademark owner had nothing to do with the prepackaging or rebottling.
• RSA Data Security, Inc. v. Cylink Corp., 1996 WL 266201, Civ. No. 96 20094 SW (ND Cal. May 17, 1996) (licensee who had apparent authority to transfer rights in patents on encryption technology may have effectively transferred rights to its customers under implied license or, in any event, the customers may be protected under an patent exhaustion concept)
F. “Implied in Law” in General
• McCoy v. Mitsubishi Cutlery, Inc., 36 U.S.P.Q. 2d 1289 (Fed. Cir. 1995), cert. denied, 116 S. Ct. 1268 (1996).
• Platt & Munk Co. v. Republic Graphics, Inc., 315 F.2d 847 (2d Cir. 1963).(a copyright case, involving a right of the manufacturer that produced map puzzles covered by a copyright on the behalf of the copyright owner to resell those items when the copyright owner refused to pay for them.)
SECTION 11: Breach and Remedies
• Equinox Software Systems, Inc. v. Airgas, Inc., 158 F.Supp.2d 485 (E.D. Pa. 2001) (“As a default rule, a mere technical breach of a contract, as opposed to a material breach, by a party does not excuse the nonbreaching party from performance…The parties to the contract, however, may agree to substitute their own contract and thus contract around the default rule.”)
• Gil Enterprises, Inc. v. Delvy, 38 U.S.P.Q. 2d 1042 (2d Cir. 1996). Delvy was too mild in his letters seeking records, and thus his correspondence was insufficient to the task of being a “written demand” under the terms of a contract. The court acknowledged “a demand for accounting need not use the specific language ‘demand’ to trigger the contracting parties’ respective rights and obligations.” Nonetheless, a distinction had to be made between “a demand and a mere request.” The court reasoned that since a demand required by a contract “is intended to trigger certain rights and obligations[,] ... to prompt such rights and obligations, it is necessary that the party upon whom the demand is being made be put on notice that those legal obligations had been triggered” so that the allegedly breaching party would have its “opportunity to cure” provided by the contract )
• Luxottica Group, SPA v. Bausch & Lomb Inc., 2001 WL 314621 (S.D.N.Y. 2001) (notices of breach were insufficient under terms of license agreement)
B. Waiver and Estoppel by Conduct
• Apple Concepts, Inc. v. Articulate Systems, Inc., 44 U.S.P.Q. 2d 1371 (N.D. Cal. 1997) (could not terminate one month after having received the late payment)
• ESPN, Inc. v. Office of Com'r of Baseball, 1999 WL 1063241 (S.D.N.Y. 1999) (deferral or exercise of right to cancel does not, in itself, constitute a waiver)
• McDonald’s Corp. v. Watson, 36 U.S.P.Q. 2d 1832 (5th Cir. 1995) (court enforces cancelation of franchise for breach despite claimed waiver and estoppel issues; filing of complaint was adequate notice of termination)
Part I. Type of Breach
• Basic Fun, Inc. v. X-Concepts, LLC, 157 F.Supp.2d 449 (E.D. Pa. 2001) (“The term in the Alien/Trinity Agreement, requiring Alien’s written approval of the prototype and packaging, and the presentation of Alien’s name, logo and graphics thereon prior to manufacture or distribution, was a material term of the contract; Trinity and BFI’s failure to seek or obtain such written approval constituted a material breach of the contract. Failure to obtain written authorization when required in a license is, as a matter of law, a material breach and voids the license.”; “When the term of a copyright license requires written approval before use, the licensee’s failure to obtain written approval means the licensee has exceeded the license and is guilty of trademark or copyright infringement and unfair competition.”)
• Igen Int’l, Inc. v. Roche Diagnostics GMBH, 335 F.3d 303 (4th Cir. 2003) Material breach where licensee took large deductions in calculating royalties, failed to keep accurate records, breached express field restrictions and violated duty to share improvements; failure to properly pay royalties, in and of itself, constituted a material breach of license agreement; royalty payments were the chief benefit for which licensor bargained.
• Otto Preminger Films, Inc. v. Quintex Entertainment Inc., 950 F.2d 1492 (9th Cir. 1991) failure to colorize two of four films pursuant to agreement was material breach of contract under New York law
- Common Law
• Otto Preminger Films, Inc. v. Quintex Entertainment Inc., 950 F.2d 1492 (9th Cir. 1991) (failure to colorize two of four films pursuant to agreement was material breach of contract under New York law)
• Valeo Intellectual Property, Inc. v. Data Depth Corp., 368 F. Supp2d 1121 (W.D. Wash. 2005) (Licensee denied preliminary injunction against termination of license; licensor likely to prevail “on its affirmative defense that Valeo’s failure to display the DDC's iCopyright tag was a material breach of the agreement.”)
• Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136 (9th Cir. 2003) A breach will justify rescission of a licensing agreement only when it is of such a material and substantive nature that it affects the very essence of the contract and serves to defeat the object of the parties; the breach must constitute a total failure in performance of the contract. - Contract Terms
• Equinox Software Systems, Inc. v. Airgas, Inc., 158 F.Supp.2d 485 (E.D. Pa. 2001) (“As a default rule, a mere technical breach of a contract, as opposed to a material breach, by a party does not excuse the nonbreaching party from performance…The parties to the contract, however, may agree to substitute their own contract and thus contract around the default rule.”)
