IP Law Daily, PATENT—6th Cir.: Summary judgment affirmed in patent license agreement dispute, (Feb 8, 2024)

By Kevin M. Finson, J.D.

Summary judgment on when payments were to terminate under a license agreement was affirmed because the trial court correctly interpreted words used in the agreement as terms of art in the patent field rather than applying broader interpretations.

An inventor was not entitled to continued royalties from sales of a certain product, the U.S. Court of Appeals for the Sixth Circuit has held. The license agreement allowed continued royalties for products covered by patents that issued from a certain application, and the product in question was actually covered by a patent that issued from a continuation-in-part of that application (Lynn v. Becton, Dickinson & Co., February 6, 2024, Gilman, R.).

Lawrence Lynn was a physician and the inventor of several medical devices described as Blunt Cannula Penetration Medical Valves and owned several patents related to those valves. In 1998, Lynn contracted with Becton, Dickinson & Co. (BD) to license the exclusive right to several patents and patent applications, including continuations, divisions, extensions, substitutions, reissues, reexaminations, and any patents issuing therefrom, and any subsequently filed patent applications and any patents arising therefrom. In exchange for the exclusive licenses Lynn was to receive royalty payments. Royalties were to continue on any given product until the expiration of the last to expire patent covered by the license having a valid claim covering the product. A later amendment added that, subject to certain exceptions, BD would have no obligation to pay royalties after August 12, 2019. BD ceased paying royalties on its Q-SyteTM product on that date, but Lynn believed royalties were due until at least December 7, 2021. Lynn brought suit against BD for breach of contract and breach of the duty of good faith and fair dealing. The trial court granted summary judgment in favor of BD. Lynn appealed.

Breach of contract. The parties disputed the terms of their amendment to the license agreement and the various exceptions that could allow payments to continue past the August 12, 2019, termination date. One of those exceptions was for any patent that issued from patent application no. 20070225635 (the ’635 application), and Lynn argued that the Q-SyteTM product was covered by U.S. Patent No. 8,480,968 (the ’968 patent), which issued from that application. The court found that no patent had ever issued directly from the ’635 application and that the ’968 patent instead issued directly from another application, which was itself a continuation-in-part of the application at issue. The court held that in this context “issued from” was a term of art which only covered the application from which a patent was directly issued, and therefore there was no error in the district court’s summary judgment ruling that the exception did not apply and therefore the obligation to pay royalties ended in 2019.

Good faith and fair dealing. The court held that because the contractual duty ended on August 12, 2019, any actions following that date could not possibly breach the duty of good faith and fair dealing.

Royalty adjustment. Finally, Lynn argued that the trial court erred by finding he had not raised a genuine question of material fact by simply making an unequivocal denial that BD had adjusted its payments in accordance with the Consumer Price Index as the license agreement required. The court held that in order to create a genuine question of material fact he would have had to at least identify specific discrepancies between the amount paid and the amount owed, which Lynn had not done.

The appellate court affirmed the decision of the district court.

The case is No. 23-3214.

Attorneys: Marion H. Little, Jr. (Zeiger, Tigges & Little LLP) for Lawrence A. Lynn. Thomas Glenn Saunders (Wilmer Cutler Pickering Hale and Dorr LLP) and David John Barthel (Carpenter Lipps & Leland LLP) for Becton, Dickinson and Co.

Companies: Becton, Dickinson and Co.

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