Difference between revisions of "Patent Tools Feedback"

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See [[Patent Tools Public Discussion]]
 
See [[Patent Tools Public Discussion]]
  
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Scope of Licensed Patent Rights
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'''Model Patent License'''
  
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It has been suggested that we include additional statements or warnings in the patent preamble relating to the scope of the patent license grant. For example, such a statement might say:
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''Issue: Is the scope of the definition of "Licensed Patent Rights" broad enough?''
  
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"Potential licensees are advised to conduct their own due diligence to ensure that they have licensed or bargained for all rights necessary from the patent owner to practice an invention. Licensees should be careful to note that the definition of Licensed Patent Rights does not necessarily include, in addition to the listed patents and patent applications, all other related patents and patent applications necessary to practice the invention, but only certain categories of related patents such as continuations or divisionals of the listed patents and patent applications. Thus, for example, the patent owner may hold other dominant patents which are not included in these rights unless specifically listed."
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''Discussion''
  
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This statement would warn licensors of the need to conduct due diligence and not to assume that the patent owner has licensed or included all necessary rights to practice an invention. The definition of Licensed Patent Rights generally includes, in addition to the listed patents and patent applications, so-called "daughter" or "sister" applications: divisionals, continuations, continuations-in-part (to the extent covering the same inventions), and foreign filings.
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The definition of Licensed Patent Rights currently reads:
  
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Some commentators have pointed out that these daughter and sister applications should be included by default because they may be yet unpublished (in the process of prosecution). Therefore, a potential licensee may not necessarily be able to discover their existence, even with due diligence. Thus, including these applications, even if not specifically listed, provides greater certainty and fairness.  
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“Licensed Patent Rights” means (a) the patents and patent applications listed in the License Data Record, (b) all divisionals, continuations, and foreign counterpart applications claiming priority from any patent or patent application described in (a), (c) those claims of any continuations-in-parts that claim priority exclusively from the patents or patent applications described in (a) and (b); (d) all patents issuing from patent applications included in (a) through (c); and (e) all reissues, reexaminations, renewals, and extensions of any patents included in (a) through (d).
  
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However, the situation is different with parent and grand-parent patents (i.e., prior patent applications to which a patent or patent application may claim priority). In such cases, the daughter application will expressly refer back to the parent or grandparent application, and thus a potential licensee may discover them with reasonable due diligence.  Furthermore, attempting to relate directly the claims of the parent or grandparent applications to the claims of the daughter application can generate ambiguity, because the priority rules allow a daughter application to claim back based on the specifications--not the claims--of the parent or grandparent application. Thus, it would be difficult to create clear and unambiguous criteria for inclusion of specific claims of the parent or grandparent application within the Licensed Patent Rights by default based solely on claims of the daughter application.
 