D. Relationship Between Breach and Infringement
• Microsoft Corp. v. Harmony Computers & Electronics, Inc., 846 F. Supp. 208 (E.D.N.Y. 1994) (transfer of copy outside scope of license makes remote purchaser liable for infringement)
• American Int'l Pictures, Inc. v. Foreman, 576 F.2d 661, 664 (5th Cir.1978) ("first sale" buyer that becomes owner of copy disregard of restrictions on resale does not make buyer or subsequent buyer an infringer; copyright holder's remedy is suit for breach of contract containing the restrictions)
• Basic Fun, Inc. v. X-Concepts, LLC, 157 F.Supp.2d 449 (E.D. Pa. 2001) (“The term in the Alien/Trinity Agreement, requiring Alien’s written approval of the prototype and packaging, and the presentation of Alien’s name, logo and graphics thereon prior to manufacture or distribution, was a material term of the contract; Trinity and BFI’s failure to seek or obtain such written approval constituted a material breach of the contract. Failure to obtain written authorization when required in a license is, as a matter of law, a material breach and voids the license.”; “When the term of a copyright license requires written approval before use, the licensee’s failure to obtain written approval means the licensee has exceeded the license and is guilty of trademark or copyright infringement and unfair competition.”)
• Black Clawson Co. v. Kroenert Corp., 2001 WL 303904 (8th Cir. 2001) License transferred exclusive right within the United States to use technology, licensor no longer possessed any substantial rights to technology in the United States and licensor therefore did not have claim for unauthorized use of it in United States. Whether a transfer of proprietary information is a bare license or a constructive assignment depends on the legal effect of the transfer rather than the form it takes; court must look at the language of the agreement and ascertain whether the parties intended a grant of all substantial rights. The court also stated that an exclusive licensee for all or any specified portion of the United States is an assignee as to the specified territory and may sue in its own name for infringement of its technology rights, even against the licensor.
• In Re Elonex Phase II Power Mgmt. Litig., 2003 WL 22024956 (D. Del.) In an infringement suit, defendant bears the burden of pleading and proving the affirmative defense that a portion of its otherwise infringing products were actually licensed under the patents in suit. Where defendant in a patent infringement suit failed to provide any evidence of how many of its otherwise infringing monitors might have been licensed, and did not make any attempts to rebut plaintiff’s calculations at trial, defendant failed to carry its burden of proof in regard to its license defense and could not question the amount plaintiff deducted from damages for licensed monitors on appeal.
• Gentieu v. Tony Stone Images/Chi., Inc., 255 F.Supp.2d 838 (N.D. Ill. 2003) Though, when a license is limited in scope, exploitation of the copyrighted work beyond those specified limits constitutes infringement, an exclusive licensee of any of the rights comprised in the copyright, although capable of breaching the contractual obligations imposed on it by the license, cannot be liable for infringing the copyright rights conveyed to it.
• S&R Corp. v. Jiffy Lube International, Inc., 968 F.2d 371 (3d Cir. 1992). In considering this issue for the first time, we find that the Lanham Act’s requirement that a franchisor demonstrate that unauthorized trademark use occurred to prevail on the merits of a trademark infringement claim against a franchisee necessitates some type of showing that the franchisor properly terminated the contract purporting to authorize the trademarks’ use, thus resulting in the unauthorized use of trademarks by the former franchisee.
• Micro Data Base Systems, Inc. v. Dharma, 46 U.S.P.Q. 2d 1923, 1925 (7th Cir. 1998)
• Graham v. James, 46 U.S.P.Q. 2d 1760, 1765 (2d Cir. 1998)
• Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 752-53 (11th Cir. 1997).
• In re Ortho Pharmaceutical Corp., _ F3d _, 34 USPQ2d 1444 (Fed. Cir. 1995) (Nonexclusive licensee lacked standing to sue an infringer even though the license contract purported to give the licensee the right to sue; the contract controlled the relationship of the parties and could not govern standing to sue a third person.).
Part II. Non-monetary Remedies
E. Cancellation, Rescission or Termination
• Adam Technologies, Inc. v. Hewlett Packard Co., 2005 WL 238128 (3rd Cir. 2005) (Notice of being placed on restricted status did not give notice of contract breach so as to start limitations period)
• Ameritech Information Systems, Inc. v. Bar Code Resources, 331 F.3d 571 (7th Cir. 2003) (Notice of default by fax was adequate to terminate)
• Detroit Med. Ctr. v. Geac Computer Sys., Inc., 103 F.Supp.2d 1019 (E.D. Mich. 2000) (Court grants preliminary injunction against a computer services company which sought to end a license and maintenance agreement and stop its support during the dispute.”To the extent that Defendant argues that the public has an interest in the performance of confidentiality agreements, the Court agrees. However, the Court believes that the public's interest in receiving adequate medical care outweighs its general interest in the performance of such agreements, especially in cases such as this, where the beneficiary of the confidentiality provision is willing to authorize disclosure given the right conditions. Therefore, the Court is satisfied that this prong weighs in favor of granting Plaintiff's request for a preliminary injunction.”)
• George Lussier Enterprises, Inc. v. Subaru of New England, Inc., 122 F. Supp.2d 231 (D. NH 2000) (Automobile dealership franchisees were not entitled to injunction preventing franchisor's termination absent showing that such attempts were baseless retaliation for underlying suit).
• Logan v. Burgers Ozark Country Cured Hams Inc., 263 F3d 447 (5th Cir. 2001) Under Louisiana law, a patent licensor who had prevailed on the claim that he was entitled to rescind the license due to the licensee's fraudulent inducement, was not entitled to recover damages. There was no evidence that the licensor had spent money in reliance on the license agreement or that he was otherwise financially harmed by the fraud.
• Monsterhut, Inc. v. Paetec Communications, Inc., 2002 WL 845066 (NY AD 2002) (No injunction against termination for spamming; agreement governs)
• New Shows, S.A. de C.V. v. Don King Productions, Inc., 2000 WL 354214 (2d Cir. 2000) (court held that “where damages appear adequate … rescission is inappropriate.”)
