ETC Patent Victory Upheld by U.S. Court of Appeals

04/09/2009

TransCore Ruling May Change How Licenses Drafted
Law360

In a ruling that could dramatically change how patent licenses are drafted, a federal appeals court has held that a covenant not to sue is a license and can be subject to patent exhaustion.

The U.S. Court of Appeals for the Federal Circuit on Wednesday upheld the dismissal of TransCore LP’s infringement suit against Electronic Transaction Consultants Corp. over automated toll patents, finding that TransCore’s patent rights were exhausted based on a covenant not to sue in an earlier settlement agreement with Mark IV Industries.

Russell Emerson, an attorney representing ETC, said he did not think this decision would have much change on the licensing area, but acknowledged that parties would be wise to draft terms carefully.

“People are going to have to be careful about the way they word their patent agreements and licenses. To the extent people had an idea that a covenant not to sue did not grant authority to the grantee, obviously this case disabuses them of that,” he said.

Article excerpted from Law360.

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