  
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In light of these considerations, the best course may be to alert the potential licensee of this issue, and the need to conduct a reasonable degree of diligence prior to entering into a license, rather than to attempt to encompass all necessary rights within the definition of the Licensed Patent Rights and thus sow the seeds for misunderstandings and future disputes.
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The current definition includes patents and applications that are expressly listed as well as most types of subsequent daughter applications that are related to them by priority.
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One criticism of this definition is that may not be broad enough to protect the Licensee from the situation in which the Licensor does not include all necessary patents in the license grant (for example, where the Licensor licenses an improvement patent without licensing a dominant blocking patent). In those situations, a Licensee who fails to conduct sufficient due diligence may think that it has licensed all necessary rights from the Licensor, and may be surprised later if the Licensor seeks to enforce dominant patents. This  outcome can be unfair to the extent that it defeats the expectations of the Licensee with the respect to the benefit of its bargain or induces the Licensee to infringe the Licensor's unlicensed dominant patents.
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While some courts have addressed this situation (e.g., "TransCore v. Electronic Transaction Consultants Corp.", 563 F.3d 1271 (Fed. Cir. 2009)), under the doctrine of equitable or legal estoppel, the case law does not provide adequate certainty for drafting purposes. Thus, it would be desirable to take a clear position with respect to the draft language.
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An earlier draft of this provision also included certain parent applications, to which the listed applications may claim priority. However, some commentators objected to the inclusion of parent applications, on the basis that this would create ambiguity and uncertainty. They pointed out, for example, that the claims of a daughter application are entitled to claim priority based on the specifications of a parent application, but there is no clear method for determining to what extent the claims of the parent application should be licensed based merely on priority. In addition, such a definition, while broader than the current definition, would not entirely address the issue. For example, the dominant patent may not be related by priority.
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Thus, commentators have suggested a number of alternatives:
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* use language similar to GPL 3.0 ("A contributor's 'essential patent claims' are all patent claims owned or controlled by the contributor, whether already acquired or hereafter acquired, that would be infringed by some manner, permitted by this License, of making, using, or selling its contributor version, but do not include claims that would be infringed only as a consequence of further modification of the contributor version")
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Discussion: One difficult of adapting such a definition is that the object of the license in the case of GPL is a software program, which serves as a specification around which the scope of the license can be limited. In the present license, it is a patent or patent application itself which is being licensed, and thus there is no separate specification or software code which serves to limit the scope of the license.
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* include all patents "necessary to practice" the licensed invention (an example would be Microsoft's Open Specification Promise, which states in part "'Microsoft Necessary Claims' are those claims of Microsoft-owned or Microsoft-controlled patents that are necessary to implement only the required portions of the Covered Specification that are described in detail and not merely referenced in such Specification. 'Covered Specifications' are listed below.")
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Discussion: This type of definition would probably provide the maximum comfort the the Licensee that it has obtained the rights necessary to practice a particular specification. However, it does require that a clear specification be given as part of the license. (But such a specification could come from the licensed patent itself, or from a particular physical embodiment, software code, or standard). Furthermore, it would shift the burden of conducting patent due diligence onto the Licensor, to the extent that it needs to conduct analysis to reassure itself that granting such a broad scope is consistent with its business strategy and legal obligations. Nevertheless, this remains a viable and useful option alternative to address those scenarios where providing certainty to the Licensee is critical (e.g., for adoption and implementation of common industry standards and specifications).
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* limit the licensed patent rights only to listed patents (e.g., the Eco-Patent Commons defines the pledged patents as "patents on the Patent List, and no other license...")
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Discussion: This is the narrowest and most specific definition. Unlike the current definition, it would not include daughter applications, such as continuations and divisionals. However, this would greatly raise the level of uncertainty for the Licensee, particularly because daughter applications claiming the same subject matter may not yet be published and discoverable, even with due diligence by the Licensee. In the context of the Eco-Patent Commons, which is a free public non-assertion, it may be appropriate to provide such a "quit-claim" type of license, which confers no further assurances. And indeed, this is that situation with the Research Non-Assertion. However, in the context of the Patent License, which in some cases may carry a royalty, we want to provide a little more certainty for the Licensee.
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* Some commentators have suggested that we provide two alternative definitions of Licensed Patent Rights, which the Licensor may choose from when making its offer. One definition would be the current definition, accompanied by warning to the Licensee regarding the need to conduct its own due diligence prior to licensing. The second alternative would be some version of the "necessary to practice" type definition, along with the option for the Licensor to supply the Specification that it wishes to license (which could be a specification of a patent).
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Discussion: We are currently considering this approach because it provides greater choice and flexibility in any given situation to shift the burden of conducting due diligence, which may vary for the technology, its intended uses, and the intended audience. Having these alternative definitions may also facilitate Licensees and Licensors bargaining over the allocation of risks and uncertainties.

Revision as of 18:33, 22 June 2010

See Patent Tools Public Discussion

Model Patent License

Issue: Is the scope of the definition of "Licensed Patent Rights" broad enough?

Discussion

The definition of Licensed Patent Rights currently reads:

“Licensed Patent Rights” means (a) the patents and patent applications listed in the License Data Record, (b) all divisionals, continuations, and foreign counterpart applications claiming priority from any patent or patent application described in (a), (c) those claims of any continuations-in-parts that claim priority exclusively from the patents or patent applications described in (a) and (b); (d) all patents issuing from patent applications included in (a) through (c); and (e) all reissues, reexaminations, renewals, and extensions of any patents included in (a) through (d).


The current definition includes patents and applications that are expressly listed as well as most types of subsequent daughter applications that are related to them by priority.