• Scholastic Entertainment v. Fox Entertainment, -- F3d – (9th Cir. 2003) (State law governed whether license for television series was terminated where license had a definite term)
• Pragmatic C Software Corp. v. Antrim Design Systems, Inc., 2003 WL 244804 (D Minn. 2003) (No right to not pay royalties and continue to use or transfer the software)
• Ticketron Ltd. Partnership v. Flip Side, Inc., 1993 WL 214164 (N.D. Ill. June 17, 1993) (shutdown of access was permitted under Illinois law because the relationship between the parties was based on a license, which Illinois law treats as being subject to termination at will by the licensor—even in the face of a stated term.)
• Vander Vreken v. American Dairy Queen Corp., 261 F.Supp.2d 821 (ED Mich. 2003) (preliminary enjoin continued use during litigation re terminating license)
• Voice-Tel Enterprises, Inc. v. Joba, Inc., 258 F.Supp.2d 1353 (ND Ga. 2003) (No terminate franchise when linked site taken over by porno group; link cut shortly after notice)
- Post-Cancellation: Preventing Continued Use
• 7-Eleven, Inc. v. McEvoy, 300 F.Supp.2d 352 (D Md. 2004) (Use of TM after license terminated is infringement unless consent found).
• Cook Inc. v. Boston Scientific Corp., 333 F.3d 737 (7th Cir. 2003) (Where a breach of contract is proved but damages cannot be estimated with reasonable certainty, the plaintiff is entitled to an injunction. In this case, however, injunction was too broad in that it prevented licensee from not only performing contract with third party in violation of anti-assignment clause, but also from using any information gathered in connection with the third party deal for the purpose of obtaining regulatory approval to sell patented product developed under license.)
• ICEE Distribs., Inc. v. J&J Snack Foods Corp., 325 F.3d 586 (5th Cir. 2003) (Plaintiff would suffer irreparable harm if defendant allowed to continue to distribute products under trademark at issue in violation of contractual rights to the mark; though plaintiff/licensee could potentially prove past lost profits, it would be considerably more difficult for it to prove the amount of damages owed from defendant/licensee’s future sale of products under licensed mark.)
• Monsanto Co. v. McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (Preliminary injunction appropriate where likelihood of success on contract and infringement claims)
• New Sensor Corp. v. CE Distribtion LLC, 2004 WL 231237 (ED NY 2004) No trademark infringement when former licensee used name to explain it was now selling same tubes, but not under name
• Pragmatic C Software Corp. v. Antrim Design Systems, Inc., 2003 WL 244804 (D Minn. 2003) (No right to not pay royalties and continue to use or transfer the software)
• Schinzing v. Mid-States Stainless, Inc., 2005 WL 1653096 (8th Cir. 2005) (Continued use after license terminate; must pay royalties on product in stock, but not on items manufactured after terminate)
• S&R Corp. v. Jiffy Lube International, Inc., 968 F.2d 371 (3d Cir. 1992). In considering this issue for the first time, we find that the Lanham Act’s requirement that a franchisor demonstrate that unauthorized trademark use occurred to prevail on the merits of a trademark infringement claim against a franchisee necessitates some type of showing that the franchisor properly terminated the contract purporting to authorize the trademarks’ use, thus resulting in the unauthorized use of trademarks by the former franchisee.
• Valeo Intellectual Property, Inc. v. Data Depth Corp., 368 F. Supp2d 1121 (W.D. Wash. 2005) (Licensee denied preliminary injunction against termination of license; licensor likely to prevail “on its affirmative defense that Valeo’s failure to display the DDC's iCopyright tag was a material breach of the agreement.”) - Electronic Self-Help
- Right to return of the property
• Comprehensive Accounting Corp. v. Talmage, 758 F.2d 162 (6th Cir. 1985) (Debtor licensees could reasonably be called upon under license agreement with licensor to turn over copies of books and records pertaining to clients' accounts that were in licensees' possession.)
• SNA, Inc. v. Array, 51 F.Supp2d 554 (ED Pa. 1999) (The contract provided that Horizon had “a fiduciary responsibility not to duplicate or copy, or permit others to duplicate or copy any or all of the Seawind aircraft, part of the aircraft, accessories, options, drawings, instructions, printed matter or the like which shall all be designated as proper proprietary information.” The court held that this contract was breached when Horizon made molds to copy various parts of the SNA planes. It summarily rejected arguments that the contracts were invalid as contracts of adhesion. “Plaintiffs are entitled to have the molds returned to them, and the court will order defendants to do so. Plaintiffs have not demonstrated any damages caused by the breach of contract, so there is no basis for a monetary damage award.”).
Part III. Damages as a Remedy
• CogniTest Corp. v. Riverside Pub. Co., 32 UCC Rep Serv 2d 11, 107 F3d 493 (7th Cir. 1997) (Damage limitation in SW agreement enforced)
• Crown It Services, Inc. v. Koval-Olson, 782 NYS2d 708 (NY AD 2004) (Liquidated damages provision of non-compete agreement was enforceable.)
• DP Solutions, Inc. v. Rollins, Inc., 353 F.3d 421 (5th Cir. 2003) (Breach of contract damages could include gross contract price for 30 day notice period)
• McRoberts Software v. Media 100, 329 F.3d 557 (7th Cir. 2003) (Damage for exceeding scope of license; lost profits not duplicate actual damages)
• Men’s Sportswear, Inc. v. Sasson Jeans, Inc., 834 F.2d 1134 (2nd Cir. 1987) (Damages award of $888,707.05 for lost profits due to licensor's failure to advertise was well within bounds of just and reasonable inference, in Chapter 11 debtor's action for breach of trademark licensing agreements and advertising plan.
