Licensing agreements are supposed to reflect the intent of the contracting parties in connection with permission to use intellectual property rights. When litigators and the courts get ahold of such agreements, however, the results can be far afield of what the parties expressed in their agreement. This webinar will focus on some of those unintended consequences, both as a matter of contract law in general and as a matter of licensing law specifically. Speaker: Thomas Moore III - Attorney, Royse Law Firm, PC

1. What Licensing Lawyers Should
Know About Litigation
Palo Alto Area Bar Association
Thomas E. Moore III
Royse Law Firm, PC
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2. Unexpected Consequences
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3. Contract Interpretation
“I can’t imagine what a litigator might
know about contract law other than
how to best to persuade the trier of fact
to misconstrue the parties’ intent . . .”
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4. Civ. Code §1636. A contract must be so interpreted as to
give effect to the mutual intention of the parties as it
existed at the time of contracting, so far as the same is
ascertainable and lawful.
Civ. Code §1641. The whole of a contract is to be taken
together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other.
Civ. Code §1643. A contract must receive such an interpretation
as will make it lawful, operative, definite, reasonable, and
capable of being carried into effect, if it can be done without
violating the intention of the parties.
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BASIC RULES

5. Copyright holder bears the burden of proving that defendant’s conduct
was unauthorized. Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir.
1995)
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Rule for License Agreements

6. Pacific Gas & Electric Co. v. G. W. Thomas Drayage & Rigging Co., Inc., 69
Cal.2d 33, 37 (1968): Extrinsic evidence is admissible not only to resolve
an ambiguity but also to show that an ambiguity exists: “A rule that
would limit the determination of the meaning of a written instrument to
its four corners merely because it seems to the court to be clear and
unambiguous would either deny the relevance of the intention of the
parties or presuppose a degree of verbal precision and stability our
language has not attained.” 69 Cal.2d at 37.
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Rule for Admission of Extrinsic Evidence

7. Advent of New Technology
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8. At issue is a clause in Miss Lee's 1952 contract with
Disney that denies the company the right to ''make
phonograph recordings and/or transcriptions for
sale to the public.'‘
NY Times, “Peggy Lee is Suing Disney,” Nov. 17, 1988
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9. LIMITATION OF LIABILITY: LICENSOR OR ANY DIRECTOR, OFFICER,
OR EMPLOYEE OF LICENSOR ACTING IN HIS OR HER CAPACITY AS A
DIRECTOR, OFFICER, OR EMPLOYEE OF LICENSOR (COLLECTIVELY,
THE “AFFECTED PARTIES”) SHALL NOT BE LIABLE TO LICENSEE FOR
ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
PUNITIVE DAMAGES ARISING OUT OF ANY CAUSE OF ACTION
RELATING TO THIS AGREEMENT, OR BASED ON MAKING, USING,
SELLING OR IMPORTING ANY PRODUCTS OF LICENSEE THAT
IMPLEMENT PROPRIETARY INFORMATION, WHETHER UNDER
THEORY OF CONTRACT, TORT, INDEMNITY, PRODUCT LIABILITY OR
OTHERWISE.
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Operative Contract

10. LIMITATION OF LIABILITY: LICENSOR … SHALL NOT BE LIABLE TO
LICENSEE FOR ANY DIRECT … DAMAGES ARISING OUT OF ANY
CAUSE OF ACTION RELATING TO THIS AGREEMENT . . .
OR BASED ON MAKING, USING, SELLING OR IMPORTING ANY
PRODUCTS OF LICENSEE THAT IMPLEMENT PROPRIETARY
INFORMATION, WHETHER UNDER THEORY OF CONTRACT, TORT,
INDEMNITY, PRODUCT LIABILITY OR OTHERWISE.
“operative, definite, reasonable, and capable of being carried
into effect” Civ. Code § 1643
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11. Covenants versus Conditions
Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008)
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12. The heart of the argument on appeal concerns whether the terms
of the Artistic License are conditions of, or merely covenants to,
the copyright license. Generally, a "copyright owner who grants a
nonexclusive license to use his copyrighted material waives his
right to sue the licensee for copyright infringement" and can sue
only for breach of contract. . . If, however, a license is limited in
scope and the licensee acts outside the scope, the licensor can
bring an action for copyright infringement.
The Artistic License also uses the traditional language of conditions
by noting that the rights to copy, modify, and distribute are
granted "provided that" the conditions are met. Under California
contract law, "provided that" typically denotes a condition.
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13. Royse Law Firm PC
MDY Industries, LLC v. Blizzard Entertainment, Inc., 629 F.3d 928 (9th Cir. 2010)
“We conclude that for a licensee's violation of a contract to constitute copyright
infringement, there must be a nexus between the condition and the licensor's
exclusive rights of copyright.”

14. Reach
Vernor v. Autodesk, 621 F.3d 1102
(9th Cir. 2010) Kirtsaeng v. John Wiley & Sons,
Inc., 568 U.S. ___ (2013)
Lexmark Int’l. v. Impression Products, No. 14-1617 (Fed. Cir. 2015)
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15. Misuse
“[C]ourts ‘may appropriately withhold their aid [to an IP owning
plaintiff] where the plaintiff is using the right asserted contrary to the
public interest.’” Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488,
492 (1942).
Anticompetitive Behavior: “Public policy forbids the use of the
patent to secure an exclusive right or limited monopoly not
granted by the Patent Office.” Morton Salt, 314 U.S. at 492
Contrary to Constitutional Policy “to promote the Progress of
Science and Useful Arts”: “The patentee, like these other
holders of an exclusive privilege granted in furtherance of a
public policy, may not claim protection of his grant by the courts
where it is being used to subvert that policy.” Morton Salt, 314
U.S. at 494
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16. Video Pipeline, Inc. v. Buena Vista Home
Entertainment, Inc., 342 F.3d 191 (3d Cir.
2004)
“The Website in which the Trailers are used
may not be derogatory to or critical of the
entertainment industry or of [Disney] .. . or
of any motion picture produced or
distributed by [Disney]”
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17. Perpetuity
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Kimble v. Marvel Enterprises, Inc., 576 U.S. ___ (2015)
Royalties on use of a patented item end with the expiration of
the patent.

18. Royse Law Firm PC
1. Licensee pay a sum equal to 10% of sales during the patent term, but
amortized beyond the patent term.
2. Post-expiration royalties are allowable so long as tied to a non-patent
right, even one closely related to a patent.
3. There is no bar to joint ventures that enable parties to share the risks
and rewards of commercializing an invention.
“A construction conferring a right in
perpetuity will be avoided unless compelled
by the unequivocal language of the
contract.” Zimco Restaurants v Bartenders
Union, 165 Cal. App. 2d 235, 238 (1958)
Alternatives

19. Royse Law Firm PC
What should licensing lawyers know about litigation?
Keep it simple.