One criticism of this definition is that may not be broad enough to protect the Licensee from the situation in which the Licensor does not include all necessary patents in the license grant (for example, where the Licensor licenses an improvement patent without licensing a dominant blocking patent). In those situations, a Licensee who fails to conduct sufficient due diligence may think that it has licensed all necessary rights from the Licensor, and may be surprised later if the Licensor seeks to enforce dominant patents. This outcome can be unfair to the extent that it defeats the expectations of the Licensee with the respect to the benefit of its bargain or induces the Licensee to infringe the Licensor's unlicensed dominant patents.

While some courts have addressed this situation (e.g., "TransCore v. Electronic Transaction Consultants Corp.", 563 F.3d 1271 (Fed. Cir. 2009)), under the doctrine of equitable or legal estoppel, the case law does not provide adequate certainty for drafting purposes. Thus, it would be desirable to take a clear position with respect to the draft language.

An earlier draft of this provision also included certain parent applications, to which the listed applications may claim priority. However, some commentators objected to the inclusion of parent applications, on the basis that this would create ambiguity and uncertainty. They pointed out, for example, that the claims of a daughter application are entitled to claim priority based on the specifications of a parent application, but there is no clear method for determining to what extent the claims of the parent application should be licensed based merely on priority. In addition, such a definition, while broader than the current definition, would not entirely address the issue. For example, the dominant patent may not be related by priority.

Thus, commentators have suggested a number of alternatives:

  • use language similar to GPL 3.0 ("A contributor's 'essential patent claims' are all patent claims owned or controlled by the contributor, whether already acquired or hereafter acquired, that would be infringed by some manner, permitted by this License, of making, using, or selling its contributor version, but do not include claims that would be infringed only as a consequence of further modification of the contributor version")

Discussion: One difficult of adapting such a definition is that the object of the license in the case of GPL is a software program, which serves as a specification around which the scope of the license can be limited. In the present license, it is a patent or patent application itself which is being licensed, and thus there is no separate specification or software code which serves to limit the scope of the license.

  • include all patents "necessary to practice" the licensed invention (an example would be Microsoft's Open Specification Promise, which states in part "'Microsoft Necessary Claims' are those claims of Microsoft-owned or Microsoft-controlled patents that are necessary to implement only the required portions of the Covered Specification that are described in detail and not merely referenced in such Specification. 'Covered Specifications' are listed below.")

Discussion: This type of definition would probably provide the maximum comfort the the Licensee that it has obtained the rights necessary to practice a particular specification. However, it does require that a clear specification be given as part of the license. (But such a specification could come from the licensed patent itself, or from a particular physical embodiment, software code, or standard). Furthermore, it would shift the burden of conducting patent due diligence onto the Licensor, to the extent that it needs to conduct analysis to reassure itself that granting such a broad scope is consistent with its business strategy and legal obligations. Nevertheless, this remains a viable and useful option alternative to address those scenarios where providing certainty to the Licensee is critical (e.g., for adoption and implementation of common industry standards and specifications).

  • limit the licensed patent rights only to listed patents (e.g., the Eco-Patent Commons defines the pledged patents as "patents on the Patent List, and no other license...")

Discussion: This is the narrowest and most specific definition. Unlike the current definition, it would not include daughter applications, such as continuations and divisionals. However, this would greatly raise the level of uncertainty for the Licensee, particularly because daughter applications claiming the same subject matter may not yet be published and discoverable, even with due diligence by the Licensee. In the context of the Eco-Patent Commons, which is a free public non-assertion, it may be appropriate to provide such a "quit-claim" type of license, which confers no further assurances. And indeed, this is that situation with the Research Non-Assertion. However, in the context of the Patent License, which in some cases may carry a royalty, we want to provide a little more certainty for the Licensee.

  • Some commentators have suggested that we provide two alternative definitions of Licensed Patent Rights, which the Licensor may choose from when making its offer. One definition would be the current definition, accompanied by warning to the Licensee regarding the need to conduct its own due diligence prior to licensing. The second alternative would be some version of the "necessary to practice" type definition, along with the option for the Licensor to supply the Specification that it wishes to license (which could be a specification of a patent).

Discussion: We are currently considering this approach because it provides greater choice and flexibility in any given situation to shift the burden of conducting due diligence, which may vary for the technology, its intended uses, and the intended audience. Having these alternative definitions may also facilitate Licensees and Licensors bargaining over the allocation of risks and uncertainties.

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