• Morrone Co. v. Barbour, 241 F.Supp2d 683 (SD Miss. 2002) In a patent license, fraud conceal sales re royalties was not basis for conversion claim. Breach of contract only
• Gruber v. S-M News Co., 126 F.Supp. 442, 446 (SDNY 1954). Where manufacturers of Christmas cards sued company having exclusive distribution rights under contract, manufacturer's evidence as to expected profits under contract was insufficient to allow recovery for them, but they would be entitled to out of pocket expenses.
• SNA, Inc. v. Array, 51 F.Supp2d 554 (ED Pa. 1999) (“Plaintiffs are entitled to have the molds returned to them, and the court will order defendants to do so. Plaintiffs have not demonstrated any damages caused by the breach of contract, so there is no basis for a monetary damage award.”).
• TVT Records v. the Island Def Jam Music Group, 262 F.Supp.2d 188 (SD NY 2003) Lost profits for breach of record contract
G. Damages Under UCC Article 2
• Olcott Int’l & Co., Inc. v. Micro Data Base Systems, Inc., 793 NE2d 1063 (Ind. App. 2003) (A2 applied to software; liquidated damages provision invalid (treble damages)
H. Damages Under UCC Article 2A
• Bowers v. Baystate Technologies, Inc., 320 F3d 1317 (Fed. Cir. 2003) (Shrinkwrap license enforced; parallel recovery allowed)
• Golden Voice Technology Training, LLC v Rockwell Electronic Commerce Corp., 267 F.Supp.2d 1178 (MD Fla. 2003) Breach license and infringe patent by having system available to too many access; term clear.
• Lowry’s Reports v. Legg Mason, Inc., 2004 WL 251825 (D. Md 2004) (Award of damages for breach of contract and copyright infringement re newsletter were not double recovery)
Part IV. Contract Limitation on Remedy
• CogniTest Corp. v. Riverside Pub. Co., 32 UCC Rep Serv 2d 11, 107 F3d 493 (7th Cir. 1997) (Damage limitation in SW agreement enforced)
• Mistry Prabhudas Manjieng, Pvt Ltd. v. Raytheon Engineers & Constructors, Inc., 213 F.Supp.2d 20 (D. Mass. 2002) (Damage limitations clause enforceable though licensee claimed it did not read the clauses or understand them.)
• Networktwo Communications Group, Inc. v. Spring Valley Marketing Group and CommunityISP, Inc., 372 F.3d 842 (6th Cir. 2004) (Contract damage limitation limited ISP damages for faulty service)
• Cosmocom, inc. v. Marconi Communications Int’l Ltd, 261 F.Supp.2d 179 (ED NY 2003) (Software license liability cap not enforceable in light of later unrelated amendment)
• Puget Sound Financial. L.L.C. v. Unisearch, Inc. , 47 P3d 940 (Wash. 2002) (Damages limitation clause enforced; layered contract formed and enforceable regarding later terms in invoice)
• Rational Software Corp. v. Sterling Corp., 2005 WL 18246 (1st Cir. 2005) (Prior course of dealing brought damage limitation clause in even though clause was in invoice)
L. Terms Concerning Cancellation
• Crown It Services, Inc. v. Koval-Olson, 782 NYS2d 708 (NY AD 2004) (Liquidated damages provision of non-compete agreement was enforceable.)
• Easton Telecom Services, LLC v. Corecomm Internet Group, Inc., 216 F.Supp.2d 695 (ND Ohio 2002) (Liquidated damages requiring payment of remaining service charges for term of original agreement was unenforceable penalty)
• Honey Dew Associates, Inc. v. M & K Food Corp., 41 UCC Rep.Serv.2d 149 (D. RI 2000) (Liquidated damages clause in franchise agreement was unenforceable penalty. The clause provided that the defaulting franchisee remained liable to the sub-franchisor for all payments which, but for cancellation of the agreement, would have been due through entire term of the agreement.).
• Olcott Int’l & Co., Inc. v. Micro Data Base Systems, Inc., 793 NE2d 1063 (Ind. App. 2003) (A2 applied to software; liquidated damages provision invalid (treble damages)
• Southern Union Co. v. CSG Systems, Inc., 2005 WL 171349 (Tex. App. 2005) (Outsourcing contract; termination fee was valid as liquidated damages)
SECTION 12: Contract Doctrines that Limit Terms
• Comb v. Paypal, Inc., 2002 WL 2002171 (ND Cal. 2002) (Arbitration provision in online card processor agreement was unenforceable as unconscionable. Clause was in an adhesion contract, was one-sided and imposed costs on the customer that far exceeded the amount in controversy.)
• FurryRecords, Inc v. Realnetworks, Inc., 2002 WL 2005812 (S.D.N.Y. 2002) (Where there was no evidence that licensor’s will was overborne by high pressure tactics, promotional company’s four page form contract, was not unconscionable under New York law.
• Intergraph Corp. v. Intel Corp., 241 F3d 1353 (Fed. Cir. 2001) (Termination based on dispute outside terms of license was effective; clause allowing termination was not unconscionable, nor was actual termination itself)
B. Unconscionable Termination of License
• Intergraph Corp. v. Intel Corp., 241 F3d 1353 (Fed. Cir. 2001) (Termination based on dispute outside terms of license was effective; clause allowing termination was not unconscionable, nor was actual termination itself)
SECTION 13: Limits Grounded in Property Law
Part I. Preemption
• Altera Corp. v. Clear Logic, Inc., 2005 WL 2233252 (9th Cir. 2005) (SPCA violation; use bitstream data not protected reverse engineer; copyright does not preempt contract; no misuse)
• Bowers v. Baystate Technologies, Inc., 320 F3d 1317 (Fed. Cir. 2003) (Shrinkwrap license enforced ; no reverse engineering clause valid and not preempted)
• Davidson & Assoc. v. Jung, 2005 WL 2095970 (8th Cir. 2005) (shrinkwrap license enforceable; no preemption of no reverse engineering clause contained in the license - licensee waive fair use privilege; requiring code to use online version of game was a DMCA device wrongly circumvented by reverse engineering to create duplicative online system)
• Dorsey v. Money Mack Music, Inc., 2003 WL 22872099, F. Supp2d (ED La. 2003) (Claim for accounting under contract not preempted)
• Dunlap v. G&L Holding Group, Inc., 2004 WL 1908424, F3d (11th Cir. 2004) (For state law claim to be preempted by Copyright Act, giving rise to federal removal jurisdiction, it is necessary that claim involve work that is substantively eligible for copyright protection.)
