CAFC finds license inherently to include "have made" rights

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.



**UPDATE on 26 June 09

Comment of LBE on post on licensing on IPFinance-->

Of --"Party A grants to Party B an [exclusive] licence with respect to the use of the Intellectual Property --, in the background presumption in the US, the co-owner would have a right to license [see Lucent v. Microsoft] but not a right as an exclusive licensor. Some agreements speak of party A granting to party B an OPTION for an exclusive license. Some universities take the position that they can ONLY offer an option for an exclusive license, although that is not dictated by Bayh-Dole.

The initial post had the text:

This week's contract construction issue involves joint ownership. Joint ownership of IP rights is one of those relationships to which parties often gravitate, even if legal counsel takes a dim view. In that context, consider the following two provisions, which in various related forms, I have encountered from time to time.

First, the parties state that they "agree they shall jointly own all of the intellectual property rights resulting from their mutual performance of the Project."

Second, the parties further agree that "Party A grants to Party B an [exclusive] licence with respect to the use of the Intellectual Property rights created during their mutual performance of the Project [for defined purposes of use]."

The obvious question is why are there two clauses apparently covering the same subject matter, one establishing joint ownership, while the other purports to grant a licence from one party to the other? If the IP is jointly owned then, subject to any particular local laws, each party is permitted to do what it likes with respect to these rights.