566 F.3d 1069 (Fed. Cir. 2009), 2008-1502, CoreBrace LLC v. Star Seismic LLC

Docket Nº:2008-1502.
Citation:566 F.3d 1069, 91 U.S.P.Q.2d 1209
Opinion Judge:LOURIE, Circuit Judge.
Party Name:COREBRACE LLC, Plaintiff-Appellant, v. STAR SEISMIC LLC, Defendant-Appellee.
Attorney:Charles L. Roberts, Workman Nydegger, of Salt Lake City, UT, argued for plaintiff-appellant. With him on the brief were L. David Griffin, Matthew A. Barlow, and Chad E. Nydegger. Of counsel on the brief was Mark E. Wilkey, Core-Brace, LLC, of West Jordan, UT. H. Dickson Burton, TraskBritt, PC, of...
Judge Panel:Before LOURIE, FRIEDMAN, and PROST, Circuit Judges.
Case Date:May 22, 2009
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1069

566 F.3d 1069 (Fed. Cir. 2009)

91 U.S.P.Q.2d 1209

COREBRACE LLC, Plaintiff-Appellant,

v.

STAR SEISMIC LLC, Defendant-Appellee.

No. 2008-1502.

United States Court of Appeals, Federal Circuit.

May 22, 2009

Page 1070

Charles L. Roberts, Workman Nydegger, of Salt Lake City, UT, argued for plaintiff-appellant. With him on the brief were L. David Griffin, Matthew A. Barlow, and Chad E. Nydegger. Of counsel on the brief was Mark E. Wilkey, Core-Brace, LLC, of West Jordan, UT.

H. Dickson Burton, TraskBritt, PC, of Salt Lake City, UT, argued for defendant-appellee. With him on the brief were Brick G. Power, and Casey K. McGarvey.

Before LOURIE, FRIEDMAN, and PROST, Circuit Judges.

LOURIE, Circuit Judge.

CoreBrace LLC (" CoreBrace" ) appeals from the judgment of the United States District Court for the District of Utah dismissing its claims for breach of a patent license agreement and for patent infringement. See Corebrace LLC v. Star Seismic LLC, No. 2:08-cv-11, 2008 U.S. Dist. Lexis 55471 (D.Utah July 18, 2008). Because the court did not err in concluding that Star Seismic LLC's (" Star's" ) license to make, use, and sell the patented product carried with it an implied license to have the product made by a third party, we affirm.

BACKGROUND

CoreBrace owns U.S. Patent 7,188,452 (" the '452 patent" ), which is directed to a brace for use in the fabrication of earthquake-resistant steel-framed buildings. On June 10, 2007, Star and the inventor of the '452 patent entered into a " Non-Exclusive License Agreement" (" License" ), by which Star received a license under the '452 patent; the inventor later transferred his interest to CoreBrace. The License grants Star a nonexclusive right to " make, use, and sell" licensed products. It does not explicitly provide a right to have the licensed product made by a third party. The License does state that Star may not " assign, sublicense, or otherwise transfer" its rights to any party except an affiliated, parent, or subsidiary company. It also reserves to CoreBrace " all rights not expressly granted to [Star]." However, it provides that Star owns any technological improvements " by a third party whose services have been contracted by [Star]."

Star used third-party contractors to manufacture licensed products for its own use. CoreBrace contends that such use of third parties was a breach of the License because Star lacked the right to have a third party make products for Star. On January 4, 2008, CoreBrace sent a letter to Star stating that the License was terminated. The License provides that it can be terminated if it is breached, after written notice of the breach and after a thirty-day opportunity to cure. CoreBrace has not alleged that it provided notice of a breach or that it gave Star thirty days to cure such breach.

On January 4, 2008, the same day that it sent the termination letter, CoreBrace sued Star for breach of the License due to Star's use of third-party contractors and for patent infringement based on Star's use of patented products under a terminated License. Star moved to dismiss the

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complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim, and the district court granted Star's motion. The court held that Star did not breach the License by having third-party contractors make the licensed products. According to the court, under Carey v. United States, 164 Ct.Cl. 304, 326 F.2d 975 (1964), a patent licensee's right to " make" an article includes the right to engage others to do all of the work connected with its production. The court also relied on similar reasoning in Advanced Micro Devices, Inc. v. Intel Corp., 9 Cal.4th 362, 36 Cal.Rptr.2d 581, 885 P.2d 994 (1994). The court further reasoned that, even when a license prohibits sublicensing, as in this case, " have made" rights are granted unless they are expressly prohibited. The court distinguished Intel Corp. v. U.S. International Trade Commission, 946 F.2d 821 (Fed.Cir.1991), as a case that was primarily about " foundry" rights, or a licensee's rights to make a product and sell it under a third party's name, and as having been based on the parol evidence of the parties' intent in that case not to grant such foundry rights. The court also examined the License and, based on its apparent acknowledgement of third-party manufacturers, concluded that nothing in the License precluded Star from having a third party manufacture the licensed product for Star. Thus, the court held that Star had the right to have a third party manufacture the licensed product for it.

The court then held that, even if Star had breached the License, CoreBrace did not properly terminate it because CoreBrace failed to follow the License's termination provisions. CoreBrace had conceded that it had not followed the termination provisions, but had argued...

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