• Huckshold v. HSSL, LLC., 344 F.Supp2d 1203 (ED Mo. 2004) (Software contract and trade secret claims not preempted)
• ProCD, Inc. v. Zeidenberg, 86 F3d 1447 (7th Cir. 1996) (later presented terms enforceable; no preemption of contract)
• Pick v. Pickoff, 2004 WL 2997480 (ND Tex. 2004) (Contract claims under state law regarding ownership of software were not preempted)
• Ritchie v. Williams, 395 F3d 283 (6th Cir. 2005) (Pseudo-contract claim was preempted, but fiduciary duty claim was not; naked license invalidated trademark)
• Torah Soft Ltd. V. Drosnin, 224 F.Supp.2d 704 (SD NY 2002) (No preemption of breach of contract claim)
• Ultra-Precision Mfg., Ltd. v. Ford Motor Co., -- F3d ---, 2005 WL 1398417 (Fed.Cir. 2005) (Preemption of unjust enrichment claim by patent law where no showing of special enhancement of loss related to particular defendant)
• Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc.,412 F.3d 215 (1st Cir. 2005) (Unjust enrichment claim was not preempted by patent law.)
• eScholar, LLC v. Otis Educational Systems, Inc., 387 F.Supp.2d 329 (S.D.N.Y. 2005) (Breach of contract claims are not preempted by copyright law)
• Ultra-Precision Mfg., Ltd. v. Ford Motor Co., -- F3d ---, 2005 WL 1398417 (Fed.Cir. 2005) (Preemption of unjust enrichment claim by patent law where no showing of special enhancement of loss related to particular defendant)
• Idaho Potato Comm’n v. M & M Produce Farm & Sales, 335 F.3d 130 (2d Cir. 2003) A balancing test applies as to whether a no-contest clause can be enforced in patent cases and have only enforced no-challenge contract provisions when the interests in doing so outweigh the public interest in discovering invalid patents. The same approach applies in license of a certification mark. Here, the public interest outweighed the interest in enforcing the contract term.
• Lear, Inc. v. Adkins, 395 U.S. 653 (1969) (Federal patent policy preempts application of state doctrine of licensee estoppel; federal interest in allowing challenges to patent validity)
C. Copyright Preemption and Contract
• Bowers v. Baystate Technologies, Inc., 320 F3d 1317 (Fed. Cir. 2003) (Shrinkwrap license enforced ; no reverse engineering clause valid and not preempted)
• Davidson & Assoc. v. Jung, 2005 WL 2095970 (8th Cir. 2005) (shrinkwrap license enforceable; no preemption of no reverse engineering clause contained in the license - licensee waive fair use privilege; requiring code to use online version of game was a DMCA device wrongly circumvented by reverse engineering to create duplicative online system)
• Dorsey v. Money Mack Music, Inc., 2003 WL 22872099, F.Supp.2d (ED La. 2003) (Claim for accounting under contract not preempted)
• Dunlap v. G&L Holding Group, Inc., 2004 WL 1908424, F3d (11th Cir. 2004) (For state law claim to be preempted by Copyright Act, giving rise to federal removal jurisdiction, it is necessary that claim involve work that is substantively eligible for copyright protection.)
• Green v. Hendrickson Publishers, Inc., 770 N.E.2d 784 (Ind. 2002) (A naked promise not to infringe a copyright does not provide the extra element required to prevent preemption by the Copyright Act.)
• Huckshold v. HSSL, LLC., 344 F.Supp2d 1203 (ED Mo. 2004) (Software contract and trade secret claims not preempted)
• Hustlers, Inc. v. Thomasson, 253 F.Supp.2d 1285 (N.D. Ga. 2002) (To determine whether a state law right is preempted by the Copyright Act, a court must determine, first, whether the rights at issue fall within the subject matter of copyright as set forth in sections 102 and 103 of the Act, and, second, whether the rights at issue are equivalent to the exclusive rights conferred by section 106 of the Act. Under the second prong of this inquiry, while state law is preempted where the act of reproduction, performance, distribution, or display will in itself infringe the state created right, there is no preemption if other elements are required in addition to or instead of the acts of reproduction, performance, distribution, or display in order to constitute a state created cause of action for a violation of such state created right. As a result, contract law claims generally not preempted.)
• ProCD, Inc. v. Zeidenberg, 86 F3d 1447 (7th Cir. 1996) (later presented terms enforceable; no preemption of contract)
• Trandes Corp. v. Washington Metropolitan Area Transit Authority, 996 F.2d 655 (4th Cir. 1993). (Trade secret was the entire program; trade secret violation occurred in licensee allowing others to copy and use program. No preemption. Court used extra element standard and also concluded that it is not correct to focus on the action alleged and whether the same acts would support both copyright and trade secret actions. Instead, "to determine whether a particular cause of action involves rights equivalent to those set forth in § 106, the elements of the causes of action should be compared, not the facts pled to prove them. On this basis, the extra element present in a trade secret claim consists of the abuse of confidence or other improper conduct involved in procuring a copy of the work.")
