On February 28, 2014, the U.S. District Court for the Northern District of Florida granted summary judgment to DirecTV, Inc. in Global Communications, Inc. v. DirecTV, Inc. et al (2014 U.S. Dist. LEXIS 25992). The decision involved the interpretation of “have made” rights in the context of a covenant not to sue, as well as whether there is an ability to sue the recipient of a covenant not to sue for the activities of an upstream manufacturer. While this case did not directly involve the life sciences industry, the principles are relevant broadly to licensing and infringement settlements across all industries.
In short, Global Communications had covenanted not to sue DirecTV for the use of certain satellite television patents controlled by Global Communications. In this case, Global Communications brought suit against DirecTV for the activities under the patent rights of DirecTV’s upstream manufacturers and suppliers.
In a prior lawsuit between the parties, the court held that the covenant not to sue is equivalent to a license. In the current case, the court was asked in part to decide whether this covenant not to sue included “have made” rights, i.e., the right to have others make the products on behalf of DirecTV. In a 2009 case, CoreBrace LLC v. Star Seismic LLC, the Federal Circuit court applying Utah state law held that a license conveying the “right to ‘make, use and sell’ a product inherently includes the right to have it made by a third party, absent a clear indication of intent to the contrary.” In this particular case, the contract between Global Communications and DirecTV included an express provision that required upstream manufacturers to negotiate in good faith for a license to the Global Communications patent right for a royalty not to exceed 3%. The court decided it could not grant summary judgment that the covenant not to sue included the equivalent of “have made” rights because this other provision in the agreement expressly indicated that upstream manufacturer license rights needed to be negotiated and therefore were not included.
The court did grant summary judgment to DirecTV on the basis that Global Communications had agreed not to sue DirecTV “based in whole or in part, on the alleged infringement” of the Global Communications patent rights. The court interpreted this covenant not to sue to apply to not only direct infringement by DirecTV, but also inducing infringement or contributory infringement.
Key takeaways from this case include:
“Have made” rights are generally considered to be included in “make, use and sell” license rights unless the parties clearly indicate otherwise.
Provisions indicating a need to negotiate license rights for upstream manufacturers may result in “have made” rights not being included in the license grant.
A covenant not to sue may preclude suit not only for direct infringement but also induced or contributory infringement.