Opinion ID: 2689159
Heading Depth: 2
Heading Rank: 2

Heading: The Most-Favored Licensee Provision

Text: The Texas court and the Florida court issued conflicting orders regarding whether the Texas lawsuit triggered Wi-LAN’s obligations under the MFL Provision. The Texas court found that the MFL Provision did not apply because the Texas Patents were specifically addressed in the Damages Provision, but did not address whether the MFL Provision applied to patents Wi-LAN acquired after the execution of the PCRA. The Florida court, on the other hand, found that Wi-LAN’s Texas lawsuit triggered its obligations to provide Ericsson with a license at mostfavored licensee status. To make this finding, the Florida court necessarily concluded that: (1) the MFL Provision applies to patents acquired after the execution of the PCRA, as well as those Wi-LAN previously owned or controlled, and (2) the Damages Provision does not cover 9 As a practical matter, moreover, under Ericsson’s interpretation, Ericsson could just stipulate that a product infringes one of the Wi-LAN Patents and assert that the covenant not to sue applies to all activities relating to the products. Oddly, if Wi-LAN contested that stipulation, rather than argue that its products do not infringe, Ericsson would have the burden of proving that its products infringe Wi-LAN’s patent. Ericsson’s argument that it sought protection for its products because of the McKool conflict is illogical; McKool would presumably also be the counsel best suited to represent Ericsson in this backwards infringement case. WI-LAN USA, INC. v. ERICSSON, INC. 15 the Texas Patents. See J.A. 667 (“In the event Wi-LAN owns or controls the licensing of patents not already addressed under this Agreement . . . .” (emphases added)). Wi-LAN argues that the MFL Provision only applies to patents owned or controlled as of the date of the PCRA. Wi-LAN explains that, although other sections of the PCRA specifically account for patents acquired in the future, the MFL Provision does not do so. According to Wi-LAN, the absence of language specifically accounting for later acquired patents indicates that they are not included in the MFL provision. Wi-LAN also argues that New York courts have interpreted similar present tense language in contractual provisions to exclude future activities. According to Wi-LAN, moreover, the “in the event” language does not alter the scope of the MFL Provision because the PCRA, read as a whole, clearly indicates that the MFL Provision only applies to the patents Wi-LAN had when it executed the PCRA. Ericsson contends that the plain language of the MFL Provision applies to all of Wi-LAN’s patents, whether they are owned as of the effective date of the PCRA or are later acquired. Ericsson insists that, even though the MFL Provision uses present tense verbs, the MFL Provision also contains the conditional “in the event” language. According to Ericsson, under grammatical rules, the conditional statement means that the present tense verbs refer to presently held and later acquired patents. See Oral Argument at 54:61, Wi-LAN USA, Inc. v. Ericsson, Inc., 2013-1485, available at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20 13-1485.mp3 (“[G]rammatical rules say that, when you put a present tense verb in a conditional sentence, it contemplates the future.”). We agree with Wi-LAN that it is clear the parties intended the MFL Provision to only cover patents Wi-LAN owned or controlled as of the effective date of the PCRA. The MFL Provision uses the present tense to refer to 16 WI-LAN USA, INC. v. ERICSSON, INC. patents that “WI-LAN owns or controls.” J.A. 667. Under New York law, the use of the present tense means that the MFL Provision does not apply to later acquired patents. See Aspex Eyewear, Inc. v. Altair Eywear, Inc., 361 F. Supp. 2d 210, 215 (S.D.N.Y. 2005) (applying New York law and finding that the present tense word “is” did not apply to later acquired patent rights); see also VKK Corp. v. Nat’l Football League, 244 F.3d 114, 130 (2d Cir. 2001) (applying New York law) (“The Release’s reference to ‘affiliates’ and the definition of the word are stated in the present tense. Nothing in this definition indicates the inclusion of future rather than present members.”). Contrary to Ericsson’s arguments, the conditional phrase “in the event” does not automatically mean that present tense verbs must include future events. We are aware of no grammatical rule that requires us to change wellestablished New York contract law. We conclude that, in context, the parties clearly intended that the “in the event” language refer to information that is currently unknown to the parties—i.e., in the event Wi-LAN owns— as of the execution of the agreement—non-HSPA patents it could assert against Ericsson products, a MFL license will be granted to Ericsson. This interpretation finds further support in other sections of the contract that explicitly account for later acquired patents. See, e.g., J.A. 666 (“[N]o damages shall accrue against [Ericsson] . . . for any infringement of any patents that, on or after the EFFECTIVE DATE, are owned or controlled by WI-LAN . . . .” (emphasis added)). The fact that the PCRA uses specific terms to denote coverage of later acquired patents in some provisions implies the exclusion of later acquired patents when those terms are not used. William C. Atwater & Co. v. Panama R. Co., 159 N.E. 418, 418 (1927) (“The court should examine the entire contract and consider the relation of the parties and the circumstances under which it was executed. Particular words should be considered, not as if WI-LAN USA, INC. v. ERICSSON, INC. 17 isolated from the context, but in light of the obligation as a whole and the intention of the parties as manifested thereby.”). We therefore conclude that, based on the language of the PCRA as a whole, the MFL Provision only applies to Wi-LAN’s patents owned or controlled as of the effective date of the PCRA, which the Texas and Florida Patents were not. Because we conclude that the MFL Provision does not apply to patents acquired after the execution of the PCRA, Ericsson’s rights under the MFL Provision were not triggered by the Texas suit. We therefore reverse the Florida court’s dismissal of Wi-LAN’s infringement suit with respect to the Florida Patents. We need not address the remainder of the parties’ arguments regarding the MFL Provision. We also affirm the Texas court’s finding that the MFL provision did not bar Wi-LAN’s Texas suit, albeit on different grounds.