• Wrench LLC v. Taco Bell Corp., 256 F.3d 446 (6th Cir. 2001) (Court indicates that true contract claims are not preempted by copyright law and, as a result, implied in fact contract claim was not preempted. The basis of the contract claim was breach of an actual promise to pay and this was an extra element that changed the nature of the action so that it was qualitatively different from a copyright infringement claim.)
Part II. Misuse
• Ford Motor Co. v. Obsolete Ford Parts, Inc., 318 F.Supp2d 516 (ED Mich 2004) (TM misuse may not exist, but certainly is not basis for affirmative claim)
• Monsanto Co. v McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (Technology agreement that precluded buyer of seeds from using the seeds other than for one crop and also precluded use of seeds produced by crop when grown, was not patent misuse. Also, concepts of patent exhaustion did not apply because the transaction was not a sale. Price necessarily reflected the limitations placed on the purchaser.; choice of forum enforced)
• Scheiber v. Dolby Laboratories, Inc., 293 F3d 1014 (7th Cir. 2002) (Court protests, but enforces rule that royalties beyond term of patent are invalid)
• Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 342 F3d 191 (3d Cir. 2003) (Not copyright misuse to limit use of clips to non-critical sites; no fair use in use of clip previews.)
• Applera Corp. v. MJ Research Inc., 363 F.Supp.2d 270 (D. Conn. 2005) (License terms did not constitute patent misuse)
• Brulotte v. Thys Co., 379 U.S. 29, 33, 85 S.Ct. 176, 179, 13 L.Ed.2d 99 (1964) (exacting royalties that go beyond the length of a patent term is misuse).
• Monsanto Co. v McFarling, 302 F.3d 1291 (Fed. Cir. 2002) (Technology agreement that precluded buyer of seeds from using the seeds other than for one crop and also precluded use of seeds produced by crop when grown, was not patent misuse. Also, concepts of patent exhaustion did not apply because the transaction was not a sale. Price necessarily reflected the limitations placed on the purchaser.)
• Scheiber v. Dolby Laboratories, Inc., 293 F3d 1014 (7th Cir. 2002) (Court protests, but enforces rule that royalties beyond term of patent are invalid)
• Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969), rev’d, 401 U.S. 321 (1971), reh’g denied, 401 U.S. 1015 (1971) (conditioning patent license on royalties based on other non-patented products constitutes misuse)
• Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F3d 772 (5th Cir. 1999) (license did not create antitrust violation, but was copyright misuse).
• Lasercomb America, Inc. v. Reynolds, 911 F2d 970 (4th Cir. 1990) (copyright misuse where license precluded licensees from competing in particular field for 99 year term of license)
• Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 342 F3d 191 (3d Cir. 2003) (Not copyright misuse to limit use of clips to non-critical sites; no fair use in use of clip previews.)
SECTION 14: Antitrust Law
A. Rule of Reason and Per Se Rules
• Independent Ink, Inc. v. Illinois Tool Works, Inc., 396 F.3d 1342 (Fed. Cir. 2005) (Market power was rebuttably presumed in patent tying case.)
• U.S. Philips Corp. v. International Trade Com'n, 424 F.3d 1179 (Fed. Cir. 2005) (Package licensing program relating to single product was not a misuse of power)
• Independent Ink, Inc. v. Illinois Tool Works, Inc., 396 F3d 1342 (Fed. Cir. 2005) (Market power presumed from patent for tying claim, but not for monopolization claim)
C. Package Licenses and Patent Pools
• Matsushita Electrical Industrial Co., Ltd v. Cinram International, Inc., 2004 WL 36010, F.Supp.2d (D Del. 2004) (Patent pool on DVD technology did not violate antitrust laws)
D. Royalty Extending Beyond Rights
• Scheiber v. Dolby Laboratories, Inc., 293 F3d 1014 (7th Cir. 2002) (Court protests, but enforces rule that royalties beyond term of patent are invalid)
• Applera Corp. v. MJ Research, Inc., 349 F.Supp.2d 338 (D. Conn. 2004) (no violation based on refusal to deal arose where patent owner refused to grant manufacturer end user licenses for purchasers of its products, insisting instead that manufacturer obtain license from patent owner itself)
• Morris Commun. Corp. v. PGA Tour, Inc., 2004 WL 627723, F3d , 70 USPQ2d 1446 (11th Cir. 2004) (refusal to give access to real time scores had business justif that was not pretextual; desire to preserve value of its investment in creating and developing RTSS and promote competitiveness of its own website)
• Telecom Technical Services, Inc. v. Rolm Co., 388 F3d 820 (11th Cir. 2004) (Refusal to deal re copyrighted software did not violate Sherman Act)
• Independent Ink, Inc. v. Illinois Tool Works, Inc., 396 F3d 1342 (Fed. Cir. 2005) (Market power presumed from patent for tying claim, but not for monopolization claim)
• United States v. Dentsply Int’l, Inc., 399 F3d 181 (3d Cir. 2005) (dominant manufacturer of artificial teeth held monopoly power in the relevant market and exercised the power through enforcing exclusive dealing arrangements with dealers by dropping those who took on other company’s products that prevented or at least severely retarded entry into the market by competitors)
• Verizon v. Trinko, 124 S.Ct. 872 (2004) (complaint alleging breach of incumbent LEC’s duty to share its network with competitors did not state monopolization claim under § 2 of Sherman Act)
• U. S. v. Microsoft Corp., 253 F.3d 34 (DC Cir. 2001), cert. denied, 534 U.S. 952 (2001).
• Commercial Data Servers, Inc. v. International Business Machines Corp., 166 F.Supp2d 891 (S.D. N.Y. 2001).
• Elkins v. Microsoft corp., 817 A2d 9 (Ver. 2002) (Antitrust: indirect purchaser rule applies)
• In re South Dakota Microsoft Antitrust Litigation, 657 NW2d 668 (SD 2003) (Antitrust indirect purchaser class certified) • In re Tamoxifen Citrate Antitrust Litig., 429 F.3d 370 (2nd Cir. 2005) (patent owner’s settlement agreement with maker of generic version regarding time of market entry and other issues did not violate antitrust.)
