Addressing whether a licensee properly terminated a patent license agreement with the inventor, the U.S. Court of Appeals for the Fifth Circuit affirmed a summary judgment victory for the licensee, agreeing that its termination was proper and did not constitute a violation of the terms of the agreement. DuVal Wiedmann, LLC v. Inforocket.com, Inc., Case No. 09-50787, 2010 U.S. App. LEXIS 19460 (5th Cir., Sept. 17, 2010) (Smith, J).

DuVal agreed in June 2001 to license a patent to Inforocket.com, a wholly owned subsidiary of Ingenio, in exchange for royalty payments. The agreement gave Ingenio the right to terminate on 60 days’ prior written notice to DuVal. In April 2004, Ingenio filed a request for reexamination of the ’836 patent with the U.S. Patent and Trademark Office (USPTO). In December 2007, the USPTO canceled some claims and rejected the remaining claims as unpatentable in light of prior art. DuVal amended the original claims, and in December 2008, the USPTO issued a reexamination certificate that included only the amended claims.

However, before the reexamination certificate was issued, Ingenio sent a letter to DuVal’s Chapter 7 bankruptcy trustee in August 2004 terminating the agreement. DuVal filed suit against Ingenio in district court in January 2008, seeking declaratory judgment as to the parties’ rights under the agreement, including if and when the agreement had been terminated. The 5th Circuit agreed with the district court and rejected DuVal’s argument that, because Ingenio sent its termination notice to DuVal’s bankruptcy trustee and not directly to DuVal as required by the agreement, the termination was improper. The court determined that strict compliance with the agreement’s notice provisions was not required because DuVal received actual notice and was not in any way prejudiced as a result of this minimal deviation.

Furthermore, the 5th Circuit dismissed DuVal’s contention that Ingenio never formally exercised its option to terminate the agreement 60 days after giving notice as required by the termination provisions, reasoning that the agreement provided no additional procedures to indicate that termination required something more than the passage of time. Although the court agreed with the district court’s determination that Ingenio did not accrue any royalty obligations during any time after it asked the USPTO to reexamine the ’836 patent, it did remand the question of whether Ingenio owes any royalties to DuVal for the period of January 1, 2004 through the date of Ingenio’s reexamination request.

Practice Note: If certain conditions to terminate a license agreement are desired, then the agreement should be drafted such that the conditions are expressly stated.