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Summary Judgment Granted for Defendant on Patent License Defense

By Michael Smith

Orion IP, LLC v. Mercedes-Benz USA, LLC, --- F.Supp.2d ----, 2008 WL 2222964(E.D.Tex. May 30, 2008) (NO. 6:07 CV 451)
Judge: Leonard Davis
Holding: Defendant's Motion for Judgment on the Pleadings or in the Alternative Motion for Summary Judgment GRANTED
One interesting issue I have seen come up more than once in local patent infringement litigation is what happens when a patent holding company settles claims against one defendant, and then a later case is filed either by a company related to the releasing plaintiff against the released defendant, or by the settling plaintiff against a company related to the released defendant.  (Got that?)
The latter situation arose when Orion sued DaimlerChrysler Corporation (?DCC?) for infringement of two patents in Orion IP, LLC v. Ford Motor Company, 2:04cv313. Orion had previously sued Mercedes-Benz USA, LLC ("MBUSA") for infringement of the patents in Orion IP LLC v. Mercedes-Benz USA LLC, 6:05cv322. On February 16, 2006, DCC and Orion entered into a ?Patent License and Settlement Agreement? to resolve both litigations. DCC settled with Orion on behalf of itself and all ?DCC Related Companies,? including MBUSA, and in the Settlement Agreement, Orion granted ?DCC and the DCC Related Companies a nonexclusive, non-transferable ... royalty-free, fully paid-up, worldwide license ...? to both patents.
On August 3, 2007, the Daimler companies (including MBUSA) spilt from the Chrysler companies. Chrysler LLC is the successor to DCC and retained the benefits and obligations under the Settlement Agreement. MBUSA is no longer affiliated with Chrysler LLC.  On September 25, 2007, Orion filed suit against MBUSA alleging MBUSA ?lost? its status as licensee of the patents when the Daimler-Chrysler split occurred and MBUSA infringes the patents. MBUSA denied infringement, and alleged that it has a license to practice the patents, and that it has a release of claims for any infringement.  Accordingly, it filed a motion for judgment on the pleadings or in the alternative for summary judgment against Orion's patent infringement claims, claiming it is still entitled to the benefits of the Settlement Agreement.
Judge Davis concluded that MBUSA was entitled to the benefits of the settlement agreement, even after the split.  "The Agreement is what it is as written", he wrote.  "The Court will not rewrite the Settlement Agreement to place limitations on the license. The language of the Agreement does not support Orion's proffered interpretation, and the Court rejects it."
In the order's final paragraph, Judge Davis noted that while MBUSA's counterclaims of invalidity and noninfringment are moot in light of his order, its counterclaim for breach of contract remains justiciable. But, MBUSA based its allegation of the Court's jurisdiction over its counterclaims on the Court's jurisdiction in patent cases.  Accordingly, "[i]f MBUSA wishes to continue to assert its breach of contract claim in this Court, the Court ORDERS MBUSA to replead its claim specifying the basis for jurisdiction within ten days of this Order or the Court will dismiss the claim without prejudice."

Full post as published by Eastern District of Texas Federal Court Practice on June 02, 2008 (boomark / email).