Baseload Energy, Inc. v. Roberts, No. 2010-1053 (Fed. Cir. Sept. 9, 2010).

In previous litigation for breach of contract, the parties reached a settlement agreement that granted the current plaintiff an option to acquire a nonexclusive license to the patent-in-suit. After the time to exercise that option had lapsed, the plaintiff was concerned that it could not develop the relevant technology—a flying wind turbine—without risking an infringement suit. As a result, it filed the current litigation seeking a declaratory judgment that the patent is invalid and unenforceable. However, the district court granted summary judgment in favor of the patentee—the defendant in the current suit—ruling that the previous settlement agreement barred all claims between the parties through its claim release provisions.

The Federal Circuit disagreed with the district court and reversed its summary judgment ruling, finding that the settlement agreement did not release the patentee’s claims of infringement or the accompanying defenses of invalidity or unenforceability. Although a licensee is not estopped from challenging the validity of the licensed patent by virtue of the license agreement, the parties may agree to release invalidity and unenforceability claims if the language is clear and unambiguous. Here, the Federal Circuit did not find any “such clear language and there was no release of either patent claims or defenses” by executing the settlement agreement. The previous litigation did not involve any claims related to patent infringement, invalidity, or enforceability. Thus, the court reasoned that there was no basis to infer that the parties intended to release such claims through the general release language of the settlement agreement. Moreover, the settlement agreement included provisions allowing for an option to acquire a nonexclusive license to the patent. Such provisions would not be necessary if all infringement claims were released, and there was nothing in the settlement agreement to suggest that infringement claims were preserved while patent invalidity defenses were released.

A copy of the opinion can be found here.