U.S. Court of Appeals for the Fifth Circuit, RPD Holdings, LLC v. Tech Pharmacy Services, Docket No. 17-11113

Contract drafting (time):

License

« Irrevocable » and « perpetual »

Texas Law

(…) Both cases explain that the use of “perpetual” indicates that the license may not be revoked at will; the use of “irrevocable” goes one step further and indicates that the license may not be revoked for any reason, even a breach by the other side.

See Nano-Proprietary, Inc. v. Canon, Inc., 537 F.3d 394 (5th Cir. 2008); Timeline, Inc. v. Proclarity Corp., No. C05-1013-JLR, 2007 WL 1574069 (W.D. Wash. May 29, 2007).

(…) RPD is arguably correct that because the License granted under the License Agreement was “perpetual,” under Texas law, it was therefore not revocable at will. This does not mean, though, that Tech Pharm would not be excused from its obligations if the OnSite debtors were to materially breach the License Agreement. RPD has offered no authority holding that a license that is only “perpetual,” and not “perpetual and irrevocable,” is irrevocable in the face of material breach—and, indeed, the cases it presents suggest the opposite.

(…) Texas law “disfavors” perpetual contracts, but will typically treat a contract as perpetual—and therefore not revocable at will—if it offers a definite endpoint for the party’s obligation. See, e.g., Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 842 (Tex. 2010). Here, indexing the License Agreement to the duration of the patent generated a definite endpoint. As we explain, however, we do not need to determine whether the License Agreement was in fact perpetual—even if it was perpetual, that still does not mean that it was irrevocable in the face of a material breach.

(U.S. Court of Appeals for the Fifth Circuit, Oct. 29, 2018, RPD Holdings, LLC v. Tech Pharmacy Services, Docket No. 17-11113, Circuit Judge Higginbotham)