U.S. Court of Appeals for the Federal Circuit, Cheetah Omni LLC v. AT&T Services, Inc., Docket No. 19-1264

Patent Infringement

License Agreements

Patent’s Continuations

Implied License Presumption

Legal Estoppel

Legal estoppel prevents licensors from derogating or detracting from definable license rights granted to licensees for valuable consideration

Contract Drafting

Cheetah owns U.S. Patent 7,522,836 (“the ’836 patent”) directed to optical communication networks. AT&T uses a system of hardware and software components in its AT&T fiber optic communication networks.

In the district court, Cheetah asserted that AT&T infringes the ’836 patent by making, using, offering for sale, selling, or importing its fiber equipment and services. In response to the allegations, Ciena moved to intervene in the suit because it manufactures and supplies certain com- ponents for AT&T’s fiber optic systems and because those components formed the basis of some of Cheetah’s infringement allegations. The court granted Ciena’s motion to intervene.

(…) In their motion, Ciena and AT&T argued that the two prior licenses included implicit licenses to the ’836 patent covering all of the accused products. The district court agreed, granting summary judgment and dismissing the suit with prejudice.

(…) Cheetah granted to Ciena “a perpetual, irrevocable, worldwide, non- exclusive, fully paid-up license under the Licensed Patents to make, have made (directly or indirectly and solely for Ciena or its Affiliates), use, offer to sell, sell, and import and export the Licensed Products.” J.A. 411. The agreement defined “Licensed Patents” to mean

(i) the Patents-in-Suit, and (ii) all parents, provisionals, substitutes, renewals, continuations, continuations-in-part, divisionals, foreign counterparts, reissues, oppositions, continued examinations, reexaminations, and extensions of the Patents-in-Suit owned by, filed by, assigned to or otherwise controlled by or enforceable by Cheetah or any of its Affiliates or its or their respective successors in interest at any time as of, prior to, on or after the Effective Date, whether filed before, on or after the Effective Date.

J.A. 410. The “Effective Date” was defined as “the earliest date upon which all Parties had signed the Agreement or identical counterparts thereof.” J.A. 411. The “Licensed Products” were defined as

(i) all past, present or future Ciena or Ciena Affiliate products, services or combinations, components, or systems of products or services, and any modifications or enhancements thereof, that could by themselves or in combination with other products, services, components or systems, be alleged to infringe at least one claim of at least one Licensed Patent in the absence of a license under this Agreement and (ii) all Ciena products identified or accused by Cheetah of infringing any claim of any of the Patents-in-Suit in its complaint, amended complaint, infringement contentions, or otherwise.

Key to the parties’ dispute is the relationship between the ’836 and ’714 patents. The ’714 patent is a continuation-in-part of U.S. Patent 6,943,925 (“the ’925 patent”). The ’836 patent is a continuation of U.S. Patent 7,145,704 (“the ’704 patent”), which is also a continuation of the ’925 patent. These relationships are depicted below: (...)

Because the ’714 patent was asserted in the ROADM litigation, it is necessarily included in the Ciena license. By its terms, the Ciena license also includes “all parents” to the patents in the ROADM litigation, and, as the parent to the ’714 patent, the ’925 patent is likewise an expressly li- censed patent under the agreement, even if not enumerated. The question we are presented with here, however, is whether the ’836 patent, a continuation of a continuation of the ’925 patent, i.e., its grandchild, is impliedly licensed under the Ciena license. In personal terms, because the uncle and grandparent of the ’836 patent, are licensed, is the ’836 patent also licensed?

Relying on our holding in General Protecht Group Inc. v. Leviton Manufacturing Co., 651 F.3d 1355, 1361 (Fed. Cir. 2011), the district court determined that the ’836 patent was impliedly licensed as the grandchild of the expressly licensed ’925 patent. Decision, slip op. at 10. The district court reasoned that an express license of the ’925 patent included an implied license for its continuations “because those continuations disclose the same inventions as the licensed patent.” Id. We agree.

We agree with the district court, and with AT&T and Ciena, that the licenses include an implied license to the ’836 patent that extends to the accused AT&T systems. Legal estoppel prevents licensors from derogating or detracting from definable license rights granted to licensees for valuable consideration. AMP Inc. v. United States, 389 F.2d 448, 452 (Ct. Cl. 1968). In TransCore, we interpreted legal estoppel to provide an implied license to a related, later-issued patent that was broader than and necessary to practice an expressly licensed patent. TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271, 1279 (Fed. Cir. 2009).

Two years later, we considered whether an express license to a patent includes an implied license to its continuations, even when the continuation claims are narrower than previously asserted claims. General Protecht, 651 F.3d at 1361. Relying on TransCore, we answered that question in the affirmative: “Where . . . continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well.” Id. We further explained that parties could contract around the presumption of an implied license if it did not “reflect their intentions” but that it was the parties’ burden to “make such intent clear in the license.” Id.

In General Protecht, the continuation patent at issue had not yet issued at the time of the parties’ express license of the parent patent. Cheetah attempts to cabin General Protecht’s holding to express licenses executed before the issuance of a continuation patent. We decline to read General Protecht so narrowly. The timing of patent issuance is not material to the policy rationale underpinning our implied license presumption. See TransCore, 563 F.3d at 1279. Moreover, if anything, it is easier for the parties to clearly identify an already-issued continuation and expressly exclude it from a license agreement.

(…) If Cheetah had a contrary intent, it could have made its intent clear in the agreement as a matter of contract drafting.

(U.S. Court of Appeals for the Federal Circuit, February 6, 2020, Cheetah Omni LLC v. AT&T Services, Inc., Docket No. 19-1264)