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CAFC finds license inherently to include "have made" rights

By Lawrence B. Ebert, Esq.

Corebrace went after Star for having a third party make a product
under the license of Corebrace to Star. Corebrace lost on a 12(b)(6)
at district court and at the CAFC.

The key line by the CAFC: The right to ?make, use, and sell? a product inherently
includes the right to have it made by a third party, absent a clear indication of intent to
the contrary.

The precedent:

In Carey, the Court of Claims, one of our predecessor courts, whose decisions
bind us, see South Corp. v. United States, 690 F.2d 1368, 1370-71 (Fed. Cir. 1982),
held that a license to ?produce, use, and sell? a product inherently includes the right to
have it made by a third party. The court stated that a license to produce, use, and sell
?is not restricted to production by the licensee personally or use by him personally or
sales by him personally. It permits him to employ others to assist him in the production,
and in the use and in the sale of the invention. Nor need he take any personal part in
the production.? Carey, 326 F.2d at 979.

The CoreBrace argument was rejected:

CoreBrace argues that the reservation of rights clause in the License precludes
an interpretation that the License includes ?have made? rights. According to CoreBrace,
because the License reserves to CoreBrace ?[r]ights not expressly granted to [Star],? the
License could not have implicitly granted ?have made? rights to Star. We disagree.
Because the right to ?make, use, and sell? a product inherently includes the right to have
it made, ?have made? rights are included in the License and not excluded by the
reservation of rights clause. A grant of a right to ?make, use, and sell? a product,
without more, inherently includes a right to have a third party make the product. A clear
intent shown in a contract to exclude ?have made? rights can negate what would
otherwise be inherent. In this case, however, CoreBrace has failed to show a clear
intent to exclude ?have made? rights from the License. In fact, other provisions of the
License appear to contemplate that Star may have the product made by a third party.
For example, the License provides that Star owns any improvements to the technology
?by a third party whose services have been contracted by [Star].?

(...)

Most importantly, nothing in the License indicates an intent to exclude ?have
made? rights. CoreBrace argues that the License?s provision requiring Star to indemnify
CoreBrace for all claims ?arising out of [Star?s] manufacture? demonstrates an intent that
no third party manufacture the products. According to CoreBrace, if ?have made? rights
had been intended, the License would have required indemnification for all claims
arising out of third parties? manufacture as well. However, that vague reference does
not show a clear intent to exclude ?have made? rights, especially in light of the
provisions indicating that third parties might be involved in supplying goods and
improving the technology in order for Star to exercise its rights under the License.

Full post as published by IPBiz on May 25, 2009 (boomark / email).