• Freeman v. San Diego Association of Realtors, 322 F3d 1133 (9th Cir. 2003) (Price fixing in relation to real estate broker database; per se rule applies)
I. Deceptive/Unfair Business Practices
• Arizona Cartridge Remanufacturers Association, Inc. v. Lexmark International, Inc.,-- F.3d -- (9th Cir. 2005) (Terms in transfer of printer cartridges limiting use to single use were enforceable and not deceptive)
SECTION 15: Bankruptcy
• In re Discovery Zone, Inc., 2004 WL 2346002 (D. Del. 2004) (payments made on trademark license were bankruptcy preferences, but protected by the giving of new value to the payor-licensee after the payments were received)
• Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1983) (copyright license is not transferable and does not become part of bankruptcy estate)
• Dahar v. Ratheon Co., 880 F.2d 1491 (1st Cir. 1989) Trustee brought adversary proceeding to recover royalties allegedly owing under debtor's licensing agreement. Held: finding that debtor had assigned right to royalties solely as security for loan was not clearly erroneous, notwithstanding "absolute" nature of assignment; trustee had standing to seek royalty payments; and bankruptcy court's interpretation of royalty provision in licensing agreement was not clearly erroneous.
• In re Tudor Motor Assoc., 102 B.R. 936, 948 (D.N.J.1989) ("franchisee's contractual rights in a Franchise Agreement are generally considered property of the estate, except where said agreements have been effectively terminated prior to a debtor's filing.")
• Watson v. H.J. Heinz Co., 101 Fed.Appx. 823 (Fed. Cir. 2005) (Invention rights remained in BR estate since not properly scheduled; inventor lacked standing to sue third party user)
• Taylor Corp. v. Four Seasons Greetings, LLC, 403 F.3d 958 (8th Cir. 2005) (Bankruptcy order approving assets purchase agreement transferred debtor's copyrights by operation of law.)
• In re DAK Industries, Inc., 66 F.3d 1091 (9th Cir. 1995) (Contract under which computer vendor (debtor) had entered prepetition allowing debtor to install software on computers that debtor sold, was in effect a sale of a right to make multiple copies of software in a particular format and, thus, payments due under the contract were not post-petition obligations, but a pre-petition debt; court had to look through form of transaction to the economic realities of the particular arrangement, to determine whether creditor was entitled to administrative expense for debtor's postpetition use of subject property. “The agreement here provided that upon signing, DAK was absolutely obligated to pay $2,750,000, even if it sold only one copy of Word. The fact that some of the payments became due postpetition does not alter the fact that the entire debt was absolutely owed prepetition, and was therefore prepetition debt.” “DAK did not employ Word over a period of time in order to run its operation. Rather, it sold the program to consumers. Accordingly, DAK's postpetition distribution of Word is more like the sale of inventory than the utilization of the claimant's trademark or device described in B K of Kansas and Neville Island.”)
• In re B K of Kansas, Inc., 82 B.R. 135 (Bankr.D.Kan.1988), aff'd, 99 B.R. 446 (D.Kan.1989) (court allowed an administrative expense claim for the debtor's postpetition display of the Burger King trademark in order to attract customers)
• In re Neville Island Glass Co., Inc., 78 F.Supp. 508 (W.D.Penn.1948) (court allowed an administrative expense claim for the debtor's use in its glass manufacturing process of the claimant's patented equipment, which was installed in the debtor's plant pursuant to a lease license agreement.)
• Broadcast Corp. of Georgia v. Broadfoot, 54 B.R. 606 (N.D.Ga.1985), aff'd sub nom. In re Subscription Television of Greater Atlanta, 789 F.2d 1530 (11th Cir.1986) (court allowed an administrative expense claim because the claimant had continued to provide video scrambling services to the debtor, a subscription television station, after it had filed for bankruptcy)
• In re Udell, 18 F.3d 403 (7th Cir. 1994) (In a Chapter 13 case, employer's right to injunction to prevent former employee from violating his covenant not to compete did not qualify as a "claim" dischargeable in bankruptcy, but bankruptcy court could lift stay to allow creditor to seek permanent injunctive relief only after considering prejudice to debtor or bankruptcy estate, relative hardship to debtor and employer, and employer's probability of success on merits. For bankruptcy purposes, a "debt" is a liability on a "claim." 11 U.S.C. § 101(12). Under § 101(5) of the Code, a " 'claim' means" (A) right to payment ... or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.”
• United States v. Inslaw, Inc., 932 F.2d 1467, 1473 (D.C.Cir.1991), cert. denied, 502 U.S. 1048, 112 S.Ct. 913, 116 L.Ed.2d 813 (1992) ("The object of the automatic stay provision is ... to make sure that creditors do not destroy the bankrupt estate in their scramble for relief." The automatic stay did not bar the Department of Justice from using computer software provided by, and claimed by, a debtor in bankruptcy. Court rejected debtor's argument that the Department's use of the software without the debtor's consent amounted to an "exercise of control" over property of the estate within the meaning of subsection 362(a)(3), commenting that such a construction of the statute "would take it well beyond Congress's purpose.")
• Computer Communications, Inc. v. Codex Corp., 824 F.2d 725 (9th Cir. 1987) Unilateral termination of joint marketing and development agreement to purchase computer equipment from debtor after debtor filed petition for reorganization violated automatic stay. Contractual clause allowing for termination upon either party's declaration of bankruptcy was void.
D. Bankruptcy Sales Free of Interests
• Beckerman v. M. Hidary & Co., Inc., 324 B.R. 434 (D. Conn. 2005) (transactions by debtor’s estate split the underlying right to collect royalties and enforce a trademark from the license itself; when the debtor rejected the license, licensee had right to cancel license as against the transferee of the royalty rights and underlying trademark)
• FutureSource LLC v. Reuters Ltd., 312 F.3d 281 (7th Cir. 2002), cert. denied, 123 S.Ct. 1769 (2003) (Where licensor merely promised to license data specified in licensing agreement to licensee as and when those data were created, even if licensee’s interest or license in debtor’s intellectual property was not extinguished by the sale of debtor’s assets pursuant to bankruptcy court’s order, licensee had no license in data that debtor, or purchaser of debtor’s assets, had not yet created.)
• In re Gucci, 126 F.3d 380 (2d Cir. 1997) (court reserves judgment on the effect that a rejection of a trademark license would have on the “rights” created by that rejected license. “The effects of a rejection of a trademark licensing agreement are a matter that remains to be litigated. To date, this Court has not addressed whether a § 365 rejection operates as a kind of avoiding power to bring back into the estate a license of the debtor's trade name or trademark that was conferred by the debtor prior to its bankruptcy filing.”)
• Itofca, Inc. v. Megatrans Logistics, Inc., 322 F3d 928 (7th Cir. 2003) (Bankruptcy court order was res judicata on transferee’s right to use licensed material)
E. Licenses as Executory Contracts
• AGV Productions, Inc. v. Metro-Goldwyn-Mayer, Inc., 115 F.Supp.2d 378 (SD NY 2000) (Predecessor's right of first negotiation to produce sequel survived predecessor's bankruptcy reorganization. The court emphasized that an executory contract may be assumed or rejected, but cannot be assumed in part and rejected in part.)
• In re Cellnet Data Systems, 327 F3d 242 (3d Cir. 2003) (Rejection of license; royalties split)
• Everex Sys., Inc. v. Cadtrak Corp. (In re CFLC, Inc.), 89 F.3d 673, 679 80 (9th Cir.1996) (federal patent law of nonassignability preempts state law relating to patent license assignability; prevents assumption or assignment of the license in bankruptcy; a license is an executory contract: “Cadtrak owes significant continued performance to the licensee: it must continue to refrain from suing it for infringement, since a nonexclusive patent license is, in essence "a mere waiver of the right to sue" the licensee for infringement. … The licensee also owes performance: it must mark all products made under the license with proper statutory patent notice. Since failure to mark deprives the patent holder of damages in an infringement action before the infringer has actual notice of the infringement, the licensee's performance of this duty is material. Therefore, the license is an executory contract under § 365.).
• RCC Technology Corp. v. Sunterra Corp. (In re Sunterra Corp.), 361 F3d 257 (4th Cir. 2004) (SW license was executory contract; could not assume or assign despite fact that terms of license did allow some assignment)
SECTION 16: Secured Financing
• Dahar v. Ratheon Co., 880 F.2d 1491 (1st Cir. 1989) Trustee brought adversary proceeding to recover royalties allegedly owing under debtor's licensing agreement. Held: finding that debtor had assigned right to royalties solely as security for loan was not clearly erroneous, notwithstanding "absolute" nature of assignment; trustee had standing to seek royalty payments; and bankruptcy court's interpretation of royalty provision in licensing agreement was not clearly erroneous.
B. Filing, Perfection and Registration
• Broadcast Music, Inc. v. Hirsch, 104 F.3d 1163 (9th Cir. 1996) (Assignment of royalties under a copyright license was not a transfer of the copyright and, thus, was not required to be registered with the copyright office.)
• In re Cybernetic Services, Inc., -- F.3d – (9th Cir. 2001) (Neither Article 9 nor the Patent Act requires filing with the patent Office to perfect a security interest in a patent. The Patent Act contains no express preemptive language and there was no conflict or field preemption of state law in this regard. “State law is not displaced merely because the contract relates to intellectual property.”)
SECTION 17: Open Source Licenses
• Computer Associates v. Quest, - F. Supp2d - (ND Ill 2004) A developer’s use of an open source tool to create parsed code in copyrighted program does not prevent developer from enforcing its rights in resulting program; GNU GPL only prohibits the developer from claiming rights in a modified version of the software tool and not in output of that tool
• Computer Associates Int’l v. Quest Software, Inc., 2004 WL 1459495, F.Supp.2d (ND Ill. 2004) Trade secret re source cde; copyrght even if well-known elements; use of freeware source code in db software did not violate general public license applicable to the freeware
• Lawson v. Advanced Equities, 2003 WL 21468579 (WD Ky. 2004) (Open source; lawyers not liable for private placement statements)
• Progress Software Corp. v. Mysql AB, 195 F.Supp.2d 328 (D Mass. 2002) (Fact dispute about whether product was derivative or a separate work under GPL precluded preliminary injunction; disclosure of source code may have cured the issue.; “With respect to the General Public License ("GPL"), MYSQL has not demonstrated a substantial likelihood of success on the merits or irreparable harm. Affidavits submitted by the parties' experts raise a factual dispute concerning whether the Gemini program is a derivative or an independent and separate work under GPL ¶ 2. After hearing, MySQL seems to have the better argument here, but the matter is one of fair dispute. Moreover, I am not persuaded based on this record that the release of the Gemini source code in July 2001 didn't cure the breach.”)
• Red Hat, Inc. v. The SCO Group, Inc., 2004 WL 883400 (D. Del. 2004) (Court stays declaratory judgment action against SCO because already pending action in another court takes precedence)
• Welte v. Fortinet UK, Ltd., Landgericht Muenchen 1, No. 21 0 7240/05 (4/12/05) (Enjoins distribution of GPL software without compliance with GPL disclosure terms; prior held the GPL enforceable)
